Transcripts For BLOOMBERG Bloomberg Surveillance 20150908

Company bought shares. Ecb president Jeanclaude Juncker will unveiled plans to sayw and is expected the best way to handle the crisis is for all 20 countries to take and refugees. Germany has called on the rest of europe to do its share. Written should fulfill it britain should fulfill its moral responsibility. In doing so, we must use our head and our heart by pursuing a copperhead to the roach by pursuing a comprehensive approach. David cameron said the crisis is about more than just taking in refugees. Congress returns to work today after a summer vacation. Among the issues lawmakers will do with the Iran Nuclear Deal, spending caps, and federal funding for planned parenthood. President obama attended a union rally in boston yesterday after signing an executive order on sick. The order means 300,000 workers and companies such as Lockheed Martin and boeing will get paid sick leave. It is a major retrenchment eglin court. This was minor and training core ceo puts it on hold. Assets and more stocks. Ores market has fallen by half this year. Ohio state showed why it is ranked number one. At the miller scored two touchdowns, including a spectacular 53 yard run. The buckeyes beat Virginia Tech 4224 in their opening game. Those are your top headlines. Tom i believe the Denver Broncos michael and the Nuclear Patriots thursday night. Tom deflategate is so over. Lets move on to a data check, looking at equities, bonds, currencies, commodities. Crude is bizarre. 45. 11. We had a 44 handle on crude, 20 minutes, 30 minutes ago. We get you through a three day 27. 80, with the big where we begin. 9 30. L get that at there are your two problems the chinese yuan is stronger over the last 4, 5, six days, in the brazilian real has a life of its own. Lets go to the bloomberg terminal and get a snapshot. I see i think these are up in my head. I am always surprised. Here is the gdp inm, the china boom, u. S. Dollars, and here is the ittybitty rollover of where they were after the boom. They had just come back. Michael it is a rising tide that has lifted a lot of votes. The problem is the cost of funding that time. Now they have to pay those costs. Yesterday president rousseff said we have made some mistakes in the management of the economy. Tom the headline is amazing. This is 1960, and here is brazil doing better. Boom is the only word that describes this. It was an absolute boom that helped all of latin america, but now it is becoming a problem. It will take a while. Finance minister says next year they may see growth. Tom we have that linkage of brazil, the tide at the hip feel with china. That is where we need to go. We begin the morning news from china, weaker exports decidedly weaker exports, decidedly weaker imports that affect asia and brazil as well. To get us started on the morning, morty singer joins us. The chief executive officer of Marvin Schaub. Let me begin with you on china. What would you expect this week from a Chinese Government to continue to support their chinese stock market . Facing quite a dilemma right now. There is no stock there is no sign that stocks have found a floor just yet. They do not want to keep intervening. China is having to intervene in the stock market and keeping a flow under the yuan. They have Construction Projects going. It is an expensive year to keep the economy growing, tom. Going aroundthing the markets these days is, do the chinese leaders have any clue . Do they know what they are doing . What is the sense you get . Enda it is not good. They are not sending a consistent message. We know there are at least those code views internally on the stock market message, but they want a big picture growth on the economy. There and how bumpy it will be is a real problem. How it will impact the rest of the world i guess we do not know because chinas economy has not been this big for us before. Michael they want to increase domestic demand. There is a sign that is not happening. Enda there are some signs that the consumer has not been completely hammered in the way you would expect, given the stock market crash and the fragile sentiment on china. There is no doubt that todays import and export numbers add to a weaker story on chinas economy. The big export markets japan. Gdp figures show it remains in the doldrums. How they rose up those exports in the nearterm remains to be seen. Tom what is the linkage of the message from the government in beijing to the Chinese People . Are the Chinese People engaged in this moment and in this debate on economics and on the market . Enda look, the central jinping aref xi showing that this is all part of a plan. But of course, looking from the outside in, it does not seem like it is going to plan. They talk up the stock market, then the stock market collapsed. A wayevalued the yuan in that was just up in market reform, but they are having to spend billions to offset capital outfall linked to that. If they have a plan, it looks like it is not going the way they would have liked. , thank you,rran from hong kong. Looking to america as we begin to september to go into september, with morty singer. I talked to a major dealer inexpensive goods this weekend on the chinese. He said they have stopped buying , simple as that. You are completely wired in with new york city and the impulse of tourists into new york. Has it ebbed . Morty it not just the chinese. , which represents one third of global purchases, is suffering. Every city in the United States that has a tourism driver in its economy is suffering today from this phenomenon. Michael what about the idea that a lot of wealthy chinese are bringing that money out of the country . We have seen it in their forex reserve numbers that came out of the weekend. A lot of money flowing out of china, coming into the u. S. , coming into the u. K. , and being spent or being put into the bank here or in real estate to try to save some of it from the Chinese Government. Morty 50 of all luxury purchases by chinese happen outside of the chinese mainland, so effectively they are taking that money outside china. Michael have we seen a comeback in that . Because the anticorruption drive ebbed tourism has somewhat. Effectively, because of the growth of the middle class, tourism is still a driving force. Tom there are designers that are completely give to the asian customer. Maybe valentino not so much. How are they doing . Is the on the asian consumer played out for profits . Isty the asian consumer driving the way in which the brands engage with that consumer, but effectively they are doing the Fashion Shows, creating special lines, moving and improving their stores there. It is an interesting time. Tom i see the u. S. Open with the big mercedes logo on the nets. Tell us about the new fashion show, the new fashion week in new york . Morty the fashion week todays becoming more consumer friendly. It used to be relatively exclusionary. You are seeing Fashion Shows which are only being done for consumers, no buyers at all. The use of social media in particular to allow people to join that party tom who does instagram best within your world . Laurent gets top marks. Aboutou cannot say enough mr. Lauren. I made a deposit this weekend at the ralph lorenz store. Aurentthe ralph l store. We will talk to morty singer about the pulse of american retail. And dylan lauren will join us. Tok chocolate lets go the twitter question of the day. Is there such a thing as bad dark chocolate . Slowdownl chinas derail the United States . Michael mckee and tom keene on a sultry september morning in new york city. It is bloomberg surveillance peter . Tom what am i watching this morning . What i watched over the weekend. A threeday weekend in the United States. Some Real Movement on monday. Many people talking about a roof to 4. 00 for the brazilian real about a move to 4. 00 for the brazilian real. Right now we need top headlines are here is ramy inocencio. Ramy General Electric is expected to win approval of its acquisition of houstons power business. The European Union may sign off on the deal today. Preparing to release one of the least expensive tablets on the market. The wall street journal says amazon will begin selling a 50 tablet with a six inch screen in time for the holidays. That is half the price of the companys fire hd tablet. Another new device will be unveiled. The public will get a look at the newest version of apples iphone. Roger federer has advanced to the quarterfinals. He beat john isner in three sets. He was the last american man remaining in the tournament. Topseeded Serena Williams takes on her sister, venus, in the semifinals. Tom the world stops for this. Line. L serena is in can her sister stop her . Serena is 33,35, and they go back to two initial victories. Who in football or hockey, 13 years into the game, still has their knees together . Their elbows . Who is the defenseman for the Detroit Red Wings . Lindstrom . Serena holds a 1411 advantage. Tom this is tonight . Ramy yes, this is tonight. Michael we will have an official serena venus report for you tomorrow. We are going to talk about oil. ,ight now brent crude is up 2 and west texas down 2 , basically because it appears west texas is not as traded as much. Where do we go from here . Do we have any sense of direction for oil prices . One analyst over the weekend writing, prices are going to the 50s, down to the 20s. Andrew cosgrove is an Energy Analyst who joins us now. That is not unreasonable at this point, that we can have that kind of divergent swing. If you look at the news over the weekend, you have nigerian cargoes that are going to be at the highest levels in 12 months. What that means is that the market will have to wait for nonus, nonopec supply to fall. The biggest supply response will be from the u. S. , but as you come into the refinery season in the atlantic basis, that will put pressure on prices. Michael u. S. Backers have only come back to the extent they have to. Opec keeps pumping because they are trying to retain market share. Iran is coming into the market. The nonopec people the russians and people like that they are still pumping. Those of the ones we think that will be hit by the lower prices the offshore ones. It is not the u. S. That will be hit immediately. In the longer term, canada, offshore, brazil, north sea, africa, brazil. Those of the places we will be looking for. Michael 20 is actually possible . Andrew anything is possible. Tom morty singer is with us from Marvin Schaub as well. I know it helps walmart and the rest. How far up the retail food chain is the benefit of low oil and gasoline prices . . Oes it help h m does it help the midbrand Department Stores . Morty this country is still based on a mallbased economy. People drive to them. This labor day was the most traveled labor day because of the oil prices. It goes all the way up the food chain. Michael where are they going to put all this oil . Toms bathtub is already full. It does not argue on an economic basis to put that trade on, so to speak. That means near data prices will come under pressure. Tom the dumb question of the oil get old . Es if it sits on a tanker, does it get bad . It can. Some of the iranian barrels in floating storage were said to be unusable to a certain extent. Tom andrew cosgrove, thank you so much. We will be addressing this daily. Coming up in the next hour, we can literally speak for four on theith Richard Haass council of foreign relations. We will speak to him about refugees and migrants. Richard haass in a next hour. Stay with us. Michael mckee and tom keene. This is bloomberg surveillance. Tom this is as close to a and fedter of market that we have. The twoyear, 0. 72. That is a yield that is elevated but not yet breaking out as the parlor game to september 17 continues. I Michael Mckee now, Michael Mckee. Rubicon for the bond market is next week when the fed needs. With a when the fed meets. Joseph stiglitz arguing strongly that they should not raise rates. The call right now is not a close one on the contrary, it is as close to a nobrainer as such decisions can be. Now is not the time to tighten credit and slow down the economy. An interesting piece, but it is surprisingly full of errors for someone like joseph stiglitz. He suggests financiers and Corporate Executives paid to go to the jackson hole meetings that is not correct. He talks about earnings being down 5 this year. From january they are down, but on a year over year basis, they are up significantly, and he makes this case that the fed is going to raise rates a lot and slow the economy. Nobody is talking about that. It is kind of a bizarre piece. He may have a prescription, a political calculus that he may like to project. Are making the argument that the fed raising rates will slow the economy, and that will slow rage will slow wage gains. The question is, will a 25 basis point increase in the fed funds rate actually tom maybe jeff lack of richmond is on the other side. Everybody is waiting to find out, will they say we have the data that we can move pretty much they do, but on jobs last week with the 5 Unemployment Rate, they could argue that there. Be veryl probably circumspect of. Tom my reading over the weekend was on the quality of the jobs being created. Are they the same quality of jobs to previous recoveries . Michael no, but the whole job market has changed. We are getting a lot of lowwage and high wage jobs. The fed cannot do anything about that. Tom we are focused on september 17. This is a lot of fun. It is an annual visit. Morty singer with us. The kids go back to school on the east coast, in new york, new england. Many kids across the country back to school weeks ago. This is what it is about, a broad celebration of buying ticonderoga pencils. You had better use them, number 2 pencils. Hold your pencil correct tom what you need to know after a threeday weekend equities bid, china bids, u. S. Bids as well. Headlinesvolatile top with ramy inocencio. The economy is still struggling to regain momentum. Chinese exports fell by more than 5 in august because of weak demand overseas. 14 . Ts were down by almost chinese stocks fell on the news, but they bounced back to post again for the first time in five days. There is speculation that state run funds are shares. German chancellor Angela Merkel wants the rest of europe to do its share in the worst refugee crisis since world war ii. She is adding almost 7 billion to the budget to take care of refugees fleeing the fighting in syria and elsewhere. Germany is pushing for the need to impose country by country quotas for refugees. We are a collective community of 500 million people. That makes the Immigration Crisis a timely problem. The real problem is the lack of collective action. These are pictures we have seeing the past several days to weeks. Hillary clinton says she does not need to apologize for using a private email account while serving as secretary of state. The democratic president ial candidate told the Associated Press that what she did was allowed. Questions about her emails have been a distraction but have not hurt her campaign. President obama knows how to play to a crowd at a labor day function for Union Leaders in boston. He referred to new england quarterback tom brady, whose fourgame suspension was lifted by a judge. President obama even brady is happy you have got a union. They had his back. Needs a union, we definitely need unions. Filed with the union to have his suspension overturned. Tom this is in the media business, something we have got to see to the end of the year. Media general to buy meredith. Importantkee, this is. Meredith with an interesting set of magazines. Oldlines in a business that has been struggling. Om it gives me pause stan collender. Michael he is our budget guy. He says there is a two thirds chance we will see a Government Shutdown at the end of september. He is basing that on the rand deal. It will on the iran deal. It will take congress so long to debate that. They will not have any time to get the budget done. Tom something to touch on with Richard Haass in the next hour. Lets look at retail. The excitement of september in new york city. The return to school, none too soon for parents. The long of a short of it is a thereter unclosed three clock unclosed. Marvin schaub what a racket. The closets are bear. Where did this come from . Morty the 68 billion spent this period and the period is wishywashy because unlike holiday, it does not start on a specific day. When kidsnow, literally graduate the prior year, and a month into back to school because mobile devices and ecommerce are driving a broader period. In ael that has ushered change in the way you do this per i spent the weekend with backtoschool clothing online. Is an on the channel approach. I have used and on the channel approach. Onlinen shop instore or , shopping catalog, and it has become the wave the way that the consumer has shifted its behavior. Michael have the retailers shifted to take advantage of that . Are they set up for these kinds of changes . The biggest ones have because they have the technology to invest the money to invest in technology. The smaller whats have to catch up. Tom i want to address luck in the business. Sometimes you just get lucky. Iconic company they have had the fortune of two cold winters. Morty product is king in our industry, and they invest in a brand that was invested in a major product. They got the two coldest winters on record the winter of 2014 and the winter of 15 of 2015. Tom and montclair does as well there. Those are highend brands. Is quality as important for zahra . Morty they do not spend one dollar on advertising. It is all about the point of purchase. You go into a zahra store, and it feels like an update it feels upscale. Inhael are we going to see increase in spending this year because gasoline prices are down and that is what retailers are counting on . Morty true, but the consumer is still very sluggish. There is a long memory. Hikes, food stamps tightening in the same year. They are still feeling the effects of that. People are Still Holding on to their purses. Tom is there to bank much stuff out there is there too much stuff out there . Are you over stored and overstuffed within a given store . Morty i am not sure that necessarily the United States is overstuffed in their stores, but there has been a clink of many 200, 400at have stores that have gone bankrupt. Even though they have struggled in the last quarter, macys is on top of it. They really are, from a global perspective, from an omnichannel perspective. They see themselves as a Technology Company as much as a retailer. Unbelievable that another company is having the troubles that it has. Tom what is your prescription . Morty it is all about going back to original merchandise and going on in International Strategy that will create a huge demand overseas. Michael do we spend full price this backtoschool season, or are we getting discounts like we do with the holidays . Earlier people shopping got discounts, but that can counteract itself later into the season. Yes at the beginning, then no later on. Singer during the last commercial grabbed my wallet, and he will grab yours next. Our twitter question of the day will chinas slowdown derail the u. S. . If you are just joining us, chinese equities to better even on difficult Economic Data. We need your informed answer on twitter. Michael mckee and tom keene. Stay with us. Worldwide, bloomberg surveillance. Tom here is what you need to know. They are back. Congress repopulates washington with a number of things. Michael mckee mentioning earlier if possible government a possible Government Shutdown to keep you entertained into the autumn season. Right now, a single best chart. Michael maybe that is what congress does best, entertains us. We have not closed the gap on jobs that would have been created if not for the recession. Hiring has to keep growing to absorb new engines into the labor force. All those kids who buy back to school the good news is, we are getting closer. The hamilton project has a handy calculator that shows we will close the jobs gap by 2017 if in the past 12 months, by february of that year. That is the blue line. If it does not, we will not get there until august two years from now. That is when we can put the Great Recession behind us from a labor market standpoint. Tom Labor Participation what does the research say right now about our appetite for a third of the public to work . Do they want jobs . Michael that is the big question. There is a camp that says people are not working and do not want jobs. Another camp says a lot of people that left the labor force are not coming back. That is why the Unemployment Rate can fall so fast, because the number of people out looking for jobs falls. Tom what was your summary of the jobs report . Michael it was actually very good. You have the fall in the own employment rate and the rising compensation. Significant Market Reaction as well. Morty singer with us, with marvin traub. There is a precursor to the next job and the next job after that, arent they . Morty they are. Retail jobs tend to be quite seasonal, so this hiring for temporary labor during the pcs thes, like now during preseason, like now. Tom it builds confidence. Michael an interesting question about seasonal hiring. Bulge inll see the big morty youovember . Can. In thelook at retail complaint of fulltime jobs. These are all parttime jobs. Morty they are. Various retailers try to address that in different ways, but effectively there are opening jobs and a relatively young think he is trying to infuse into macys some climate, trying to make it Americas Department store. He not only has all the celebrities and exclusive brands with those celebrities to create wonderful products, but half of the power business is their own brands, to complement others that they sell there. Mixture and hee is starting to do it internationally. He is doing a big thing in china with ecommerce. They have a big business without even trying in china. They are really pushing a lot of energy into it internationally. Tom we need to get to our top photos today. Here is ramy inocencio. Up, burning mans annual flame. The weekend festival ended this past summer. This past sunday. Nearly 70,000 people made the it tohe nevadas the nevada desert. A lot of my friends have been to this, and my Facebook Page lit up with a lot of people saying i am so tired, i am so hungry. Michael it has been around for a number of years. It is sort of the hightech geek fest festival out in the desert. A lot of people who are big in the tech world. Tom maybe it is remote for you and me next year. Morty i would pay to see that. Tom it looks like hard days night. Next he . Ramy thousands of european farmers protesting outside the European Commission building yesterday in brussels during the agricultural ministers meeting. They are blocking streets with tractors because they are demanding funds to help with low food prices. There is also high taxes. Tom mike, this is different mathematics in that culture. It is similar in the sense that both sides want guarantees, but the europeans have always been much more generous with what they pay their farmers. That is the one reason they have had a hard time reaching new trade deals because they demand europe cut back, and they will not do it. Ramy we had to the final frontier. We have a new photo from the hubble space telescope. Galaxy mee 96. R tom we did not go out to dinner with him, but measuring light it is amazing how far we have come in 30 or 40 years. I like the milky way idea. Speaking of milky way, she is right across the street. Dylan lauren will join us. She has expansion plans per we will also catch up with her. Mike, help me the Health Benefits of going to dylans candy bar. Her father has done better than good in expanding in retail. China, ineurope, with our next hour for the entire hour, Richard Haass with the council on foreign relations. We will speak of refugees and migrants a tumultuous weekend across all europe. Right now, top headlines with ramy inocencio. Ramy there is a big transaction in the tv station business. Media general has agreed to buy meredith corporation, to become the thirdlargest owner of network tv affiliates. The deal is valued at 2. 4 billion. The House Democratic leader is dismissing concerns about Hillary Clinton and her private email server. Congresswoman nancy pelosi spoke to bloomberg tv. She said that the issue is being overblown. All haveosi we confidence in Hillary Clinton and her integrity. I feel very confident that she did not receive or send any email marked classified. Clinton has told the Associated Press she has nothing to apologize for about the emails. And sonys christian themed movie war room was topped the box office over the weekend. It took and 12. 6 million. Wasaight out of compton taking it 11 million after the last three weeks. Tom now Important News of the day. She majored in kit cat bars at Duke University and is decisively moved on from being dads daughter. Dylan lauren will expand her candy empire in downtown new york city not through the hordes of children stocking up thatalloween, but rather chocolate is good for you. You have got to be kidding me. Dylan everything in moderation. We do carry Healthy Products and nonedible candy products, bags and accessories, jewelry that you do not necessarily have to eat out of. In chocolate has magnesium it, and some of them have low sugar. We also carry glutenfree and sugar free. Tom you have glutenfree chocolate . Dylan yes. Michael when you decided you wanted to go into the business, why did you pick candy . Were you thinking about the little monsters out there . Candy, and my parents always supported the idea of do what you love. Mosaics andade sculptures out of candy. Bars isylans candy sort of a curator of a museum, whether you package it well, you can look at it and enjoy the color. You are going to go to 14th street, downtown, where everybody wears a black tshirt. Merchandising when you go to a different culture, even in the same city. Dylan downtown is a boutique version of uptown. Is in black and silver we are in the building. Tom your father was probably there partying his brains out, right . Dylan i dont know about that. The fixtures are very pop art and very cool in the area. We have light up candy canes that spin like barber poles, and rock candy tom is she doing the right thing . Morty she has always done the right thing. Her father started it, but you are continuing it in a way that is wonderful. People want to be entertained more so than ever before. The lights, the action, the entertainment, the theater. Tom what is the biggest mistake you have made . Go, is the biggest you should have listened to dad. What is the biggest mistake you have made . Dylan not following my gut picture people say you have to carry this product or this product. But it does not feel right and it does not sell well. And it just sits there and goes bad. Michael what is it like to run a Small Business in new york . With wrench rising and Everything Else in the city is it easy with rents rising and every thing else in the city is it easy to make a profit thereby . Dylan it took 13 years to expand to new york, chicago, l. A. , east hampton, and hopefully internationally. But going downtown was something i always wanted to do. I always wanted to open it smaller because i always believed in the flagship being the wow. We look at the Business Plan to make sure the numbers will work. Michael does the small still work in new york city . Alan i think so i think so. I think it is great to have a place people want to go to shop and feel good. Tom your father is equivalent to the icons of the generation Robert Redford splashed this weekend in the new york times. How is your father doing, and what does he do next . Dylan he is such an entrepreneur. He has been going for 45 years. You never know. Loves pop culture, media, magazines, restaurants, fashion, the library of fashion. I cannot really reveal that, but i know that the sky is the limit. He is so creative and he so inspires me. This is our candy button bracelet. Michael i was hoping that we could actually peel those off. Myan i did not wear candy jewelry today. Tom we are not going to go there and we cannot get out of this fast enough. Thank you. The forex report save me, please. I am looking at the renminbi, stronger. The brazilian real, 3. 84. Stay with us for more. This is bloomberg surveillance. Chinese equities find the bid. A brazil is grappling with political austerity and collapsing markets. Munich takes 17,000 refugees. Merkel attempts to contain chaos. Good morning. This is bloomberg surveillance. It is tuesday. I am tom keene. We really begin to cover the ramifications of refugees and migrants. Tom keene they are not the same. Some are willing to take in Asylum Seekers who need to get away. People who are just coming for economic purposes, they are worried about jobs and how they support them. 39 in germany are not refugees. We will cover that later. Our top headlines. Ramy inocencio good morning. Thanks. There is other side of chinese economic problems. In august. L 5 imports were down as well, almost 14 chinese stocks filament news and bounced back for the first time in five days. State run funds but shares. The European Union is coming up with a plan to deal with the biggest refugee crisis since world war ii. They will unveil the proposal tomorrow. The best way to handle the crisis is for all 28 countries to take in refugees. Germany has called on the rest of europe to do its share. Integrationndle the of 800,000 refugees here in germany. It cannot be repeated every year. We need a different asylum policy. Sweden, austria, and cannot be the only countries that accommodate them. Ramy inocencio David Cameron said this is about taking more than just taking in refugees. Inwritten should take refugees. Britain should take in refugees. We should tackle the causes of the problem. Ramy inocencio the u. K. Has agreed to take in 20,000 Syrian Refugees. Congress returns to work today. Issues, the Iran Nuclear Deal and funding for planned parenthood. The president attended a union rally after signing an executive order on sick paper federal contractors. About 300,000 workers will get paid for sick leave. Its a major retrenchment at glencore. The ceo but the dividends on hold and plans to cut 10 billion of debt through the end of next year and will sell assets as well as more stock. Their value has fallen by half this year. Ohio state showed why it is ranked number one. Braxton miller scored two touchdowns, including a spectacular 53 yard run. They beat Virginia Tech in their opening game. Transaction,other im going to call this a minor deal. Concordia health care is going to buy them. We are coming off a threegame weekend. Futures are up. Doubt futures are up. Oil is churning. It is fragile this morning. We need to begin the morning with news from china. Weaker exports and imports affect all. Have an important focus on the International Religious relationships. Let me go to you for a quick up eight. Did they pop up the Chinese Market yesterday . Enda curran they have been intervening to keep it. The stock prices have yet to find a natural flow. The government does not want to keep up the policy. They dont have the confidence to step away. According to goldman sachs, they have spent 200 billion in supporting stocks. They have a 400 billion fund to do so. Michael mckee they have been intervening in the currency market. How long are they going to keep that up . Do they have a target . Enda curran they are burning reserves. It adds to the fragile sentiment on china. When they have to intervene to shore up the currency, there must be a temp tatian among policymakers temptation among policymakers. The problem is they contradict their message about market reform. Washingtonnt goes to later this month. I doubt he wants to arrive with the backdrop of boosting exports. Tom keene thank you so much. He is briefing us from hong kong. Hour, we havetire richard haas. We have time left over. Withhould washington deal chinese leadership . Richard haass china is going through structural problems that transcend everything you just talked about. I dont care if the government intervenes on currency. That is tactical. They face enormous problems. He comes to washington with the most difficult inbox of any world leader. Its everything from the Financial System to the economy and demographic challenges and environmental challenges. They are nervous. Their legitimacy is based on Economic Growth that they cannot come close to doing. Believe theiryou legitimacy is threatened . Richard haass i do. The idea of unrest in china cannot be dismissed. The model cannot work. They are trying to take this shift to domestic demand, there is just not enough demand there. This regime is uneasy. Michael mckee do we have confidence in this regime, that they know what they are doing . Richard haass the old tricks arent working. Tom keene the old tricks like the military parade . Richard haass that was playing it safe. We tried out the new toys. There is a worrisome signal. We dont want the chinese , you cannot find your legitimacy in nationalism. In being mored it muscular in the region to compensate for the loss of economic performance. Michael mckee we get a president elected and that is the height of his political power. The chinese come in and they have to build credibility. How much credibility does he have . Richard haass he is the strongest chinese leader since mousey tongue. Aat is a risk as well as lessing. He has a limit blessing. If it doesnt work, it falls on him. The Anticorruption Campaign is a political campaign. It is about him strengthening his pace. If the economy does not turn around, you will see significant pushback. Tom keene i give you credit for being centrist. If i look at the announcements administration, we will talk about the iranian deal. It goes back to your book about get your house in order at home. Does the president policyccessful poor and Foreign Policy . Richard haass his princes principal legacy is a middle east that is unraveling. There cannot be a continental solution to a crisis if the middle east is going through Something Like a 30 years war. Half of syrias population is uprooted. There is nothing that the outside world can do. Tom keene do you fall the president directly for the on settlement of syria . Richard haass im not saying hes the entire fault. We have gone from a president who did it too much in unsettling a rock to president obama has done it too little in unsettling syria. His legacy will be what he did not do in syria. Michael mckee is there a moment here, some ounce of power that thering about fighting to a halt . One,rd haass if there is we may have 26 years to go. The battles of the 30 years war decimated european society. I dont think the locals or the outsiders have the capacity or the consensus. You need two things, a balance of power and a shared sense of what the rules ought to be. It does not exist. Thekeene we will look at refugee and migrant challenges this morning in your area are twitter question turns to china. Will the slowdown derail the United States . We need your informed answer. In morning. Bloomberg surveillance. Tom keene good morning everyone. Bloomberg surveillance. Atwill begin a four day week 27. 8 zero. I thought this was a smart morning mustread. This is from dan willingham. He is writing about teaching. He pieced together some smart ideas. The problem in American Education is dumb teacher training. Teachers know the training focuses on high level. And not enough on nuts and bolts matters of teaching. This is from the prayer book of Richard Haass. You have to blend the highlevel theory with the real politic you talk about every day. Richard haass you have to find a new way of teaching teachers. Teaching is not just a craft. You have to know about what it is you are teaching. I had a fascinating conversation a few weeks ago. He said you could be a professor. You could teach people what they need to know to get along in the world. Youre not qualified for research. Richard haass all reward structure is toward esoteric research. If you are good at teaching, that has zero impact if you get tenure or not. Tom keene tell us about International Relations. How would you teach it better at our universities . Especially in our elite junior and senior year high schools . Richard haass we are not repairing americans for the world they are about to enter. Americans get some of the basics about how the world works, the relationship between the United States and the world. People not have basic understanding about what makes the world work or how important it is or how we can influence the world. You have to make the commitment that a certain percentage of our education is going to be insisted upon. Coast,ne we on the east many in the midwest and south are already two or three weeks into the school year. Youve been waiting for this. , it escalatesisis over the weekend. 17,000 people in. We have some amazing that the sticks as well. Michael mckee and tom keene. Stay with us. Bloomberg surveillance. Tom keene ok. It doesnt matter. Were not going to talk about today. What happened over the summer . The ruble revisited. This is something to consider as we go into the autumn months. Thet now, lets get to challenges of top headlines. Ramy inocencio good morning. The big transaction in the tv station business. Media general is the thirdlargest owner of network tv affiliates. The deal is valued at 2. 4 billion. Amazon is preparing to release one of the least expensive tablets on the market here in a. It is a 50 tablet with a six inch screen in time for the holidays. That is half the price of the fire hd tablet. Availed,hing will be the latest version of the apple iphone. Roger federer has advanced to the quarterfinals. In three sets. Serena williams takes on her sister venus, the winner goes to the semi finals. Michael mckee the grand slam is at stake. Tom keene they are 35 and 33. This is it. Michael mckee they are both amazing. Tom keene its like the tennis industry dreamed of this. Michael mckee its the new promised land. Germany. They have promised to take in 800,000 refugees this year. It is a political calculation and an economic one. Hans nichols joins us from berlin. They have the lowest birthrate. They could use more migrants as long as they are people who can help build the economy. A lot of these people are not migrants, they are seeking political asylum. its anols exceedingly difficult problem the numbers are daunting. 160,000 talking about refugees across europe. The vice chancellor of germany said they can take half a million a year going forward. , thats thenumber number of applications they expect. They want to process them quickly. They are economic migrants. This is a very difficult position. I was at a reception mayor area all morning yesterday. 500 people were waiting in line just to register. It is a chaotic system. You think of germany being full of order. This is taxing their infrastructure. Michael mckee germany is not europe is not all in this. Hans nichols the argument has been bolstered i the numbers. Ever since that friday night agreement, they suspended the rules and brought everyone to germany. There has been an increase in refugees in germany. Sunday, it was 10,000. When you look at the serbian transits, last week it was 3000. Michael mckee what do we do with this plan . Is it going to stop the crisis . Are they just trying to put their finger in the dike . Nichols what merkel is saying is you cant distinguish between how they arrived. David cameron wants to go to the camps inurkey turkey and lebanon. This is a very ethical problem. Fromel mckee hans nichols berlin, thank you very much. Its fascinating that germany is so welcoming now to refugees given its history. Are they asylumseekers who really need to be taken in . Are they just looking for a better deal . Richard haass what merkel is doing is extraordinary. She has a stature here that is quite extraordinary. No one else is in second place. It says something about her. She has a sensibility. The numbers are far larger than germany is talking about. You have economic migrants from the balkans and the political refugees and all that. This has multiple dimensions. How do you stop the cause of this . How do you resettle people locally . Howd you deal with the of people coming to europe . Even the numbers they are talking about simply are not enough. Tom keene a must read on this is from jean park. Backgrounderrific piece on all of these themes. Andwill the natural right the inflammatory conservative right react to this in europe . Richard haass its getting ugly. In hungary, the Prime Minister is an early warning. Mr. Cameron is talking about 20,000. This could make it more difficult for him to win the vote about whether peden stays in europe. There are all kinds of repercussions. You will have back in france. Tom keene this is not a threemonth thing. Michael mckee this keeps going. Richard haass if syria alone has generated 12 million iraq, nine year nigeria is reducing large numbers. There are enormous amounts of people who say they need safety someplace else. Tom keene we will touch base with us again with the ambassador. Thent talk enough about article to get you up to speed. Art or question moves across to asia. Will china derail the United States . Stay with us. Tom keene a buoyant equity market in futures are up 33. Dow futures are up to 60 right now. That is a good tone to a fourday work week we begin on tuesday. Now our top headlines. The chineseio economy is still struggling to regain momentum. Exports fell by 5 in august is a week demand overseas and imports were down by almost 14 . Chinese stocks fell on the news they bounced back to post again for the first time in five days. Angela merkel once the rest of europe to do its share in the worst refugee crisis since or two. She is adding world war ii. She is adding the numbers. She is pushing for the eu to impose country by country vote is for refugees. We spoke with the former Italian Foreign minister. We are a collective community of 500 million people. That makes this a tiny problem. The real problem is the lack of collective action. Ramy inocencio there will be a resettlement plan tomorrow. Hillary clinton says she does not need to apologize for using a private email account. The president ial candidate told the associated is that what she did was allowed. She said the questions about her emails have been a distraction, but have not hurt her campaign. The president knows how to play to a crowd. The president referred to new england quarterback tom brady, whose suspension is listed lifted by a judge. Even brady is happy hes got a union. The man is back. You know if brady needs a union, we definitely need unions. Ramy inocencio the Nfl Players Association filed suit to have his suspension overturned. Tom keene are they damaged by this uproar with mr. Brady . Michael mckee they rallied behind him. The people in new england really closed ranks behind tom brady. Thursday night is patriots and steelers. Tom keene a real football game. Very cool. Here is brazil. It is growing and booming capital. The gdp is a straight up moonshot. Question getting ugly. Richard haass is here with us. He is the expert on this. The does dr. Oneil say is prescription . Richard haass its going to be fundamental house clearing. The degree of corruption is profound. She doesnt have the credibility to clean it read she is associated with the. You have to reduce the scale of the government. Brazil is so topheavy. They have ignored a lot of the intellectual thinking of reforms. Publicthey roll back the sector and allows the private sector to work in a fair way, its not going to grow. Michael mckee that chart told the story. The rising tide lifted the boats, but they had to pay for that tide. Richard haass you saw some slight reforms back when. They have been overwhelmed by the government stepping in for the slowdown. Its sad. Its a country with a great future and always will be. We thought that was ill had escaped that trap. It looks like they are back there. There is terrible news out of argentina. Tom keene the markets provide the incentives or change and reform, or is this another argentina . Richard haass i dont think its going to be another argentina. I dont see that kind of abuse at the top. You have to worry about the election next month. It may not transition things as much as you would like. Brazil should be doing so much better. You look at the basic ingredients, the physical opportunities there and the population. It just cant get the political leadership. Tom keene there was an article about an impeachment having a value. No value. Richard haass i am not persuaded she is going to go. Look at the next four years. You have to assume she is going to be there. How do they get out from under it . Tom keene its great to have you with us this morning. We will get to iran in a moment. We need a data check here. There we are. Futures are up 34. The euro turns as the dollar is churning as well. I am watching oil. 4540 on oil, that will be interesting if that makes down to 43 a barrel. Michael mckee this is bloomberg surveillance. Withis Michael Mckee along tom keene. Yesterday, the president announced 300,000 Government Contractors will be eligible for paid sick leave. Congress is back in session. They are here just in time to regret how to stop the Government Shutdown. We are in washington. This is going to be a very tough rest of the month for the president and congress, trying to get us through to a new fiscal year. Theyve got iran. Theyve got banned parenthood. Theyve got a budget with nothing on it yet. That is very true. Its going to be a very busy month. Congress has been gone for a fifth week five weeks. They are trying to us a budget by the end of the month. The president has been doing some executive actions. You cant go around congress on the budget. You have to work with them. There isnt much partisan action on this. The republicans are on one side and the president is on the other. They do have that september 30 deadline. We will have another Government Shutdown like we did two years ago. Michael mckee they are only an actual session for about 10 days. That is very true. There are a lot of ideological things going on. There is a debate over banned parenthood. The republicans who control Congress Want to defund that. They have not been able to come to any consensus yet. That,y are not able to do there is a tough deadline at the end of the month. Tom keene i have not heard much recently about speaker john boehner. Where does he fit into the calculus . He has a very tough job. He is trying to keep his caucus together. There are several republicans that have plans for 2016, they are running for president. He is trying to control the caucus and avoiding the check down shutdown. This is what he said it when the republicans took control of the senate as well. He is trying to usher things through, but he has a tough agenda. Some republicans dont want to work with the president. Tom keene thank you so much. E continue with Richard Haass lets talk about the pentagon and how they fold into this. We dont have a military parade like the chinese do. Richard haass for good reason. Tom keene its a different formula down there. Give us an update on that huge part of our federal budget. Richard haass the most interesting thing about the pentagon as a percentage of gdp, its at the bottom of the post world war ii standards. We are not spending as much as we need to. Tom keene do we need to spend it on sophisticated toys . Weve got some very hightech and expensive items. We have a military retirement that is unsustainable. We have to increase our deployments in asia. We are fighting wars in the middle east. We dont have enough resources to do all of this. We are cutting manpower. The sequester isnt enough. Michael mckee how does the debate over iran influence this . Does it play separately from the budget mess . Richard haass there will be a residue. This is my hope. People will quickly did it and start focusing on the rest of the policy. What do we have to do with our policy toward iran and other countries in the region to address the shortcomings of the agreement. . That is at least constructive and we can have a constructive conversation about policy. We are talking about the refugee focus in europe. Hour, ecowill be here. Pimco will be here. Stay with us. Worldwide on television and radio, bloomberg surveillance. Tom keene this is what the professionals watch. Copper. It is moving in the right direction. To 239. Is up that is a huge deal for the system, financial construction of the commodity business. I am watching copper futures. Michael mckee this will give us an indication of where the economy is going. So far, things are slowing down. We have commentary this morning from the San Francisco fed president. Wall street journal interview. He says there are some significant headwinds that have developed. Wo fed predicting t rate increases. He is doubting if they will do it once. There is a lot to think about. Tom keene we are nine days away from the annual extravaganza. What is going to happen in the next nine days to assist janet yellen westmark . Michael mckee almost nothing. We do get retail sales. They will have to base their decision on what their forecasts are. Williams is a voter. What he has to say is important. He is not as important as well dudley bill dudley. Tom keene 10 days ago, october popped up. Is that next . Michael mckee its a question of how do you handle it question mark . There is no press conference. Tom keene we could have a press conference. We could bring in the people that watch the fed and tried to figure out where Interest Rates are. If you dont move in some number, will you have a News Conference in october to have the option to do it . Haass, on richard your walls are all of these photographs of another time and place. How did we get to the place where central bankers run the world . Richard haass fiscal policy doesnt work. Legislatures have broken down. We have central bankers do too much. That has become the only tool. Going back to what you were just talking about, the difference between stan fisher and bill dudley. Janet yellen is getting different signals Michael Mckee im not sure they are completely different. They are trying to manage market expectations. Dudley spoke for everyone when he said i dont know what is going to happen. I am less compelled to raise rates now. , he still could go either way. Wouldnt you like to be a fly on the wall . Tom keene we will talk about pimco in the next hour. This is great. This will be on television and radio worldwide. Stay with us. Looking forward to it. Bloomberg surveillance. Tom keene equity futures are higher this morning. Dow futures are up 267. We say good Tuesday Morning to you. These are our top headlines. Ramy inocencio tom, thank you. There is a takeover in the pharmaceutical business. Concordia health care is buying a british company. The price is 3. 5 billion. The House Democratic leader is dismissing concerns about Hillary Clinton and her private email server area nancy pelosi talked about the front runner. She said the issue is being overblown. We all have faith in Hillary Clinton and her credibility. She did not send emails that were not classified. I think the other side is trying to make something of it. Ramy inocencio she told the associated rescue has nothing to apologize for. Sonys christian themed movie war room was the top at the box office. It again at 12. 6 million. Ken 12. 6 million. In 12. 6 took billion. Is keene the new movie three months away. Ok. Iran and the challenges we see there. The quote over the weekend was stunning. We have stopped the highway race. This is what colin powell said. It is foundational republican pluginseven as few agreed to the transaction. Has thought long and hard about this. Give us an update on how your aching has changed. Over the last three weeks or three months. Richard haass the treaty itself is a mixed bag. It is a ceiling on Iranian Nuclear capability for 15 years. There are two big flaws. Togives them greater access resources. Years, the 15 constraints on its capacities in the nuclear area come off. What happens after 10 or 15 years . Andkeene are the president senator kerry informing america westmark . Richard haass there is some difference in the understanding being around iran and the International Atomic agency. What will we do to deal with the regional thrust . How will we be sure that 10 or 15 years from now iran wont start accumulating uranium. That is the stuff that we need to focus on. Michael mckee you have some ideas for that. You say that congress should prove approve the deal. Hard haass i think thats its too late to amend the deal. Its not the deal i wouldve negotiated. Its the only deal we have. For a great power to say nevermind causes as many problems as it solves. We have to strengthen the countries around the region such as israel. We have to discourage them from having Nuclear Programs of their own. We have to think about how after 15 years, what do we do . Have a ban on iran so it cannot accumulate the basic ingredient of a Nuclear Weapon down the road. I want this to be permanent. I want openended prohibition of iran becoming a nuclear power. I think there is a decent chance the europeans will help. I think its something we can insist on. A bipartisanbe commitment on the part of the United States. Tom keene are changing relationship with saudi arabia, it is iran versus saudi arabia. There is a generational changing of the guard. Are we ready for that . Richard haass im not sure the saudis are ready for it. The inhouse fighting has not unsettled. They are one of our most difficult allies. We have disagreed on some fundamental issues. They have been the principal provider of resources to radical islam. They have been the problem. Tom keene within this, i think of the stereotype and americans have. It goes back to lawrence of arabia and alec guinness. If you were speaking to americans now about how we need to address these geographies and cultures, what is the number one projection . How do we be assertive . Richard haass we get them to do the reforms they need to do. They are not going to listen to us. Our notion of a stable middle what mr. Resembles rand and mr. Mcnally have given us by the way of the map, that is over. Arabiarried that saudi may be in play at some point. This group that calls itself the islamic state, its not going to be content with somebody controlling mecca. One of the biggest showdowns is yet to come. Can we survive the onslaught that is going to come . Michael mckee that is a stunning statement. We have to have richard back to talk about that. Tom keene absolutely. Michael mckee you are talking about a pending world. A pending the world. Ending the world. Richard haass drones cant deal with the underlying challenge. Willeene we talked chinas slowdown derail the United States. Michael mckee nope. U. S. Ts are only 12 of gdp. We are selfsufficient. Yes. Absorbted states cannot it. No. It will slow the American Express a little. We will give the passengers more time to enjoy the scenery. They mean the american economy. Tom keene what an interesting september this is. Economics and International Relations and the linkages in the finance as well. I said this earlier, i am watching the commodities space. Michael mckee i am watching china right now. We have some Economic Data coming out overnight. We get prices from china. We will see what the impact in the decline of the u. N. Has had on prices. We get the money supply. It does put pressure on their base money and brings deflation. Tom keene we are linking in the refugee crisis into something that may have a voice in the crisis. That is francis. He is attending the united ambassador, the pope coming at this time . Richard haass he will put a focus on the humanitarian side of the crisis. He will also talk about climate change. Dont be surprised and he comes to new york this month that he puts a spotlight on climate change. Tom keene what do you most focus on within the refugee crisis . Richard haass how do you accommodate this scale . The scale of it, there is a mismatch between the scale and the response. Tom keene richard haas is with us. We rarely dorn as to sports. There is an iconic moment tonight. This will be every stroke and every swing. Michael mckee its almost shakespearean. You have one heading for the throne. Serena could win the grand slam. Standing in her way is her sister. She might be the only person who could beat her. Tom keene this has started in 2002. We are 13 years into how they have changed the sport. In our next hour on radio and television, pimco will join us. Will link in a smart conversation on economics and finance. Much more on this 40 work week. Four day work week. This is bloomberg surveillance. Good day. Good morning. It is 8 00 on wall street. Stocks rise and so do markets worldwide are we live in interesting times. WithMichael Mckee along tom keene. We are watching a lot of green on the screen this morning. Chinas trade data. The top story today, five things that will influence trading. You have got to start there. Forex reserves reported down 93. 9 billion with the shanghai composite finishing up 2. 9 on the day. That has everyone feeling a bit better. Betterns are feeling with the dax up. The stoxx 600 is higher by six points. Other stories in the news today, refugee continues to grow refugee crisis continues to grow. We are told it is not going to stop hurray president obama and congress are back in washington. Is it going to matter . Out with a note this morning, there is now a 67 chance of a Government Shutdown october 1. I mentioned european stocks. Good news economically. Secondquarter gdp up. 4 above expectations. In the first quarter, it was up 1. 2 . The economy theyre performing better than people had forecast given all the talk of a global slowdown. We also have a deal in farm appeared come coria pharma. Concorde ef. Concordia. 250 points. 6 . Oints higher, one point the euro, we should mention, 111 64. The bond market reflecting better economic prospects or perhaps better prospects for the fed rate. A fiveyear, 1. 49. 72 basis points. Here is an interesting picture. Up to 4 2. 6 . 0. 6 . Richard is from columbia university, where he teaches a a management company. He joins us now from the headquarters in california. Im curious, your feeling about how dangerous the september is to common i were talking about everything going on. Fedhave the San Francisco president today saying he is not even sure he wants to raise rates once this year. How do you evaluate what is going on in the world and the threat to u. S. Global economies . A great point. S if you are focused solely on u. S. Data, the fed would be hiking. Growth is above trends. There is good reason to think inflation will rise toward target. Rise, it will because it will be because of developments. Terms of economic activity, and the tightening of financial conditions you referred to three stronger dollar. I think they are nervous, potentially about hiking. I would point out a danger of this strategy is that you get into a situation where if the data is weak, they dont hike. The data is strong, mike would you be nervous about the Global Economy if you were sitting in the room . Richard that is a good point. I would observe the global isnomy is slowing, china having a difficult issue with transition. On balance, i think stan fisher said in an interview recently, you will never have enough data there there will always be a reason to put it off. If i were there at this point, i would probably be in favor of getting a hike in getting a hiking cycle started. This morning, coast to coast, we are brought you brought to you by before will house industry. Need transformative device from the industryleading experts. Find out why online. Again on radio and tv worldwide with richard clarida. Professor, is the Global Economy in recession . I know that is not a negative gdp, but is there enough mediocre where you could say it is a recession recessive World Economy . Not say thatuld pet you have better prospects for pickup in growth in europe as well as u. S. Theg jump chunk of Global Economy there. I would not say Global Economy is in a recession and we moved away from that myth five or six years ago. You have rapid growth and it is now more of a multispeed world. Should they raise rates or not raise rates . Why cant there be a middle ground, where we get off the zero ground, wait for more information, we do not wait for a vector, whatever you want to call it. Why cant we find the middle ground . Why is it so hard . Richard that is an excellent point. Dated dependent monetary policy, i wrote recently data dependence is not a monetary policy. Policy is about how you react to data. They have not divided us with guidance and i think you are absolutely right. Would be possible to have an initial rate hike along with communication about the conditions that was a poor future hikes that would go a long way to getting us out of the catch 22 situation. They could raise in september and explain one and done and that would be the markets . Richard i would give much more todance as they respond inflation, the impacts of the strong dollar and so forth. I want to rip up the script. I put you posing as two of our smartest people. Presentclarida on the refugees and migrants debate in europe, the size of it, the. Cale how has germany responded . Merkel has shown real leadership. It is obviously an enormous humanitarian crisis. Merkel is basically saying no, we collectively as europe have tohave a plan, and ability absorb this flow. She deserves high marks for that, absolutely. Impacts there a market the rest of the world has to worry about . I do not think there is a direct impact. The direct impact as the crisis in the middle east and we are aware of that political uncertainty. This is one of the collateral consequences of turmoil. Awful humanitarian crisis. Tom we are back. In september, richard claritin comes back. I think he took off in august mix ofe we are with a International Relations, economics and what are you focused on in this work week . The fed is the overhang to everything. You wish they would get it over with because it would remove the thorn in the markets side. The question is, what impact will they have in the economy . We do not know. Keep watching the chinese economy and the data to see the impact. Betterthanexpected gdp in europe. Developed markets are not doing badly right now. Datalet me do a complete check herewith futures up 30 and dow futures up. They were up earlier in the trading day. 27. 80. A 10 year yield, the twoyear indicating good news about what the fed will do. It is a dramatic reversal, a where we wererom four or five trading days ago. West texas down, 45. 71 on west texas. Giving it up. Last few days. Ort of in the middle ground the euro, 11167. The yen, that is a big deal. A stronger yen over the last few days. Tom good morning, everyone. Lets get the latest headlines. One of the largest owners of network tv affiliates in the media general has agreed to buy meredith corporation. The new company will be called meredith media general, headed by the meredith ceo. General electric is expected to meet approval. A wall street journal says the European Union might sign off on the gdp deal today. Antitrust regulators might do the same. Atis a major retrenchment glencore. The ceo puts its dividend on hold and plans to cut 10 billion of debt through next year and will sell assets as well as more stock. Under pressure from investors. Market value has fallen by half this year. Joining me now is julie hyman with more. Julie stocks are on the radar. We seeing them higher once again. This continuation of the incredible volatility we have seen as well with stocks, we have seen enormous moves over the past couple of weeks. We are watching the mix as well because we might see a break in an 11 day streak over 25. Days over theo past couple of years that were over 25. The volatility is very high. Applealso looking at which has its regular event to introduce its product. Newse are looking for any on the apple tv. We seeing a pretty broad rally among banks. Shares are trading higher by about 2 . Analysts talking at wells fargo about valuation, the stock is pulled back 6 year to date. Analysts are saying it is time to come back in and buy. These are only examples. Of the overall rally we are in the market is morning, partially on the back of a rally that happened in china at the end of a session overnight. The back of last friday the markets all fall. Quite interesting on what apple will be doing. We might see a bump, which is sometimes the case. We will look forward to that. Julie sometimes there is disappointment when we actually get the news. More is coming up after the break. Stay with us. Tom good morning. Futures again up 30, down from will we were in the last hour. Bloomberg surveillance brought to you by invest xco. Walter davis has more than 20 years of experience. Ask the expert. On radio and television worldwide, bloomberg surveillance. Michael . Bit of breaking news. The peoples bank of china is proposing a reserve requirement trading, and they say it is not capital controls are we will see. It brings up a question and tom just gave a little bit of a market check. I want to put the question to , our guest. Ida he is coming from their California California studios. At this point, what is the Investment Climate . Are looking at chinese trade data that were not good, but were seeing markets around the and i am wondering if commentary is making too much of the whole idea of lack swans and things going on that will affect the fed and affect all of this . A couple of things are going on. There is a repricing of chinese Growth Prospect p there is also of their ability to get their arms around the policy challenges that they face. Legitimate. Is the challenge we all have his china is trying to design the unprecedented for an economy that size, 11 trillion in gdp, more than one thing people. That is to make a transition from a deaf one model to another model replying relying upon domestic demand. That is a factor. In terms of lack swans or the list we can come up with a of our favorite ones, but that is what this is about. Repricing Growth Prospects in china and the longer challenges policymakers face in reaching their goal. Reprice to a new value . John herman at miss it mitsubishi, theyre all talking about what youre talking about. Talk about a new normal, a yield , is that really what is going on . We are just repricing to a new level . Richard sure. The new neutral is once the banks do begin to hike, they will hike at a slow pace. It is obviously an important factor in markets as well. You have, for example, the fed is done growing is alans sheet, but you have got the ecb and the bank of japan doing massive quantitative easing and Central Banks cutting Interest Rates. That is very much going to be the landscape for the next several years. Tom Michael Mckee, we talk about the big stories. As one example, sweden is its own story in itself as it deals with tepid gdp in europe. Mike it raises the question of whether or not the fed is communicating well with markets at this point. You have bill dudley come out and say his enthusiasm for a rate increase wanes. Now today, John Williams in the wall street journal comes out and says, maybe the two rate increase as i all for this year will not happen at all. People are getting whipsawed by this. Richard they are. As we send the prior segment, data dependence is not a monetary policy. You see stanley fischers take on his preferred course. I know all of them. They are worldclass economists. But the fed is a committee chaired by chair yellen. At some point, she will have to get an arm around this and lay out the liftoff strategy is. Mike does it make a difference if they raise rates 25 basis points or they dont . Will we notice other than the the rate . Richard increase itself is immaterial in a 17 joined al economy. What they are concerned about, of course, is that monetary translated through Mortgage Rates and currencies. In all three asset markets, they do not have full control over the Market Reaction and over the market pricing. Have much less influence than they did 20 or 30 years ago. That is why there is all the skittish in a not because my five basis points means that much, but because of the way the Financial Markets are going to factor that in. They have not laid out a real strategy for the exit. It is part of the challenge. Tom thank you so much as we begin a fourday work week. Getting back to the autumn as well. A lot of great themes in International Relations. Neil will join us in this hour and we will move on. Up 31, dowtures futures of 250. West texas intermediate, it holds on today. 4550 per barrel. A lot of talk of cheaper oil. Here are the latest headlines. The European Union is coming up with a plan to deal with the biggest refugee crisis since world war ii. The ecb president will unveil proposals tomorrow and this is affected to say the best way to handle the crisis is for all 20 countries to take and refugees. Congress gets back to work this week after its august recess. The Senate Begins debating the Iran Nuclear Deal today. President obama already has enough votes to sustain a veto if both houses vote to reject the agreement. Beginers may also debating a proposal to cut off planned parenthoods federal funding. Amazon is preparing to release one of the least expensive tablets on the market. Amazon will begin selling a 50 tablet with a six inch screen in time for the holidays. Lets get a data check right now and take a look at what is going on with the futures are at in the futures. A 10 year yield moving higher this morning. 2. 16 right now. Crude is trending lower, though bouncing off the lows of this low this early session. Broadcasting live to boston, to the country. And to the Financial Capital of the world. This is bloomberg surveillance. Mike good morning. I am Michael Mckee along with tom keene. Among Financial Firms four times in a row. No 8 30 numbers this morning. Number we have out, Small Business optimism rises to 95. 9 from 95. 4, trivially below the 96 it was forecast. Reasonable news but not a lot of change in the southern indexes. More hiring and not more pay. A little more Capital Expenditure and not more sales. Cared we dof flat get the janet yellen fed labor Market Conditions index. I am not sure people pay a whole lot of attention. To all of youing on the radio worldwide are particularly those of you on television as we sima asked from our radio studios. Todays proven once again i have got a face for radio. Mike i was not going to say that. Tom come in close. For those of you on radio, the headphones do nothing for me today. You need the fancy colored headphones. Tom yes. Lets get that to economics and the debate of the moment. Neilve been speaking to dutta. It is deal day. It is 2 billion. Blackstone blackstone is to buy strategic hotels. Six plus three, nine plus two, 11 billion of transactions this morning. Is about easy money. His janet yellen driving mergers and acquisitions across america . Think at some level, a lot of the deals are getting in front of what is likely to be a rate hike. Tom yes. The cfos are going, lets go, lets go, lets go. It shows how everything is interlinked. Glass halfekend, a full guy in the american economy, what is what does the caution crew have wrong . Joes caution on the damage the fed could do, push against that, please. I will not speak specifically to joe, but those on the dovish side of the consensus, lets say, have been pointing out the same set of risk factors for the last month. Week Global Growth will spill out, forcing the fed it clearly has not. At some point, if you have been saying the same thing for eight months and it has not translated data whatsoever, you kind of have to scratch her head and say, maybe i should change my assumptions. It is a little bit slower than what we had going into december, but the income generated from the labor Market Recovery is basically steady at 5 . If you take jobs, hours, and i think the policy mistake in the u. S. Already happened. It was in 2013. We had a 100 basis point back up in longterm Interest Rates. We lived. The economy did fine. Dont know whether raising rates would necessarily be a policy mistake, but dennis from the lannett fed told me in jackson hole that the probability of a mistake affecting the economy is almost zero. If things go long, they could always lower rates again. Do you agree . That is part of the option now the approach. Simple, sayings go. Theyre concerned about the strength of the dollar, mostly from the Global Economy. That is sort of keeping the feta little cautious here. I want to speak a little bit about that. If you look around the world, thethe exception of euro vast majority of companies that have had to cut rates after raising them are basically small open economies, heavily tethered to get stuff out of the ground and then send them overseas process. Rates andd is cutting has been cutting rates because of milk prices. Does anyone honestly think the u. S. Will fall into that same trap . Give me a break. Labor markets are tightening. That is putting pressure on services. Rental rates are firm. The fed is an institution, i think, that things in terms of costs and benefits. To me, the costs of keeping rates at 0 tom i will go back to alan krueger on friday. Is the challenge our central bank is having because jerry allen is observing two american economies . Or are they looking at it at full stressing one economy . Neil they are setting policy to the macro economy. Tom on the greater economy and the dialogue is not that. Neil shery ahn raised some eyebrows when she spoke about inequality about a year ago. Talking about these issues. Good actually look at the data, look at where rate wages are up rising. Their rising for those workers with a large propensity. That is where the raises the wages are rising. They are closing the gap quickly. That is why if you think about the labor market, and the fed, the fed is actually helping to reduce income the desk income inequality. I think the dovish arguments are losing their staying power as the labor markets continue. We sort out the economic tea leaves. A fourday work week really moving to september as well, futures up 34, the dow futures up on a 10 year yield. Points thisasis morning. What i would really watch is the twoyear u. S. Full faith and indicating48, really at the top end of a higher yield for that shortterm twoyear yield, something much more important for the fed. The dollar yen, 11999, almost two 120 this morning on the end. It is time for a morning mustread. Writing in the lactic on serious refugee crisis. He quotes from a doctor of m. I. T. Who describes himself of someone who happens to be the child of lebanese immigrants. As americans, we should know a bargain when we see one. Syria is a fire sale. The golden door should be opened with Syrian Refugees first in line. I saw this quote and i was very personally touched by it. My father is from the philippines and my mom is from singapore. Theyre both migrant immigrants. I would not be here without them and they have made successful jobs and successful careers in pastnited states over the years. The original author opened up the doors to the United States. It really touched for me. He was the only one of the president ial contenders who said unambiguously, sure. Bring more people here. It seems like a nobrainer to me and perhaps to other people as well. I am a descendents descendent of immigrants. I imagine pretty much all of the president ial candidates are descendents of immigrants as well. Whenever they may have come to the country. You are looking at live pictures right now of the syrian refugee crisis. We have an looking at these pictures for the past few weeks and months. It will continue going up. It is. We will talk about early movers based on analyst action. Tom a Beautiful Day in new york. We welcome all of you. Lets get to the headlines this Tuesday Morning. United autoworkers will pick the target for next week. The talks will determine the contracts for 140,000 american autoworkers. Plans to test delivery of fresh food and groceries later this year. The trial will begin in San Francisco and one other u. S. City. This puts google in direct competition with amazon. Com. Are currently an 11 billion industry in the country. Finally, disney is extending its Movies Anywhere Cloud Service 2000 from amazon as well as microsoft. It lets customers store movies from multiple vendors on tablets and smartphones in order to watch later. Ease the moveelp from physical dvds to fit will to digital sales. I wanted to take a look at individual state free market movers. Lets start with alcoa, being updated over at bank of america. Analysts are saying the companys shift to rely more and engineered products, not raw aluminum, but stuff made from aluminum, that that is starting to bear fruit. A recent acquisition would help with that exposure to aluminum itself. At the same time, another commodities strategies wrote aluminum may be near a bottom. These things would be positive for alcoa. We are looking at a trio of internet stocks this morning. These three are being initiated with by ratings. Facebook, google, and twitter would be the top picks in the particular space. They call a potential here real and spectacular that we see a structural change. A little seinfeld reference there. The head of the apple announcement for product upgrade, interestingly here Morgan Stanley is updating the stock to an over rate overweight. A big increase come outpacing some of the gains we are seeing in the market. At Morgan Stanley looking at a recent survey saying this demand has been resilient even in the face of the apple watch. It is interesting here that there is still demand for a focused product on your wrist and not just an apple watch that does everything. I have bought the fitbit and i have that using it and i do love it. Because it is so focused that share price is down the lowest and thursday, june 18. We will see what happens. Julie tom and mike will be back with neil dutta. This is bloomberg surveillance. Tom good morning. We welcome all of you on television. Invesco, whichby believes it is time to say goodbye to the traditional 6040, and say hello to modern portfolios. Mike mckee, you have got news. Many i do not know how people are actually trading russia but all russian exchanges, trading has been halted. Apparently dealing with equipment problems. They will resume trading, but they do not know when. Strongergoal after a thursday, friday, and monday. With emerginge markets. His is neil dutta futures up 33. I just looked at the eci wages one of thes, statistics we have on our paychecks. Was six orike it eight years ago. It is not back to where it was. Like you say no, there is wage growth. Where do i see wage growth . There are a variety of wage indicators as you mentioned. The media wage tracker, for apple, is above percent. If you look at compensation per hour from the bureau of labor statistics, 2. 5 over the last year. Because aoks fluky lot of the weakness was german by incentive compensation in the northeast. Tom which number do you use . I got this over the weekend and i was at a barbecue. There was nothing healthy for me. How do you measure wage growth . Most of our listeners go, neil dutta is not. Principallook at components analysis, you take the indicators, they are trying to account for the same thing. Then you try to extract the underlying signal from these indicators. What it tells me is underlying wage growth of 2. 5 . Is, is the bigger story that about where wage growth should be . Reason is test productivity has been quite soft. Typically, compensation growth equals inflation plus productivity. We have had compensation growth of 2. 5 and inflation. As we set up for autumn and september and october, whatever the fed does on to next year, the productivity question is the core issue for smart people. That gets to another aspect. F the economic picture Companies Going to spend to increase productivity. Or this point, is it a question of holding on to what you have got until you cut costs every chance you have . The interesting. We have been here before. If you go to silicon valley, they probably laugh at this discussion we are having. It is not without precedent in the u. S. Economy. It is a whole notion of the solow paradox. Productivityhat will ultimately pick up and that will be an important factor. Research Development Spending in the u. S. Has rose risen very sharply. Get capital stocks relative to aggregate hours. You will see jobs numbers like we did last attic, somewhat slower payroll growth, stronger earnings. The revisions were 44,000 positive. Neil i agree a few. It is not reasonable for us to jobs becauseany the labor force will not support that. As we get slower employment growth, we will see Hourly Earnings accelerate. Think capital to deepen, which would support productivity growth down the road. I think it is important to whether the fed could ultimately normalize rates. Quite a few sit there with excel spreadsheets. You download Economic Data and look at them. The u. S. He state of economy . We are clearly not growing at 3. 5 at a regular basis. Doing and how might the headwinds John Williams is talking about in the channel today, affect us . If you haveost show a 10 increase in the value of the dollar, it cut gdp by about. 5 in the next quarters. What i will say is really in some models, this is in the range of a forecast. We all play this little game. My sense is underlying growth in the u. S. Is around to 5 to 3 . Private domestic demand, we are already there. The dollar is a drag, but at the same time, government takes Government Spending is accelerating. We are sitting here talking about the dollar. Of the research out of jackson hole showed the dollar have less of an impact on import Price Inflation because it is already sourced in dollars. A lot of the traded goods. In your view as an economist, is a normal relationship with stocks and bonds roque and . We are an artificial great higherion that we about rates, that for stocks, whatever, is that relationship broken . I think it is true the becausearket is high bond yields are low. I also think it is true that it is not necessarily the act of the market that is significantly overvalued, but the bond market that is. I think as we continue to price in said tightening, that will weigh on the equity markets. Over time, ultimately when the that is raising rates, that is a sign of healthy. I do not think the equity market will have the kind of run it did over the last several years. I think around percent riskadjusted returns in the equity market over the next couple of years is a reasonable scenario. Tom a lot of doom and gloom articles about equity market evaluation. Know this is seen by many on wall street as a contrary indicator, but they are suggesting markets will go up. And that there is a lot of room to run. If were going to start seeing the kind of growth that will propel companies to topline gains, and therefore profits that will justify higher prices, or whether it is just the psychology we have had for a number of years, that dos oh is go up so we have got to buy in . It depends on your time horizon for an the markets. What ultimately gets significant bear markets in stocks is the fed inverts the curve or we have a recession. We have neither situation today. The curve is not going to invert for quite a long while. If you look at cyclical sectors of the u. S. Economy, whether it be durable good spending, these remain well below what you consider normal, relatives in terms of shares of gdp. I think there is a lot of room to run. To me, declines in the stock market will be buying opportunities. I think what we need is a little bit of an abatement of what we call the news affect, which is all of these tape arms coming off with china evaluation. Crash risk. The red headline coming across. Tom you are blaming us for the unnatural crisis . Neil i am not. Im saying you need to have some ease of the negative news flow. Is iay to break that getting people to focus on something else. That is sometimes fundamentals. The spill over the market to the economy usually takes a long time. Tom thank you so much. See mike say this is a beauty contest . Mike we lose. Tom we thank you for joining on television today. Bloomberg surveillance will continue on the radio. Market day is coming up as well. Dow futures are up. The 10 year up 2. 19 . Erik we are about 30 minutes away from the opening bell and it is shaping up to be a big day for stocks. Good morning, everyone. The s p 500. Here is a look at futures right now, suggesting things will be very different this tuesday after labor day. He was equity indexed interest as you can see here, up 270 points. Almost one point 7 . Treasuries, meantime, are a little weaker. Investors appear to have an appetite for risk. Yield ticking up here the dollar index, as you will see here, is slightly down. Even with a weaker euro and a weaker yen. Some of that has to do with marginal strength. Here are some headlines were following for