Transcripts For BLOOMBERG Bloomberg Surveillance 20150922

Billion euros. I do not know where the figure came from, but they will be readjusting. Do i understand that i cannot buy a diesel vw in america right now . They basically shut it down. Vonnie yes. They have recalled diesel cars. The funny thing is the north american head was speaking last night. Clarification, i learned to etle, my a vw be father had a vw rabbit. There is our clarification on vw. A busy morning. Here are top headlines. Here is vonnie quinn. Vonnie chinas president , jinping arrives in washington. He has defended the way he has handled the chinese economy. He said the Government Intervention was needed to deal with systemic risk. More problems for volkswagen. And face billions in fines repair costs for cheating on federal air pollution tests. The Justice Department is investigating vw for possible criminal violations. That could lead to charges against the company or its employees. The head of vws operations in the u. S. Admits the company screwed up. Ande must fix those cars prevent this from ever happening again and make things right with the government, the public, our customers, our employees, and also, very important, our dealers. Vonnie the follett has spread to asia. South korea has launched its own investigation. The fallout has spread to asia. South korea has launched its own investigation. The board of bank of america combined roles last year. Off one ofst take his two hats. Either way, he says he will stay with the company. Scott walker says he is not the only republican who should be quitting the race for the white house. The wisconsin governor ended his campaign yesterday after falling in the polls and struggling for donations. Otherwalker i encourage president ial candidates to do the same so that the voters can focus on a limited number of candidates who can offer a positive, conservative alternative to the current front runner. That was scott walker speaking last night. Whohe is not the only one is ending his campaign. There is an obvious reference to donald trump in that soundbite, who walker never mentioned by name. Recently he felt to 10th place. Pope francis heads to the u. S. Today. He ended his trip to cuba by visiting the shrine of the countrys patron saints. The u. S. And cuba reestablished diplomatic relations this year, a move francis helped broker. Those are top headlines. He is landing at the air force base today. Tom 4 00 p. M. This afternoon. Wroteall street journal about him in a great section yesterday. When does he rest . His schedule is arduous. It is amazing, the geography he is traveling. Vonnie he will be at Madison Square garden at some point, central park. Lets do a data check right now. I want to get through this quickly and talk to vonnie quinn about the markets. All you need to know is the futures deteriorate. I believe when i walked in the door we were 20. Now we are 30 dow futures. Everything is in risk off this morning. Even oil finally breaks down. Onto the next screen, if you would. , 21. 14. You will see 23, i am guessing. The mexican peso may open with a forehand. My Bloomberg Markets article yesterday with Joe Weisenthal and Tracy Alloway this is something we never quote generic first, lx future, in sync off the london exchange. We have so much going on this morning. There is my chart bank. Lets go over to sink right now on the bloomberg terminal. This is a first for bloomberg surveillance. We have never shown zinc. Heres the headline of stockpiles in new orleans, of all places. Traded out of london, mostly new orleans, and mostly for stainless steel. Vonnie i did not know that the stockpiles were in new orleans. Londonrk barton in highlighting the mining deterioration we are seeing in the market this morning. All sorts of places, asia, dx wide down. Some of the currency conflicts down. Gold even gives it up a little bit recently. Vonnie the u. S. Dollar has become a barometer of the global mood. It is not a funding currency or a safe haven. The dollar just below 96 now. Is backing upield from where it had been. The german yield have you had a look this morning . Tom no, i miss that completely. Lets do the intro in the markets because vonnie is killing me with her probe bloomberg terminal data check. We may see 4. 00 on the brazilian real. Vonnie observed a negative twoyear yield on the german. That is something. It is wiping obviously in europe. Tom that is a huge deal to see german twoyear yield down. Michael mckee just sent me that chart. Let me get up the intraday chart so you can see off the bloomberg terminal the moving target we are dealing with. When we opened the show i made this mark here that we have already come below that in the last three minutes. Vw truly plunging right now. There is some of the market feel led by the shock and all of by the shock and awe of vw. There is news on syria. Russia has made clear this is the former soviet states of the caucuses that is the russian story. Christopher granville is managing director of the russian team, which barely describes his russia. Thinking of he joins us from the United Kingdom this morning. Nice of you to bring the russia crisis the list you this morning. Christopher there was also this tragedy in syria. Assad has had a relationship with russia for years. What is the traditional russiadamascus relationship . Christopher co. A historic alliance. Russia is being true to its ally over history they tend to behave. Tom what is the note for Vladimir Putin . Alwayspher he has called it the syrian state, careful not to personalize it. That has been his position since the beginning of the civil war in syria, and his position has been reinforced by the disaster of libya. Regards the west as having doublecrossed him over libya. They induced him not to veto a United Nation Security Council resolution to try to stop the violence. The resolution went through. It was used by the west to change the regime in libya. The country broke down and is now in chaos. And he does not want to see that in syria. Vonnie is there the idea this morning that there will have to be compromise between the west and assad in syria . Does Vladimir Putin not want to be left out of that . You areher i think spot on. What he wants to do, president impose himself in this escalation process, if you are talking about hitting the islamic state, and make russia and indispensable player. In the two years and the last change the game in syria, recalled mid2013, a red line had been crossed. President obama announced the United States was going to attack. It was Vladimir Putin who turned around that policy and brokered the chemical weapons decommissioning. What is happening in the meantime is he has entered into a huge geopolitical confrontation with the u. S. Over ukraine. It is a very big game. Tom i want to bring our viewers up to date on where we are. Michael mckee found this quote for us with a Christoph Reuter quote Michael Mckee thought it was just a superb effort by Christoph Reuter. Within that is the hand wringing we have of just do something. It was that roosevelt feeling from the 1930s. What is the just do something for the United States . Christopher it is difficult for us to sit here and think for the United States government. It is a hugely complicated, multifaceted problem. I would summarize, to something in the way i just mentioned. Prevent another libya. Because libya has been dangerous to europe. Saharas are across sub tom the ft this morning says there are 2000 Russian Troops deployed within missile support in syria. Need tip or 10, 2000 troops wherever . Chrisopher Vladimir Putin is saying yes. It has prevented a total crumbling of order in with disastrous consequences. Tom christopher gran will Christopher Granville with us. Story wet is a thought it would be a story this morning. It is quickly becoming the lead story. Olkswagen sets aside billions the stock is absolutely crushed over the last two days and has worked lower to new intraday lows in the last few minutes. Coming up, vonnie quinn and tom keene. We will look at vw with mark barton from london. Stay with us. Bloomberg surveillance. Tom good morning, everyone. Good morning worldwide, in the United Kingdom. London, millennial bridge not millennial, valenti him bridge not millennial, millennium bridge. Tom keene, bloomberg surveillance in new york city. We need to get the top headlines with mark barton from london. Mark the migrant crisis starts today as Leaders Debate which countries will help them. Authorities are in standoff with refugees across the continent. Withmseekers scuffled Croatian Police near the syrian border. Hundreds more are gathering in turkey waiting to enter greece. Thousands more migrants are expected today, up to 10,000 more. Chinas president ,s asian paying, flies to the u. S. Today , flies to the u. S. Today, where he will meet with bill gates and tim cook. The u. K. Works to strengthen financial ties with china, including a possible Stock Exchange link. Is appearing at the shanghai Stock Exchange. He says the two countries should stick together to grow their economies. Volkswagen is facing more problems after admitting it faked pollution tests on cars in the United States. The u. S. Department of justice is investigating vw for possible criminal investigation. And south korea wants to know if vw complied with its can pollution with its pollution standards. Tom i want to go to the bloomberg terminal, the intraday chart. Two days down, we have just barton, bounce, mark moments ago after an ugly half hour. I know you were covering that in london. The is the likelihood that ceo will have to step aside . This is becoming ugly quickly. Can he make it through the week . Mark tomorrow, mr. Winter corn, the chief executive, meets with senior Advisory Board members. The meeting originally was meant to be a rubberstamping of his contract through 2018. They were meant to decentralize power from the center as well. Things have changed since friday. What did mr. Winterkorn know about this divide . That is the 18 billion euro question. I say 18 billion euros, but it is 18 billion. That is the amount of fines it could face from the u. S. Bloomberg intelligence says it faces up to 20 billion worth of includeenalties that shareholder lawsuits and consumer lawsuits. What did mr. Winterkorn know . Vonnie the number is coming from 37. 5 million per car. Word from the any families involved in this bigcompany . Tom nothing. The only words of note that we , is in the last one for hours. Horn wants to win back the confidence of customers. He said the company was this honest with the epa, with the California Air resources board, and he said the company was this honest with all of you. This quote was memorable to the extent that he said we have totally screwed up and we are waiting to hear from porsche and from mr. Winterkorn, who said on sunday, i am deeply sorry. What did he know, though, vonnie . Tom mark barton, really appreciate it. Coming up in the next hour, the conversation with peter orszag on the nations improved deficit. Peter orszag on a Government Shutdown possibility and on the glide path, the smooth trajectories wished for by a Federal Reserve. From new york city this morning, this is bloomberg surveillance. Tom always magisterial, sometimes gorgeous. New york city, a cloudy morning today, just sparkles in the september air. Of course, a city that will greet the pope here. He touches down in washington at 4 00 p. M. This afternoon, then migrates to new york and philadelphia over the next couple of days. Good morning, everyone. Bloomberg surveillance. Next hour. G in our how about a morning mustread that ties in two of our guests . I have been using him to bank much, he is that good. Have behavioral economists discovered anything new, or are they simply replacing some wrongheaded notions of postworld war ii macro thatmics with insights people in business have understood for decades and maybe even centuries . It is a wonderful essay. Ook for it in Bloomberg View by justin fox. Two behavioral economists thinking oftentimes very mathy. Our guests will join us later on bloomberg surveillance in the 9 00 hour. Really looking forward to talking to George Akerlof and Robert Shiller on their new book as well. Chris granville is with us from trusted resources. Ess and themathin strange thing called behavioral economics. What is it . Chris i wish i had my wife here. She is an economics professor. She is an oldfashioned monetary economist. Thatkeptical view economics is parasitical, and it creeps into things vonnie we talked with bearish words the other day, a professor in the Psychology Department at swarthmore. He said psychologists are being employed by the Economics Department now but there salaries are going way up. They are all invading in, and what is really about justin foxs oped piece is a distrust in mathematical models. You came out of oxford. Is there a new distrust over the certitude of math . Weis in cambridge, england, were a little bit biased. There is a certain way of thinking, and intellectual structure, which can be brought to bear, i think profitably, as a layman, on a range of issues. What the economics of the incentives to what motivates us, to what makes us more or less productive, i think is profitable and stimulating in every sense of that word, words of inquiry. Because ultimately all our Living Standards depend on productivity. There is nothing else. Tom Chris Granville with us. We will continue our discussion on russia with him in a moment. Coming up, we will talk to chris whalen about deploying out of charlotte, north carolina, today. Stay with us. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Tom good morning, everyone. We are watching vw in europe. It is south, south, south, no question about that. Something to watch as futures deteriorate. The markets are on the move. Lets get to our top headlines. Here is vonnie quinn. Vonnie chinas president is starting his First Official state visit to the u. S. Today. He told the wall street journal that his country will change and evolve despite the current slowdown. He says that his visit concludes friday with a state dinner at the white house. His first stop will be in seattle. Boeing may get a big plane order from china. Chinas government signs off on all plane purchases by the countrys airlines. Russia and israel have agreed on ways to keep their militaries from clashing in syria. Russia has said it will consider sending contract combat troops into syria possible war, and it has forces along the border with syria. Scott water is calling on republican president ial candidates to unite to beat the common foe, donald trump. The governor of wisconsin is dropping out of the race. He says other candidates should continue should consider doing the same. He did not mention truck i name, but he said candidate should focus on offering an alternative to the front runner. Iott walker today i believe am being called on to help lead the field in this race with a positive conservative message to be able to rise to the top of the field. With this in mind, i will suspend my campaign immediately. Tom walker 1 Vonnie Walker was led the polls in iowa but now is in 10th place and is struggling to raise money. Fiorina appeared on nbcs tonight show. She showed a very nonpolitical side. Please come take a will walk with me i want to lie back down in my nice warm bed vonnie there were some serious moments. That ben carson is wrong for saying a muslim should not be president. Tom you should get a papal blessing or something because you have to reason the news because you have to read the news. Lets move on. Does hillary ever sang . Vonnie she has not been on fallon yet, as far as i know. Tom coming up, chris whalen will sing for you. We are doing that here in a bit. Continue, im sorry. Vonnie i was going to move on a another comedy show, franchise with headwinds. The decision shareholders at bank of america have to make today here for perspective is chris whalen of kroll bond ratings. Give us the outline anyway, chris. Has been that with large public companies, you should separate the two roles. To do both jobs, and remember, these are managers, not large shareholders. These are people running the company that does not have controlling shareholders. By definition. You need to separate the board role from the guy who runs the business, and the ceo reports to the board. This is why you cannot combine the two. Vonnie is this a uteri lateral is this a unilateral action on brian monahans part . Boards can ultimately do what they want. We do not have one shareholder, one vote. We have a board that has a duty to the corporation, not to shareholders they are the indirect representatives to the shareholders. That is why governance is so important. Tom the banner we just put up is great, chris. I love your idea, it is physically impossible. I happen to strongly agree with you. The workload load in the modern office is too great. Chris they and of delegating the tasks to subordinates, where have a ceo that sorrell hasr martin himself the chairman. Why is it so important moynihan to do the jobs . Push backhink it is a to colonial times where there is the sort of this macho role. It is precisely checks and balances that gives you good management. Tom i want to link back to Stock Performance. Forget about the emotion of it, the soap opera. Just simply put, not picking on jamie dimon or mr. Moynihan i know them, i like them both but im sorry, chris, that is a grand canyon divide between the two. Chris if the performance of bank of america were better, we would not be hearing about this. You have this media frenzy around this contest between the board and moynahan and the shareholders, but the reality is, even if the shareholders voted unanimously to separate the roles, the board can do as they like. Flawed board process, inflated analysis, timelines are all wrong with this analysis. But give me one in our but give me one argument for this because there seems like there could not possibly be one. Chris it is a matter of convenience for the board. , if you have a strong outside chairman in other words, a strong outside director who chairs your Audit Committee that person is effectively the balance to the ceo chairman. I take the point. It can work. But i think functionally, if i am the ceo of a public company, i want my chairman next to me helping me deal with large shareholders, with other constituencies. That are really the board responsibility. I wouldis granville, say there is a different british itos than what we see in america a different british thos than we see in america. Chris it has been a part of the Corporate Governance code in the u. K. For at least the decade. If they choose not to comply code,ne or another of the the idea is that shareholders will judge. Tom brilliant. We do not do that here, right . Chris not yet. The new york Stock Exchange does require a certain number of independent directors. Tom chris whalen, the way i read the annual report, this is the old day when they were physical documents that you actually read. You know this. You start at the back, and you open it up, and there is the board. Everybody informed makes choices based on those names. When i do that with the bank of america, and my informed that this is an independent board . Chris their behavior suggests otherwise. I agree with my colleague mike mayo. Bank of america is probably the least reconstructed of the large banks. They still reflect the old ken lewis regime, because that is where Brian Moynihan came from. I think the bank, given his ,erformance and other issues really should have fought long and hard about picking this fight. If i were Brian Moynihan, i would have accepted a chairman. Tom what will we see today . Chris i think he wins. Tom chris whalen, thank you very much. We hope to get mr. Mayo here in the next couple of days. Coming up, russias reserves are on the rise. Maybe they have been in decline over the last couple of months. It is the subject of our single best chart, the mystery of Vladimir Putins piggyback. Stay with us. From new york city, bloomberg surveillance. Good morning, everyone. Vonnie quinn and tom keene. Time for the single best chart. This is a way cool single best chart on russia. Chris van Chris Granville is with us. A numeral for real to the u. S. Dollar anytime today. The actual challenge is a mystery. What is the quality of mr. Putins piggyback . This is a huge deal. This is a long chart, way up near 600 billion. Down we go. We improve and then we simply rollover. Chris granville is an expert on the International Relations of russia. Do you know what the reserves of russia are . Chris they have about 70 years of reserves in gas, 70 to 100 years in oil. I cannot remember the numbers of oil. Andchart, the line goes up down. We are talking about huge magnitudes, going from enormous to less. Tom when you take that over to cash i love what you did. You go from the hydrocarbon reserves, which are joined norman us, over which are ginormous, over to the cash reserves. Do you know what the cash reserves are . Chris about 370 billion u. S. Compared to a lot other countries, a large amount. Tom is it in play, through derivative instruments called upon already, where it is not available for mr. Prudent . Chris most of it is not in liquid form. Amount, and 40 billion is invested in local projects, but most of it is liquid. Vonnie from what you are saying, he is a very good leader with things like fiscal policy and so forth. What about those reserves when it comes to syria and engaging in war . Chris he has released some of them to Viktor Yanukovych just before the situation in ukraine. But a bubble, they are insured to move macroeconomics. Very countercyclical, very cautious, and he appears to have assimilated and internalized the point that if you lose control with public finances, you lose power. It is a straightforward incentive. Vonnie at what point will sanctions dent those reserves . Chris they are not really affecting the reserves too much since last winter when we had a big currency crisis in russia. That arguably is less due to sanctions than due to the oil price collapse. Tom we have the indonesian rupee, the brazilian real. If pressure breaks through 70 rubles per dollar, does he get into a currency crisis, which changes your story . Chris it would do during the difference is, we have already done that in russia last winter. It would take the oil price gap down again, well below the present range. Tom give me a price of where oil needs to go. Chris to 30, then another crunch in russia like we had last winter. It fluctuates, 40 to 50. Russia is a poorer country with physical challenges. Tom Chris Granville, thank you so much. We have some photos today. What do we have . Number three, at the Franklin Institute in philadelphia it is a lego model of the vatican. In honor of the popes visit. It was created by father bob simon, who spent 10 months creating this in his rectory. Thinks n mobile . Lego pope vonnie it is absolutely beautiful. Tom look at the people. One of my great moments at bloomberg was a phone call via, reporting on one of the previous post. Vonnie i wonder where the vatican bank is . Tom fantastic. Next . Their in indonesia, National Disaster Management Agency has announced a majority of the countrys 34 provinces are suffering from a drought caused by el nino. It is the worst drought in the last five years. It has forced villagers to travel for miles for water. And farmers are demanding Financial Support from the government. Tom Richard Sharma making the distinction yesterday that el nino that indonesia is a real country with topie looking at those photographs. Tom that is not san francisco, it is indonesia. Vonnie summer may be over, but Sand Sculptures are still in season. The 17th China International sand sculpture festival opens september 28. The theme is a world in a grain of sand. Have more thanll 50 Sand Sculptures. They are beautiful. Can i also tell you tom how does the sand Stay Together . Vonnie you pack it really tight. Be using someto kind of glue. Look at that. Come on. I did Something Like that at a beach a few years ago. There it is. Vonnie they are also wonderful at fireworks displays. Choreographed fireworks displays. The chinese. Tom coming up, a new report. Barclays. Aska rajadhyaksha will join us. Stay with us. From new york city this morning, futures at 30. Is bloomberg surveillance tom good morning, everyone. You need to know that markets are on the move. Dow futures, 2. 23. Real,ight away to dollar and we did not get to four yesterday. I wrote that up with Joe Weisenthal and chasing alleyway and Tracy Alloway. We will see if we get there, or if the Brazilian Central Bank intervenes. You just heard about the drought in indonesia. That is a new record low, 14,552. Vonnie it is a watershed moment for music streaming. U. S. Sales topped 1 billion for the first time. A Music Industry trade group says sales of Services Like pandora and spotify jumped 23 . The cost of renting a home rose again last month but at a slower pace. From asays rent was up year ago. Rent hikes may be slowing down because more apartments are being built. In monday night football, the new york jets intercepted andrew luck three times and beat the Indianapolis Colts 207. Those are your top headlines. Were you watching, tom . Tom i did not watch, but i am stunned at that result in that is really cool. It would be something. The red sox are going to do well, the yankees are going to be terrible. Maybe the jets will do better. Maybe Mohamed Elerian will speak to us now. He always speaks to us when the jets win. Maybe he will speak to us today. A diehard jets fan. There we are, colts had been jets to get the season started. There we are, coltsjets to get the season started. We live within a global new mediocre. Is headline from barclays lower for longer. Maybe the call is mediocre for the millennium. You do not mince any words about it. You go out longer. How far do you go out . Years, ixt several would say. As far as the Global Economy goes. It is coming from emerging markets, from china. Russia,just spoke of the unraveling of the rupee, the unraveling of the real. Filteruld americans these little moments of unraveling . Boy, it feels like 1994. It does, but that is overstating it. Countries like russia and indonesia can cause headlines. China is huge. It matters more than most of these economies put together. At this point, it is the single most important economy in the world, including tom what is your Growth Numbers . Growthe are calling for of 6 . Way below their numbers. Maybe 50 to 150 basis points below that. Vonnie it is difficult to know with the outlook is for the next few years when you do not know what Central Banks are going to do. Theyo to decide where dollar is going . Ajay more than what the fed does is a messaging around the time of the meeting. If the fed comes out and says we are going to hike 25 basis points, we come back in nine the problem is that the economy is in decent enough shape for the fed not to be able to make that move. I do back to her question, not think the fed knows exactly what it wants to do. There are two caps. One of the changes we were seeing at citigroup was a 5050 call, then an abrupt shift to a main scenario next year from Willem Buiter of the global recession. What is the global recession . How do we define that, and are we there . I subscribe to the generally accepted tom 3 . Ajay Global Growth of 2 . Recession,a global it is not about growth being buiter seemsillem to define it. We are looking at mediocre growth, especially it is the very mediocrity of the growth that has resilience. Corporatek at europe, consumers are overextended. Vonnie where is the yield curve going, the u. S. Yield curve, calling for flattening positions . Ajay it will flatten a little bit further over the next six to nine months. All of the action is going to be outside the u. S. To some extent in europe, but primarily emerging markets. Tom do you assume great instabilities in emerging markets, or is it manageable . Ajay is it is it is manageable, but the direction is very clear. Tom a new report position for mediocre growth. We are going to position for a smart conversation on the American Economy in our next hour. Peter orszag of citigroup. From new york city, with futures on the terminal, 28, it is bloomberg surveillance. Tom americas budget deficit. It is a thing of beauty. So why could washington shut down again . Well, we will have to see in this hour. Peter orszag is with us this morning. Markets decline as commodities stock piles, pile up. And the bank of america they hold a contentious Shareholder Meeting in charlotte. Good morning everyone. This is bloomberg surveillance. It is tuesday, september 22nd. Im tom keene. In this hour joined by Michael Mckee as we bring you three hours of bloomberg surveillance. This morning quite remarkable. We are going to get the volkswagen here in a moment. What a drop again. Peter people there are really confused. So much coming at them from every direction. Tom there we are after a fed meeting on thursday. Right now to our headlines. Facing possible government punishment for cheating. As you mentioned the shares are down in europe for a second straight day as the emissions scandal widens. They say 11 million cars are affected worldwide and more than 7 billion in the Third Quarter to pay for it. Now its reported that v. W. Is facing a criminal investigation by the government that could lead to charges against the company or its employees. It admits the company screwed up. We must fix those cars. And we have to make things right. For the depoth, the public, our customers. Our employees and also very important, our dealers. V. W. Admitted the software was rigged so that the vehicles ould pass emissions tests. A Congressional Panel in south korea will also investigate. Defends his dent handling of the economy. He said it was needed to diffuse what he called systemic risk. And a Shareholder Meeting to decide whether Brian Moynihan should remain. Either way he says he will stay with the company. No heeding scott walkers call bid for the race. I encourage other republican president ial candidates to do the same so that the voters can focus on a limited number of candidates who can offer a positive, conservative alternative to the current frontrunner. And Walkers Campaign had problems with organizing fundraising. He slumped from the top to 10th place. And today the pope ended his trip to cuba with a visit to the shrine of saints. The u. S. And cuba reestablished diplomatic relations and pope francis brokered that. Tom the gridlock begins. We make jokes about it but washington will really be locked up. Peter there was a story suggesting if you needed to go downtown today, you should leave yesterday. Mirets peter . He got out of town yesterday. Tom yes. Some place outside reston, virginia. Markets on the move. Somewhat volkswagen affected some commodities affected. Emerging markets if you just heard Ajay Rajadhyaksha from arclays. Right now i need to address these markets. Mike, lets first address volkswagen. Day two of a drop. This is volkswagen finally getting its hand on the scale of the problem. Setting aside 7. 75 million. Then theres still the criminal investigation after that. So this is going to be a problem that will be around far long time. Tom and never did i think i but do a zinc, a chart commodities have that new weight. Another leg down feel to them. Motorcycle well, at this point we are all waiting to see what happens in china. The day we get the chinese g. D. P. And so much market psychology is twisting on how china does. Tom we will watch that throughout bloomberg surveillance this morning. Now fiscal policy. The looming and growing question, could your federal government be shut down again . Bloomberg economist peter titles e of the evious, he give us an update on how far we have come. Its amazing how i dont hear about the fiscal deficit much anymore, do i . Peter well, the current icit is down under 2. 5 g. D. P. This year. Over the longterm its improved dramatically. Youre used to this looking like a hockey stick. Instead it looks like this. We had a step up then it gradually rises. It wasnt as dramatic. But right now the longterm fiscal outlook is better. Tom we will talk about wonky economics and fiscal policy but peter, people are baffled by the political process. What happens to your budget process with all this politics . Peter well, we have lived through the past two years in which news out of washington has been muted and we have not had quite as much drama. I think thats about to end. Theres a very high risk of a government shut down at the end of this month meaning most economic will not be produced. Mike so we may not get jobs report at the end of the month. Peter yes. And the fed is the primary focus for many people but theres going to be a lot of drama even if we dont have a Government Shutdown there will be a temporary resolution. Then we have a lot of things happening in the novemberdecember timeframe. The people planning to take enough december need take into account that the backdrop isnt going to be a stable environment. Mike and youve got washington arguing over the debt ceiling which may be a bigger thing right now than a budget. If we do see a budget shutdown, whats your sense of how long lit last . Is this a 2011 thing where we spend a considerable amount of time and 2013 closed . Until somebody backs down . Peter it should be shortstop. And theres some risk not risk but theres some possibility that it wont happen at all. But the two things that have to happen before we get to an end game. Where this is going to end is a clean resolution of most of the planned parenthood funding doesnt run through those. So there are two pieces to this. One is at some point either the House Republicans need cave and say, thats ok. We will vote for a clean continuing resolution or mr. Boehner has to vote today and be willing to split his party and get all the democrats onboard. The problem with that is the threat to his leadership and theres still a risk that ted cruz or some other senator even if the house worked out its own internal thing works out filibuster. I dont think it will be long even if it does happen. Mike well yesterday paul ryan had to come out and say i upport john boehner. Peter he is in a hard position. This is just another example. The risk in that, by the way is coming back to the debt limit. That same group of republicans are not going to want to vote for a clean debt limit so we are going to see this same dynamic play out again. Tom as you is it on the cushy couches of those couches. Does anyone Pay Attention to this foolish necessary on the hill . Peter yes. The primary focus is how do we get this through . Tom it really becomes disruptive, right . Peter these are the kinds of debates given that you know where its going to wind up, theres no possibility that republicans are holding out to cut off funding to planned parenting. Ads part of this process they are not going to win so its obvious where this is going to wind up. Its just a question of how long it takes to get there. Tom peter boirt with a preview of your Government Shutdown. Coming up on surveils this morning, they have got a new book out. Pretty good. Tom at 3 52 this afternoon there will be no one in that vufmente it is of course washington, d. C. Ready for gridlock as the pope will touch down this afternoon. What a week its going to be for all of washington, d. C. That brings us to our morning on the treasury, here is Michael Mckee. Michael well, jack loo the treasury secretary writing in the wall street journal a little bit of a warning to stay on reforms and noting no one expected restructuring to be easy and for years they have in other words, dont that again from jack lew. The u. S. Is letting the chinese president know that it cant back slide and theres some feeling that with the instability in china they will put aside reforms because stability is important and they will go back to the old ways of doing things and the u. S. Is telling them thats not good. Its an interesting balancing act because on the one hand we want to generate more business with china. Xai is meeting with those in china and we want to also push ack on in the south china israeli sea and call them on the carpet in cybersecurity issues. Peter if the president made it clear he will continue reform. But weve talked before about how chinese growth and deceleration has continued. But the wag a dog, the pop will you explain getting fed up with government and economy chest thumping. Tom Henry Kissinger stayed throughout pooks we need to take a longer, broader, bigger view. Are we capable of doing that . Peter we are. Ewe often dont do it. But we are capable and the longer view here is i think we have no choice but to encourage Economic Development in china and i think the that our wellbeing and safety and security is better if the growth process continues than if it collapses. Tom very food, peter orszag with us. Of course 7 of the run rate you heard barclays cap rate earlier talking six or sub6 growth rate. Coming up, tom we welcome all of you to bloomberg surveillance this morning. Its a surveils of markets on he move. Right now lets stick to our headlines. Heres david. David hearings as letters debate which countries will help the refugees. Scuffling with Croatian Police. Hundreds more are camping in turkey waiting to enter greece and austria is expecting thousands more migrants after 10,000 walked into the country yesterday. Will meet ident xi where tech executives will hear him speak. And chinas economics head George Osbourne is suggesting the possibility of a Stock Exchange link. And the New York Times says a company is trying to decide whether to build a selfdriving electric car or a combination of the two. Apple has hundreds of people on the project. Tom youre so smooth, david, let me ask you the question, why . David i dont know. Tom none of us drive. I dont think any of us on the set drive. What i do know is if you want to speak on the fiscal policy of the nation a good place to start is peter orszag. He established in short order excellence on our fiscal policy working with peter dimon at the brockings institution and gone on to work for the president as his lead budget advisor. He joins us now with the update on the miracle which is our lack of deficit. Theres a school of thought that says you guys, and i mean you, peter, put in a tax regime that is with all great joy worked out so well we are almost bringing in too much tax receipts. Peter so revenues have gone up partly because of the increases in parget tax rates but also mostly because economy has come back for the most part. The official forecasts have knocked down medicare and medicaid expenditures. Michael because this compounds over the years . Peter yes. So it really speaks to the typical entitlements issue. We are on a much different ynamic now than we were. Tom how do you adjust our budget projections given for a new lower, longer economy . Peter i dont think the official forecasts have knocked down forecast. I think its possible right now we are under 2 g. D. P. Theres another dynamic the official forecast doesnt take into account. A report out doumenting the growing gap in Life Expectancy by earnings and education so for the viewers if youre a highlyeducated higher earner, your Life Expectancy is going up really fast, if youre a lesssweated slower learner, your Life Expectancy is going down. If you were born in 1960 and you made to it age 50 with a college degree, youve got a 2 3 chance of making it past 85. Tom wow. Michael the change in the glide path you were just talking about with tom, is this also at the same time bad news because people in washington are going to look at this and say the costs are coming down so we dont have to get to work fixing medicare and Social Security as the baby boomers use most of our resources . Peter well, on the one hand none of that was happening anyway. So not much of a loss there and econdly, as rapidly as she can one is doing her best to raise quality without raising the cost. O its looking to how they are going to pay for hip and knee surge enrichment they are going to pay 1 3 the amount. Its being tried out in 75 metro areas first but the important disappoint doesnt matter how many tests you do or if youre readmitted to the hospital right after being discharged, all of that on you as the hospital is your risk. Youre getting 1 6 of the payment. Its been shown to reduce cost and help improve quality. Tom thrink military in with this debate. Right now we are exhausted from two wars. How has the military folded into a better fiscal economy . Peter i will call it fiscal lies or a misleading part thats, that both parties have bought into a time path that includes a dispense department and thats particularly on a glide path that you really cant get to people say we can just cut back on expensive planes and what have you. Not really feasible without introducing end strength and thats a much different dynamic. Michael so the military is locked into these . Peter procurement is most of the budge set driven by the number of troops. Housing, health care, pay, etc. Michael so for any company, its like that, your biggest expense is labor . Peter true. Tom coming up some of the mathyness of glide patz and boy did we time this right. Carlos gomes of nissan. We must speak to him about the twoday debacle at volkswagen. If youre just joining us, volkswagen, the second most ugly day for them. Tom good morning, everyone. Bloomberg surveillance within the framework of the last week or so, another vol tile day today. Risk of futures, negative dow futures negative 224. Lets get to our top headlines. Heres david. David Bloomberg News . Reporting v. W. Is facing a criminal investigation by the Justice Department. The company says 11 million cars are affected worldwide not just the half million in the u. S. The automakers shares are down for a second day in europe after v. W. Said it will set aside more than 7 billion to pay for the scandal. They admit the company screwed up. We must fix those cars. We must prevent this from ever happening again and we must make this right for the public, our customers, our employees and also very important, our dealers. Was w. Admitted software and other elp diesel cars pass emissions tests. And to keep their forces from clashing in syria, vladimir tin and Benjamin Netanyahu said they will have talks about that. And united to beat the common not mention id trump by name but said voters should be able to focus an fewer list often candidates. Today i believe im being dueled lead by helping clear the field in this race so that a positive conservative message can rise to the top of the field. With this in mind,ly spend my campaign suspend my campaign immediately. David walker once thread polls but fell to 10th place and is struggling raising money. And Carly Fiorina on the tonight show with jimmy fallen, she shows a very nonpolitical side. My names flick. Please dont take a walk with me id rather stay right here i want to lie back down in my david there were some serious moments. And another was criticized for saying it was wrong for a muslim to become president. This why you didnt run for president . Well, that one i heard. Tom when do the adults show up for the adult conversation . There, i said it. Michael in the oval office how often did you hear the president sing . Eter well i didnt but when parking lot clinton was in office and bill the can actually play. Tom ok before sink was founded in 1746, its the 24th most element in the world or whatever, thank you inorganic chemistry. I dont know what this is, lets blame this on joe biden or Carly Fiorina. But having lot to do with stainless steel production, this is stock piles in new orleans as expressed in the london metal exchange. Michael youre waterproofing less etals and thus demand for zinc. Tom this is great but all adds up on the bloomberg commodities index, which is really weak this morning. Michael theres a lot of uncertainty about where the world is going at this moment. Everybody worried about china so no one knows whats happening with china. M this poe layerty tom that the point theres no visibility with someone in the markets about anything. Peter the u. S. Is seeing this as possible positive bright lights but the growth is not vooped if the u. S. At 27. 5 is a standout for the world, thats saying something. Tom well, much more here and well speak with peter orszag in our next conversation. Let me do a data check. The futures are stabilized at negative 30 if you can call that stabilization. The euro quietly is weaker. Thats important to see a breakdown further would be a yield. The twoyear in as well,. 96 . Michael this is bloomberg surveillance im Michael Mckee along with tom keene. A showdown in charlotte as bank of america shareholders vote on whether chief executive Brian Moynihan should also remain as chairman. Michael price jones joins us from washington. He is the director of Corporate Governance which advises shareholders. Youre recommending a no vote. How much of your opposition is on principle and should have on moynihans performance . Michael its both. Really this is about a casespecific instance of bank of america and the need for them to have strong and independent leaders as they change with our renew and ultimately with the strategic side of our Company Going forward. Michael how do you think its bank of improv for america shareholders . Michael talking about the strategy and leadership that can occur when off 360kind of thinking on the board which cant come from the c. E. O. So its really going to be making the longterm decisions. Michael this is in response to the company having a vote because the company had separated the two jobs then put them back together in october. Is this something that should be done by every company . Separating these jobs . And what does it say about shareholder pressure, Shareholder Activism Going Forward . Michael certainly a lot of investors believe the two positions should be separate it really comes down to very Large Companies and you really need the head of that table to be led by an independent director. So its about bank of america more than boards in general that the point. Michael well, they did anger shareholders because they went back on their previous agreement not exine the two jobs but does this signal a new era where people are going to be able to organize and get this kind of response . At least a vote from other companies . Michael well, i think bank of america has found themselves in a unique case but it is interesting to see how many funds have come out in the u. S. And the mine tans and whether or not they should have this kind of growth. And they really need to manage their Shareholder Relations much better than they have. Tom if we see a vote for mr. Moynihan in the bank, can a vote be of a certain size that it can still change policy in the bank . Michael anything less than a 70 support level will bring on new directors. Like tomas play and others have been around for 10 years. So anything except a resound ctory, then tom in charlotte we will have someone there. I never understood why they call the company ash lon, its always been valvoline out of kyi from a million years ago and the news is they are filing a spinoff. A specialty chemical, all the rage in specialty chemicalth. Right now two companies, ashland and valve threaten to makes our thile our fathers demanded we put in the car. Michael yes. You see it all over the indianapolis area. Tom its a flafere, like orange juice, but ashland is split into two with dividends involved on both sides of the equation. Its again, the rage here of and we are seeing in m a the splitting up trying to get to a better focus on many, many different companies. Futures and futures at negative 30 and dow futures at we need to look at some movers as well. I know this has the attention of peter orszag. George akerlof and Robert Shiller are coming up on bloomberg surveillance. We will not speak to mr. Akerlof about policy we thats because he is a yellen. George akerlof of georgetown and Robert Shiller of yale. Tom good morning, everyone. Bloomberg surveillance. Theres moving in the market today with dow futures negative 227 and lets get to our movers. Its a special today movers. Heres david. 2k5eu6ed lets start with ashland. Words the company is going to split into two publiclytraded focuses. So here in the premarket ashland shares look like they are up. I want to move a bit talking about energy. Before we get to that, lets talk about volkswagen. Obviously the story of the day the scandal surrounding this company strolves mechanisms when you test for emissions to make it seem like car was better than it was. Shares down. The Company Announcing it set aside more than 7 billion to ay legal fees. Tom im sorry. Every company has to say, wait, did we do this . Noil issue in this case seems to be that something has been done deliberately. So whether or not another company would have deliberately hofpblet michael what do we know and when did we know it . Tom but the knock on this is all i know is we are down 160 to 106 . And two cups of coffee. Thats interesting. What are they going to do tomorrow . Michael since they do not want to sell the cars will people come back to it . Because i dont think people associate some of the cars they associate with like lamb bore. Enie, or audie tom and i didnt know how big these were. Looking ahead at what this could mean for v. W. Michael people are talking about these gigantic fines but whats happened in the past is fines are negotiated and it comes out much smaller than the full amount we think it could be. Tom i imagine senators from tennessee would have a few hings to say about that. David Energy Continuing to be the story here. The company said it was going to try and raise a billion dollars in share but deciding it youre seeing shares up has to do market with their Balance Sheets and how they calculate their reserves on Balance Sheets. October is upon us. Weve got breaking news right now. This is important. Right now Management Changes at v. W. Its happening literally as you see. Help me with this if you would. We are going to come back on this right now. The v. W. C. E. O. Management changes. We will return. Good morning. Tom good morning, everyone. Breaking news, this from volkswagen, a report out of a german newspaper, Michael Mckee. Before we go to hans nichols. Michael this is the report in the german newspaper saying the c. E. O. , winterkorn is going to be replaced. It doesnt say whether he is just being replaced or fired but according to the c. E. O. Of porsche, he was appointed to that. Appointed to a job by winterkorn and then they were given complete control of it. Tom we go to hans nichols in europe with this story. Hans, no story here but is it a surprise that they stay internal with a new c. E. O. If hat is the announce insanity hans maybe a little bit which mattias is there i think onefourth of their profits come from porsche. A little as also been bit slow to adoptthat. So a berlinbased publication is saying mr. Winterkorn is being replaced. They are not saying he is being fired or replaced but also are not giving us a date on when this board is meeting. Was this voluntary . Is it official . And whats the timeline of it and whats mr. Mullers task Going Forward cleaning this up . Tom have you seen a good south side report of what the report snoub has the that been written yet . Hans no. Because this part no one knows how many jurisdictions and how much the fine is going to be. The 18 billion number was back in the envelope e. P. A. Calculations based on 450,000 vehicles but then company. Ayed problem it will expand many productions. Deutsche bank had regulators in europe and in the state. B. P. Had basically regulators in the u. S. What volkswagen could have is regulators across every time zone. Investigations in korea. Theres talk about there may be something in france. The e. U. May investigate. So across so many levels they will face some sort of investigation. Main in the states, criminal liability and guys if that happens, if theres criminal liability we have civil lawsuits and that opens up another entire box of problems for them. Noil thing in europe is they may not have to cheat there. Diesel advocates and europe, were saying wait a sefpblgt that he make cleaner cars in the states. Lets see how clean they are and then make case to europeans they can buy cleaner technology but they were not able to scientifically able to reply date numbers volkswagen came up with. They went to the e. P. A. They went to volkswagen and at first denied it and then eventually became clean. One thing of Mattias Muller is he is the c. E. O. Of posh and necessary stuttgart. D posh has sold a lot of s. U. V. S in russia and at the auto show they unveiled a concept car entirely of an electric battery meaning porsche may lead the way to go completely electric. Tom al now we bring these headlines to you this morning. Back to economics. The government. Michael back to the man who knows everything about the economics of the government. We have been talking about a Government Shutdown possibly happening next week. Lets go beyond that specter of. E shortterm according to peter orszag. Peter was telling us earlier that the situation has improved but this is cyclical. I remember going through the 1990s, we were going to fall off the Social Security cliff then ewe had the great expansion of the 1990s and everything got better. All of a sudden we are back in the soup again. Peter what that underscores is the budget forecast is very uncertain, especially with regard to the deficit. They say its supposed to be 3 of the economy but they leave off its plus or minus 3 grdgd so it will be somewhere between minus two and plus eight. The central forecasts look pretty good. So the most important thing we can do is double down on the changes that will help regain a lot lost. Theres a lot of work to be done there. Tom you owned the phrase glide path. The idea of smooth trajectories, of being in control of the identical even if its unknown. Line . Our audience the potential of junk conditions in our budget debate or for that matter junk conditions in the Global Economy. Peter you always stay world is better if you can evolve to where youre going as opposed to having a crisis. In a budget situation the concern has always been that at some point investors lose confidence and we have had a skyrocketing tom ive heard that for 60 years. Peter right now that doesnt look like a plausible possibility. You dont want say with certainty that, that doesnt reinforcing the health Care Trajectory is to make sure we never face that situation. Michael you have to look out here beyond what can we do and how bad is the problem . We know things are bad now and we know its cyclical. If you were giling advice to the president of leaders, what would you tell them to do . Peter to move away from paying on a per item basis, a fee for service and make that irreversible. Where we started the process. Right now we are only part of the way toward paying for value and if you pay for quantity thats what you get. If you pay for value, thats what you get. Most hospitals and doctors feel like they have one foot on the both and one on the dock. Michael i can hear republicans right now yelling socialize medicine, we are all going to e canadians. Foirt only disagreement and im simple phiing it is the democrats want to do it by changing the way we pay doctors and hospitals and the republicans want it a different way but they both want to move away from fee for service. Tom the government will pay for the gridlock in washington with the pope and the leadership from china showing up. David . David before this i had v. W. As my agenda item. David we continue to watch that here on bloomberg tv and Bloomberg Radio. Tom tim cook paying homage to the leader of china . Michael in seattle it will be interesting to see how nice they make with him given the way the chinese have treated the u. S. Tech sector in the past. Tom yes. It will be amazing to see the body language there and hear some of the back story. My agenda item begins at 4 00 m. This afternoon and feel and three geographies. Washington, new york and telephone. And the only question is why isnt the pope going out west where every article says the Enormous Growth of the Catholic Church is but most certainly on the east coast in celebration of the popes visit. Here at 4 00 p. M. Starting an Andrews Air Force base we believe the president will meet toe pope. Coming up Robert Shiller and George Akerlof joining us. This is bloomberg surveillance. Is this is bloomberg surveillance. Good morning, everybody played it is 8 00. Say therethe street is no visibility. Surveying a cloudy landscape today on surveillance. I am Michael Mckee along with tom. An ugly start to the morning. Lets start in china. The shanghai composite index finished up by 29 points today. Symbolic on a day when the chinese president arrives in the u. S. Like the market stabilized if you go back a couple of weeks. A key question during his visit. Because no one knows what will and no one knows what the fed will do and no one knows how battles volkswagen will turn out to be, european stocks are down big on the day. The ftse off to present. The dac is down by 2. 8 now. The same questions hang over u. S. Equities futures trading. Certainly, yesterdays rally is over. 1. 4 . 1. 3 . W is off 220 points, off 1. 7 , 73 points right now. He want to talk about stock money is flowing out of and fast, the admission scandal effects as many as 11 million cars and set aside 7. 3 billion to deal with it. Breaking news that the ceo of lost hisny may have job and hans nichols joins us now with the latest from berlin. Complications saying martin will be replaced september 25 by matteas, the current ceo of porsche, one of the 12 companies within the full slack in group. Porsche has really been a Profit Center for the volkswagen group. It is a small percentage of the number of cars they sell. Annual sales are around 200,000 vehicles, a good year for them. The overall footprint of s 10 million vehicles. This is a Profit Center. Byy have done very well introducing cars like the suv that sells very welker china as well and russia. Sales have taken a little bit of a hit. It looked like people in russia were parking assets. The sales were getting hammered. We will try to get back to you later and see if we can independently pair of verify the ceo, who on friday was supposed to receive the formality of a contract extension is actually going to be replaced by one of his deputies. This could be a much bigger problem than initially thought. Theyre saying 11 million cars worldwide . 11 million cars worldwide have been affected. They made that announcement in a profit warning or they also said they were setting aside 6. 5 billion euros for potential legal provisions. What we will also have is they say in this profit warning that there profit did not affect in missions. I have a hard time squaring what wolfsburg and said in this profit warning, which hinted they did not do anything wrong, and what last night, michael horn, the head of north america, said. There are a lot of moving parts on this. Autot got back from the show in frankfurt where i spoke with both ceos ease. Close onf porsche came emissions standards. Also a somewhat complaining line on those standards. Those savings will have a lot more weight now. We will have them for you later this morning. Epaael what we know is the started this by accusing vw of misleading factors. These 11 million cars around the world, what do we know about what other countries are doing . Run through one what we know. Walked of germany close to the line saying they would investigate that they wanted more answers. Environment the ministry here in germany. From the transport ministry, they will test all of the vehicles. In france, it looks like they have the cooperation to test all of their vehicles. And the European Union union, which is 28 countries, they want ,o have their question answered but short of a formal investigation. It looks like there is intentional legal liability in asia and certainly north america. Let me clarify a little bit of what we know we do not have an official announcement from the Justice Department. The Justice Department is starting a criminal investigation according to two people familiar with the matter. Bloomberg broke the story and a lot of other news organizations confirmed it, but it is not like we have an announcement from the department of justice that they will be investigating. These are anonymous sources. Hans nichols in berlin. Vw shares down 20 this morning as that stock continues to crater. Another index that is moving down or Something Else cratering is the brazilian royale. I know you have been on watch. 4. 124 and continuing to bounce around over 4. To bring in derek now. He began his career in currency markets and did it so well, he is now the european head of Global Markets research. We will ask him a lot of what is going around in the world. We have got to start with brazil. Tom of course. Writing up that a million years ago, 13 years ago, was stronger than this. What does it signal about the nation . Derek that there is a lot of concern in terms of the Overall Investment grade of the country. We have downgrade from the s p. When you look at the political situation, what you have is a ballooning of Social Security payments total. Getting worse because of the recession. The political difficulties for the government means it is very unlikely they will have the ability to tackle very difficult issues to get the situation under control. A downgrade looks increasingly likely. Tom separate for us the difference between steve at the Johns Hopkins university and the idea of hyperbolic collapsing economies from troubled economies like indonesia and brazil. What do they have in their system that can allow them to heal versus economies that have just given up . It is about dealing with domestic issues and trying to restore some degree of confidence so there isnt a fear of major getting out of control. It is about taking really difficult issues. A lot of emergingmarket currencies under pressure, there is a link in terms of having very large external positions. Besides brazil. Brazil is not in there. The political issue and having to take tough decisions is crucial. Surveillanceg brought to you by cohen. Insight your Business Needs to move forward. Sign up for insights. Michael, distressing news. Ofhael lloyd, the ceo discloses that he has lymphoma. He has cancer. Curable ands highly says his own expectation is that he will be cured. Suggesting that he had been to the doctor and the doctor has diagnosed him with lymphoma. Goldman shares down 1. 5 in premarket trading here. Tom we have seen this before. Jamie dimon of jpmorgan with serious cancer a month ago. The good health of jamie dimon was seen. When i saw him a number of months ago, he was ever stronger. Says he Lloyd Blankfein will be able to work duringtially as normal the time he is undergoing chemotherapy over the next several months. Lloyduch more on this blankfein, still able to lead during treatment. We certainly wish him well. Dell futures, 2. 34. The two year yield is in today. 6941. I am looking at the yen as well. Brazilian tom good morning. Headlines on Lloyd Blankfein at Goldman Sachs. Michael a letter from lloyd to shareholders. He has been diagnosed with lymphoma. He says his doctors and his own expectation is that he will be cured. Big news from Goldman Sachs. We wish him the best. More banking is today, taking place in charlotte, north carolina. We see here that, sorry, that there is a special shareholder a big vote on whether erik schatzker, talk to me a little bit about the importance of the meeting. Erik given that the news just came out, i think it is worth speaking just for a minute on that. Lets reiterate, everyone should hope he gets better. Thinge that is the human to do. But also for the sake of the shareholders. He has done a great job running Goldman Sachs. It is still the act on wall street in so many respects. We must talk about who might need to lead Goldman Sachs in his absence were he to take a of absence. Ave clearly, if it were shortterm, all eyes were turned to the president of the firm who said years ago that he would love to be the chief executive officer. The thinking is he is unlikely to succeed lloyd. If it were to be longer, it could be a guy like the cfo, barbara storage barbara schwartz. Back to you for the moment. I just thought it was really important to get into goldman. We have shareholders at the special meeting that has been in the works for a long time. A vote here on whether or not the chairman and the chief executive going to win. It is a big deal because people are upset about how bank of america is run and governed. Shareholders have a choice. Back to you. You are watching bloomberg surveillance. Tom good morning. Rumors of speculation. Michael the german newspaper said earlier today that the ceo will be replaced by the push ahead, matthias mueller. He is saying that report is ridiculous. We do not have independent confirmation of the status at vw. The stock remains down about 20 on the day. It has now risen to the level of the german duck the german government. Urging vw to show total transparency. She says she hopes the facts will be put on the table quickly. Called thebably be National Champion in germany as the biggest car company. You canaggregate all across different news sources, including bloomberg. Joining us in studio, the breaking news. Here is william maloney. Are you going to change her headlines at the end of the report . It is backandforth all day long. Good morning. Declines in france and germany as the full slag and fallout continues. It fits between 50 and the 200 day moving average. Watch the nasdaq today. Yesterday, they fell 4. 4 . , estimate two. Ex two publicly traded companies thereafter the last night, shares fell 17 yesterday. Hat estimates. Autozone be General Mills and estimates were mixed. Dupont raised a buy at citigroup starting at 63. Target of 60 and finally, at Goldman Sachs, storage cut to neutral. Tom thank you. If you would like to hear more, bring in this chart and it goes perfectly to the brazilian riau. You can see the spike at the four level. To those of you on radio. In the brazilian currency. Also the dollar. A lack of visibility out there, people are complaining in the markets that you look in the currency markets for some sort of clue, the dollar fell going into the fed meeting. Going in for a third day. He began his career in currency markets. He has since been promoted. Of course, currencies tell all. Nowis the dollar rallying when everyone is suggesting the fed is not going to raise Interest Rates soon. There was not a huge change in the story. Barring the fact that they did not go in september, what they are estimating in terms of rate increases for 2016 and 2017 was pretty much unchanged. Of course, since the meeting, we have had a stream of president s come out and pretty much reinforce the prospect that we will get that first rate increase each year. The market takeaway is not a whole lot has changed. The fundamental story in the is still very much as some fed action this year. The euro is falling for the day. The idea that the fed would is Mario Draghis fondest hope. It is. Ultimately, what we have had from the ecb members over the last week or so is also pretty important. If you are told back before the fed left rates on hold, it seems to be trading, rising one equity markets are falling. I think the press conference from the most recent Monetary Policy meeting and what were isting from the ecb beginning to change the dynamic. Actually looking softer because of the increased prospect and perhaps the ecb will seriously consider extending quantitative easing. If there were one currency pair you are watching to tell us a story of what is happening with all the news breaking and confusion about what will happen, what would he . It be . Euro yen. Stands, looking ambivalent compared to everywhere else, it is beginning to take on a risk type characteristic. Yearend declines, a signal investors are increasingly concerned. Tom thank you so much. A blur of breaking news today. Drops. Ag and, glencore come on over here. Here is the debacle coming down. I just put this out on Bloomberg Radio plus as they break 100. What a debacle. A symbol of futures, 32. Bloomberg surveillance. David here are the top headlines. Has lymphoma. N he writes that it is highly curable. He says he will keep working though he will cut back. He is 61 years old and has been the ceo since 2006. Vw admitted it ready to the test in the u. S. And 500,000 cars were involved there the automaker says the issue involved 11 million cars around the world. They set around 7 million to fix the problem. Vw getting hammered. The company lost one third of its market value in two days. On july merkel has weighed in now, saying vw must show total transparency. Winterkorn will be replaced friday. First stop is seattle, where she will meet with tech executives will great bill gates and him cook. Speculation china will announce a big order for boeing airplanes. Those are your top headlines. A day to check, lets look at the dow and s p. S p futures down 1. 6 . The 10 year down 1. 78 . Nymex crude down 2. 6 . Your listening on Bloomberg Radio. Welcome back. I am Michael Mckee along with tom mccain. Brought to you by commonwealth financial network, ranked higher. N independent satisfaction not a lot of economic numbers are out this morning. The fhs a will give us a house price index. It is similar to what bob does, tease ahead. Professor shiller joins us later this morning. We also get the Manufacturing Index around nine and 10. The number everybody is watching how much vw 20 , shares are down after the company disclosed this morning that 11 million cars were effected by the admission emissions scandal. They set aside 7. 3 billion to do with the issue. There was a report from a berlin newspaper that Martin Winterkorn , the ceo of volkswagen, was onng to be replaced september 25. Reportokesman said that is ridiculous. The portion of spokesman declined to comment. That is where we are at this moment on vw. We can tell you the stock is down 19. 9 right now in germany. It is movable particularly for the auto business. We forget what 1999 and 2000 was like for carlos. He received tremendous credit for his nissan plant and now, matt miller, 15 years on, carlos is maybe revising again. Conversation with matt miller. Matt . Matt and the entire industry. Europeanof the automobile manufacturing association. He is first and foremost here to show us the ultima. Thank you for joining us. Off to japanto fly tonight, but you are here in the u. S. And you sell 350,000 of midsized sedans here in the more thanyear, volkswagens entire sales per at why do you continue to invest in the segment what americans seem to just want to buy trucks and tried suvs and crossovers . The new altima we are showing is the most sold car for nissan in the United States. This segment used to be the largest segment in the u. S. It is now the second largest in the u. S. Contact are taking the lead, but still, it is an important segment. The second most sold car and growing. Matt you do not sell diesel in this country. Is this technology to difficult to make perform and still pass epa emissions testing . Think so. T it is a specific technology. Nissan, as you mentioned, will not sell any diesel cars. We have electric cars and hybrids. Most of it is a powered engine. This technology is much more widespread in europe. Matt youre the head of the automobile manufacturers association. Ceoss and leaders of those companies, including issueagen, is this an that you think is pervasive . Are carmakers across the globe having to sheet in order to pass regulators testing . Carlos i do not think so. We are reminding everybody about how much improvements we have made for the last years by all the Car Industries in order to have better efficiency, etc. Every Single Member of the association to make their own statements about what they are practicing and what kind of, you know, devices they have. This is much more in issue for every car manufacturer. We want to as much as possible reof death reinforce what is existing between one side and the consumer from the other. You put together nissan, 1999. You have been working around the globe, regulators from so many different regions. Do you have a statement on your emissions testing or how you deal with regulators . Carlos every country has their own testing and emissions. We have to adapt in the most truthful and transparent way. We usually share the problems with regulators. Evolving a lot to a lot of things to their possible which were not possible to years ago. What is important for the industry is to give some kind of visibility about what has to come. That is why what is going through this year at the end of the year is very important. We alle is saying, ok, need to reduce emissions but give us visibility about what kind we want to reach 16 years down the road so we can get prepared. Volkswagen is down 20 today p are getting crushed in europe. Do they deserve it . Is it a punishment the entire industry is waiting for . There is doubt existing today. I am sure you will see in the next hour statements made by carmakers, each one stating in his own company. I am not so worried about it. I can understand. Matt your next meeting, does your car have a too big to fail issue . Will you tell hes leaders in order . I think most of the company is in order. We tried to face the challenge in the most chance and truthful way possible. At the same time, it is a moving target because technology is evolving. Matt thank you so much for joining us. Back to you. Tohael we will continue monitor what is happening with full site appear the stock is down by 20 this morning. Futures are down in the u. S. S p futures up 33 points. This power of surveillance is brought to you by volvo. It is time for morning mustread. Historiant religious writing about the popes balancing act, saying he will come before congress not to plant bombs but to heal if we let him. He must perform a delicate talent thing at, but he is good at that. Gerry is exploring the role of this particular pope as a healer and divided within the church. It is something people will pay close attention to, starting in the afternoon when the pope arrives in washington dc. He will be in washington, philadelphia, and new york are there are two factions of the Catholic Church feuding with each other and are some to some degree alien to each other. He said pope francis is the people centered operative, on the one hand speaking for the poor and trying to place more emphasis on expanding the church and doing more for the poor, while the other faction of the church is Holding Close to church dogma in the hierarchy that is established there. Close the wants to disconnect between the churches, to speak with people, especially the poor, and the pope are wanting to expand our sense of religion. That will be the main focus here in new york, washington, and philadelphia as the pope makes his first visit to the United States. The pope arriving at 4 00 in the afternoon at the air force base here he will meet with president obama and his wife on the tarmac. Nd then onward and upward later today, well be live from fenway park in boston. They will speak to the red sox president. This is bloomberg surveillance on Bloomberg Television, radio, and streaming. Michael what bank find has lymphoma. He writes that his form of lymphoma is highly curable and he says he will keep work. Michelle joins us now. Let me start by asking you about the prevalence of this particular disease, lymphoma. A widespread type of cancer. How widespread . Michelle it is a very common cancer. About 80,000 people in america are diagnosed every year with lymphoma. Makes upcommon type about 70,000 of those patients. About 10,000. I want to ask you about the rigor of chemotherapy he will face. It be like . He is assuring shareholders that he expects he will be able to work substantially as normal leading the firm. Difficult rounds of therapy . Do not know exactly what kind of lymphoma he has. Is thing about chemotherapy it is not so much the drugs themselves have changed so dramatically over the years but doctors have learned how to manage the system the symptoms that come with it. Dry mouth, the hair loss, all of that. It is not that he will not get a toxic drug. Chemotherapy works by literally killing cells. What theyre doing is theyre able to get it so he will not be wiped out for quite so long after each course. When you look at the amount of Drug Development when it comes to lymphoma, how much progress have we made over the last years . Is this something where there is still a lot of money devoted to research . A dramatic money amount of money is being devoted to research and we have seen amazing advantages just in the past decade. Again, he will not be taking advantage of the more immune systembased drugs going on there. He is going with a more standard chemotherapy. They better dialed into how much you need to get, how far you can suppress the immune system to kill off the cancer cells growing in the lymph nodes and the immune system itself. It is a much more tailored approach and they know better what they are doing and how far they need to go in order to get him to a remission, to a cure, without disorienting his quality of life and allowing him to continue working. Michelle cortez. Just recapping what we know so telling thelankfein news yesterday that he has lymphoma. It is cure curable and he will undergo chemotherapy over the next few months. He told shareholders the news. This morning in a letter. Coming up, mike and tom hold a coauthorsn with the of a new book. Tom good morning. Michael mckee and tom keene. Bloomberg surveillance is always brought to you by invesco. Have you considered all your alternatives, noncommittal Asset Classes and strategies . Find out more at invesco. Com alternatives. Futures 34. Mike, we have been talking about the brazilian rail this morning. Point 4. 02. Isnt it great to do the first interview with someone when they take over a new duty . Michael it is the first time she has been with us as the head of strategy for td securities. I want to start with global rate strategy, which, oddly enough, is your title. I am wondering what a global rate strategy is right now in an era in which the fed says it will not raise rates, but then the next day, a whole bunch of fed officials come up and start saying that we will raise rates. No one quite knows what the feds reaction is, no one knows whether the ecb will be doing additional qe, and everyone is wondering whether the bank of japan has it right. How do you figure out what to do . Having me onfor the show. Im excited to be back. You bring up global rate strategy. Thatnk it is interesting the fed here is actually looking outward. The fed historically has looked at the u. S. Inflation. Is we have the fed turning up and maybe we need to look at external development, emerging markets, financial developments. Actuallyhemselves are looking outward, which is what brings me to a global rate strategy. Interestou cannot do rate strategy in isolation. At g7. E to look one thing i have worked on is the fact that if you look a global bond correlations across the world, they cease significantly in the long and. When you look at the 10 or 30 year, i think that you have to look globally. When you look at the front end, we found correlations are not that high. I know it looks right now like the fed will hike, but all we have heard is, you want to wait and see. I think the markets have overreacted. I think the front end is pessimistic about u. S. Growth. All we heard is that they just need a little bit of time to see if all the volatility is actually effective u. S. Economy. The taperk at tantrum, it is a perfect example of when we had significant volatility. The stock market or you look at credit spreads. If you look at what happened to action. Economy, it is fine, which is why the fed could go ahead and taper. I think the hike will be similar, or the fed will see if all the volatility affects the labor market, affects inflation. Thinkg really happens, i we should be pricing in a hike this year. The market has taken that a lot lower. Endou look at front treasuries, we are pricing in 50 chance of a hike this year. I think that will be higher. The long and is a completely different story. I think the front end should be much more about fundamentals about the mandate the fed has. That sell two years going into this . Priya i will say yes. It is very hard to pick, but i would say out rather be on the long end here. Point 15end up at two is not that crazy high when you look globally and you find a low rates across the world. You find productivity even in the u. S. Very low. That is thing fascinating, and you know this from india and the challenges to be a dre seems linkage between bond and currency markets. What does that signal, when i see a full faith in credit, tone of a certain name, and then i see currency markets, the headline they have, but how do you dovetail those . Priya that is a great point. They are Macro Markets and should be reacting in a similar fashion or what is happening is the fed is telling us, and i think the signals were getting from policy makers is that the two need to be in line, the dollar strengthens too much, it actually slows down the fed exit. The twowhy i think markets have to be in sync. It is interesting. One big surprise from last week was, why is the dollar this strong . I wonder if it is trying to bully the other Central Banks. We need india to ease. We need the ecb to do more qe so that the fed can actually respond to domestic fundamentals and actually start the process of normalization. And begin responding. Tom what is your call on the process of that normalization . Priya lets start with 25 and get to a certain rate. I do not buy the fedss endpoint of 3. 5. I think that is very high. It has been a very long cycle. Athink the market is pricing 2. 5 percent the endpoint. I think the market might be right here. Maybe the fed will not be able to hike beyond 2. 5, but lets start the process. I do not think they can normalize. A global disinflation environment. I do not think they will let the portfolio shrank. I think what were hearing is that they are not in a hurry to do so. Lets get off of this emergency level. If they do move between now and the end of the year, it is just going to be sort of a three three pronged process where they raise interest on reserves, raise the fed fund rate, and put in reverse repose. A lot of questions about how that will affect the markets and whether it will work. What do you advise your clients . Priya it is a good question, especially near yearend. Istime, i would say this challenging around your end, it will be particularly. Good. K the fed has done a a good job communicating to us that the fund rate should be in that quarter. Being being interest reserves. I think where it lies is up for debate. I would say the fed also needs to be flexible. They have tried to limit to 300 billion. We have heard they might make that unlimited for a short time. I think if the money market is doing work the way they planned it to or the way they hope, that they will be flexible. Belief is can i will see a lesson symbol because of the jason c to the United States. Do you buy that idea . Yes. the dollar will probably be the strongest of the year. We do see divergence. Tom we have got to finish up with an important point. When you get me and mike a Toronto Maple Leafs season tickets, i know you have them as part of your package with td bank, are you thinking section 120, or do you like 121 at Maple Leaf Gardens . What is the section you think is most attractive . Priya when i am watching the game for the first time, i will check it out. Tom do you realize this is religion . Hockey is like cricket in india. There is hockey and then there is makebelieve hockey. Michael hockey is over a lot more quickly. Have you been briefed on this yet . Upya i need to get cashed caught up. Preseason last night. We will talk about that. , we look forward to section 118 row seven. Michael breaking news from groupon. The company will cut 1100 jobs, pretax charges of up to 35 million. Cost savings from the job cuts this year next year. Tom they have 3500 people so it is meaningful. Let me go through a data check as quickly as i can. Weakness, 4. 02 right now. Some form of a bid, but a weaker brazilian real. 33. Es, dow futures, 268. Stay with us. Another hour of bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance. We welcome all of you worldwide. What a day. Terrific news flow this morning. In new york city and around the world as well. Let me get right to it because we want to move on to lloyd blank find and bank of america. Lloyd blankfein. Visit ibkr. Com services. 402. Razilian real record weakness for the troubled nation. That bears close watching. Indonesia to record weakness as well. You are seeing some moves with some yen strength, euro weakness. The dollar index up. Withis the headline item dollar weakness we have seen a reversal and now we have a bit of dollar strength. Lets keep this short. Mike an update on Lloyd Blankfein. He has announced on the companys website in a letter to shareholders that he has lymphoma. It is a highly curable form of lymphoma. His doctors has his expectation is he will be cured. Doctors say he will be able to work normally. Although, he has canceled some of his travel. Erik schatzker covers the. Nvestment banks for us he is with us now on the tmobile phone line. We saw this happen with jamie dimon at jpmorgan. He was able to keep a tight handle what was going on at jpm. Any difference expected from lloyd going fine and Goldman Sachs . Erik a bit of that question is hard for me to answer because jamie dimon had throat cancer and lloyd has lymphoma. The dynamic is a bit different at Goldman Sachs. In the Management Committee and the board room, perhaps where things may play out differently. The longtime president would love to be ceo. That will not happen anytime soon, not while lloyd is in treatment but it may give gary the opportunity to lead more than hes been allowed to a Goldman Sachs until now. It may give the board opportunity to put some of the potential successors to Lloyd Blankfein into position to do more at the firm. Has been theine chairman and ceo since 2006. One of the longest tenured leaders of goldman. Erik yes. Wondered how much longer he will stay in that job. ,f you look around wall street you see that little by little as the financial crisis is for the behin further behind us, lloyd s not alone. Servinghe longest ceo, jamie dimon is close behind it. The classes that were saying enough already, youve done your time and now its about time to hand the baton, those voices are not so strong anymore because lloyd has been so long. Ceoswondering about a response abilities, you are in charlotte where there is a special Shareholder Meeting today for bank of america. Should Ryan Moynahan been a desperate moynahan be able to be ceo and chairman . Should Brian Moynihan be able to be ceo and chairman . Rik i would add to the point that you just made. Lloyd blankfein is chairman and ceo of Goldman Sachs. Jamie dimon is chairman and ceo of jpmorgan. Precedent outy of there for the idea that the ceo of a wall street banks also be chairman. If you go back to 2009, thats the way it used to be at bank of america. Here is the important point. Of the 2009, in the wake financial crisis and the disastrous countrywide financial acquisition, bank of america shareholders decided to split those roles. They passed a resolution to change the bylaws. Thats why up until last october, bank of america had an independent chairman. What happened in october is significant. Thats when the board decided to effectively ignore the companys bylaws and give the job of chairman to Brian Moynihan who is no longer independent. Shareholders complained about in may,bitterly that just before the annual meeting, the company said we will have a shareholder vote on it, do with within a year. That brings us to today. Shareholders will cast their votes and decide if they are really upset enough with the way ,he board handled this issue with the Stock Performance and the lousy returns of bank of america, to deny Brian Moynihan the right to keep the job that he already has. Erik schatzker covering the bank of America Special Shareholder Meeting today in charlotte. We will bring you the decision that shareholders make estimates and happens. Shamus flynn is with us. He is with the innervate center on corporate response ability. Interfaith center on corporate responsibility. Telling catholic shareholders how they should feel about these issues. A lot of services with a i know that at one point, you were calling for bank of america to separate the two jobs. Now, after talking to and working with management, you are voting with management in this case . Yes. Weve had a long relationship with bank of america. With all the Legacy Companies that now for bank of america. We did file a stockholder resolution last year on this issue. It was more of a strategic move on our part. We wanted a more substantive conversation with the leadership on issuespany related to ethics and culture and what theyve been doing to amend and correct some of their ways and operations since the financial crisis. Resolution, wehe agreed to withdraw the resolution and we have been working with bank of america in preparation for a report that will be coming out at the end of q1 in 2016. Mike historically, youve argued the position of ceo and chairman should be separate. Is this a onetime change in your position . Does that undermine your view in general for the future . It goes maybe a little bit to of the interfaith center. Them toooking for indeed fulfill their social mandate and look particularly at the ways they serve society. We are looking at a broader set of issues. This being one of them. Lots of other issues as well like highfrequency trading pools, weveark heard a lot about payday lending and stuff like that. We have a number of issues that we engage on. This being one. Our members have different priorities. On this particular issue, we were happy to go in this direction. Everyone on wall street wants your persistence in moving towards this event today in charlotte. What has been the response of nonreligious, sectarian institutional shareholders to your effort here . What has been the response of institutional by side . Their position is clear on this. Governance is a high priority. This is one that the board does a plus. An you were just talking about mr. There is quite a precedent for this in the u. S. System. I just came back from london and rome where they have a different view on these issues. A number of folks would clearly preferred that these roles were separate. We heard bank of america out on this issue. At thiske on this particular time, we were happy to withdraw this resolution if they agreed to the ethics and culture and the deep dive into the company in terms of looking at what their role in society is. Finn. Reverend shamus tom looking at bank of america shares in premarket trading. Down 1. 4 this morning. Tom the markets are on the move. A most complex morning. Futures 34. Yields did not come in first. A 6. 8. Came in with dollar yen stronger yen. Mike a cloudy day in new york city. We welcome all of you worldwide. Many different stories out there, including Lloyd Blankfeins illness. The markets really on the move. The 10 year yield 2. 4 a complete data look. David i want to look at features quickly. He for we talk about books wagon. Volkswagen. The nasdaq down 89. Angela merkel is urging vw to clear up irregularities on emissions readings quickly. All the facts need to come out. Hans nichols joins us from berlin. There was a report in a german newspaper that the ceo may be out. What do we know about that . Hans theyve had this story for about two hours and no one has been able to confirm it. Volkswagen spokespeople told them that this was not true. Here is the brunt of what they reported. They said on friday that the 25th of september, martin, a ceo expecting to extend his contract thed be replaced by mattea current ceo of porsche. Pressure has been building. Weve heard from labor leaders. Weve heard from angela merkel, strongly hinting that volkswagen has to come clean. Onhave some great reporting what happened on a Conference Call last night between the Supervisory Board members and he was not asked directly whether or not he knew about this socalled defeat device that allowed volkswagen to trick the epa on whether or not they were actually emitting the kind of pollutants they said they were not emitting. Saying the company was dishonest, not only with regulators, but with shareholders. How big has this gotten . Hans there are investigations in korea, france, European Union officials have negated that volkswagen has set aside 6 billion euros. David coming up, the conversation with george and robert, the coauthors of a new ools. Called fishing for fa tom good morning, everyone. Bloomberg surveillance. Bloomberg radio and Bloomberg Television worldwide. A lot going on today. Movement in the markets and commodities, for exchange, some of our themes this morning. We look at the equity market. We start on a modestly Goldman Sachs chief executive Lloyd Blankfein disclosing he has lymphoma. He will undergo chemotherapy and his own is is highly curable. Goldman shares are down 1. 5 . Automakers are lower. Speculation that volkswagens admission of cheating may lead industrywide investigation. Fiat chrysler down 5 . Ford motors down 2 . The copper and gold producer is part of a transatlantic slump in mining stocks. China is the worlds biggest user of raw materials. Stake inng its 6. 9 the maker of jellies. Some stocks moving up in the midst of this market decline. Solera holdings higher by 3 . The maker of Auto Insurance software may attract a second suitor. An offer that exceeds one from the private equity Firm Business equity partners. This debt equity partners. Vista equity partners. Darden restaurants up 1. 5 . A fiscal firstquarter earnings that sales beat analyst estimates. Weatherford international up 10. 5 . Scrapping a proposed billion dollars sale of shares and convertible debt. That is a huge precursor to the restructuring of oil. Executives think they will say to people what they think. The markets go, maybe not. The idea that weatherford may be in the move to make a few deals and investors are saying not so fast. Tom there is your equity report. Ashlyn got my attention. Mike great minds think alike. Tom has one of the greatest minds around. So does Tracy Alloway. The two of them have great minds and really boring nights because they sit there and look up what is so important about zinc . Tracy tom can speak for himself. In my mind, zinc is a really of the pain in emerging markets and the overall collapse in the commodities complex. I know youve been talking about it already come up missing prices at their lowest since inventory numbers that showed a 57 surge in inventories in the space of a month. Props to the analysts at credits wes because they put out a big commodities no yesterday saying they were turning bearish on a bunch of metals. Zinc included. The demand from china is not there. They reckon china will have to cut its infrastructure expenditure by as much as 50 . Tom lets get a shot of this in the bloomberg terminal. I will put it out on Bloomberg Radio plus. This is the bloomberg commodity index. Its not just oil, oil, oil. In thisa major message freefall. Tracy its really everything. The slump. Nowthing im interested in are the second order of sets. We talked about fallout in brazilian credit markets. I was looking at some currency and commodity links. All these big moves will ripple their way through the Financial System and we dont know how that will play out. E what do we using for use zinc for . Zinc, . If you talk about look at things like chinese railways, chinese building construction. Mike this is one of those base metals that gets put into stuff that makes stuff. Tom it is the 24th metal in size. There is not much zinc out there. I can read wikipedia like a pro. It is all new orleansbased. Ation k to galvanize asi china is not making as much a stainless steel. And you get roofing nails they are zinc coated to keep them weatherproof. What other commodities did they throw under the bus . Tracy much everything. Im trying to remember something on. Were polish bullish mike Tracy Alloway. A lot of bearishness from Credit Suisse about base metals. A lot of people following that. Tom it shows you the complexity of the markets you can do a long data check. Futures 271. Ow brazil and reality at record weakness brazilian real at record weakness. A tough day for some of the em currencies. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Tand thats what were doings to chat xfinity. Rself, we are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. David this is bloomberg surveillance. The volkswagen scandal will cost the ceo of that company his job. He will be replaced when Company Officials meet friday. Bw has admitted that it rigged software to pass emissions tests. 11 million cars worldwide are affected. They are setting aside 7 billion to pay for it. Chinas president is starting his First Official u. S. Visit today. He was be to take executives in seattle. He will conclude his trip with a state dinner at the white house. Streaming u. S. Sales in the first half of this your top 1 billion for the first time. Sales and Services Like pandora and spotify jumped 23 . Lets take a data check, looking at the futures market is dow futures down 261 points, s p 500 down 33 points and the nasdaq down 81. 75 here. Blankfein has been diagnosed with lymphoma. Lets get back to tom and mike. Tom good morning, everyone. Bloomberg surveillance. Open. We yields are exuberantly lower. 2. 15 . Todays opening bell brought to you by sei. See how sei Global Operating platform can be your catalyst at business, expansion seiccom imagine. Com imagine. I told people that you were the smartest guy around. I think we have now that youve been bumped down to third place. We had to bring into nobel Prize Winners in economics. Robert schiller and george accor coauthors of phishing for phools. Which it sounds kind of weird, but its in a study in behavioral economics of how companies try to manipulate you. What is the concept here . There will always be no relation in advertising and companys efforts to sell to you and you need to be aware of that . Phishing is a metaphor for something that is much broader. Creates an itself equilibrium where there is a certain level of fishing. It is not everywhere and horrible, but its bad enough to be concerning. Businessy hard for one not to play the same tricks that other businesses are playing. Its a competitive marketplace. Mike is this something people do that is illegal, immoral . When bob says they do tricks, what does that mean . George this is just a lot of being human. Some of it is illegal. We are thinking of it is mainly being perfectly legal. People into doing things that are good for you, but not good for them. People have the view that markets just buy some kind of magic deliver us what we want. Well, they do. Markets are wonderful. Also ame time, it there is a profit to be made, they also give us things we dont want. Things we get candidates doing and then we later regret. Tom i want to mention that we will scrupulously not speak about the American Economy with professor akerlof. If i could, you brilliantly mentioned john thain guild explain how it is modern in 2015. George the bezel means that come in good times, when people are irrationally exuberant on the positive side, all kinds of scams and things build up and there undiscovered. Suddenly, there is a loss in thesee in the bezel scams get discovered. Bezel, the stock of undiscovered scams. It was no coincidence that the Bernie Madoff scandal got discovered when the market turned down. When times turned sour. Mike you argue in the book that these are the kinds its like a stone rolling downhill. These tricks that you talk about, these fishing methods build on themselves and they can end in a crash and in a crash. Robert its hard for one company to hold out against the nuclear rim. Equilibrium. Businesses and governments to take action against phishing. The action has to take some sort of rule or structure the Better Business bureau is an are meantbusinesses to reduce phishing. A business wants to have Good Standing in the Better Business bureau. Tom let me full in your wonderful book, my book of the year five years ago, animal spirits. How weve come back to such a front and center debate on animal spirits with a lack of nominal gdp in the economy. What do you hope to accomplish with this book . Its not about the American Economy or nominal gdp. What does phishing for phools help to mean for all americans . George i want our view of economics to grow up. Weve had a childs view of what markets do. Magically come a automatically just give us what we want. This takes in adults view in the markets not only give us theresreally want, but some ability to tempt us or manipulate us into buying something and markets will do so automatically. They will do so as long as there is a profit to be made. Tom look at the cover of this book. These are the most twisted covers 40 comic book. Foreign economic book for an economic book. Mike why dont markets act efficiently clear in this case . Why doesnt fishing get competed away and people do business with companies that dont fish . A lot of the fishing we talk about is fishing that people want. Liked thatmpt you snake on the cover into wanting something you dont really want or buying something that you really dont want, theres nothing that markets can do about it. The beginning of the book pictures a poor woman in las vegas who is addicted to gambling. The casinos are just giving that to her. Nobody can competed away. Compete it away. They will come in and compete for her business. Om George Akerlof we will continue with bob shiller. Phishing for phools. Is that what we saw at the press conference . Mike i would not a qs the Federal Reserve of phishing. Accused the Federal Reserve. There is an interesting bias underway in the markets that would lead people to believe what they want to believe. You have been in big situation like that. And ambiguous situation like that. Tom george has handled the pressures of being married to a senior Government Official with such a classy way. He will not comment on the American Economy. The dow 206. We will continue with bob shiller. He will comment on this exuberant American Economy. Tom good morning, everyone. Bloomberg surveillance. The pope will land in washington this afternoon at 4 00 p. M. Mike en route to washington to see the pope. He will meet with president obama on the tarmac and then start a busy week. He will address congress and visit new york and philadelphia. Joining us is the executive editor of american magazine. Thank you for being here. Let me start by asking you about the importance of this trip. The world meeting of families. He wants to be there in philly for that. He is going to address congress. Hes making the most of his time here. David have big a deal is that . Tim no pope has ever addressed congress. Very few popes have addressed national assemblies. It will be very interesting. He will be very frank and direct. Is he going to lecture the congressional representatives . I think he will challenge them and try to give them a sense of hope. And question some of their decisions. I hope everybody will leave you feeling challenged in some way. David gary had a wonderful piece talking about how there are two churches. He tries to bridge both of them. Its a delicate act. Tim you saw that a bit in cuba. He is very diplomatic. He met with castro. A lot of people pushing for him to push more for human rights. I think he knows he has to be diplomatic care. He will be a little bit careful. David we focus on the big events. He will be doing other things. Tim we are interested in the smaller meetings. He is going to a school in harlem, a prison facility, Catholic Charities and d. C. These are in his wheelhouse, personal encounters. It will be interesting to see what happens there. David there was an expectation that this pope would do more to get people to get back to the church. How is he doing . Tim its only been 2. 5 years and signs are good. A poll today says his popularity ratings are very high. Whether people are getting back in the pews, that may take longer. People are considering it. David the means by which he is doing that, one of which is through twitter. How successful has he been with social media . Tim he has nine languages. He approves most of the tweet before they go out. This is not some underling. They bring in them to him and he signs off on it. Up, tom and mike will continue their conversation with Robert Schiller. This is bloomberg surveillance. The pope coming to washington today. He will meet with president obama. Taking a quick look at the markets, the dow and s p 500 and nasdaq all down. This is bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance. Michael mckee and tom keene. This morning, much about Interactive Brokers traders university. Even experienced traders need to keep learning. Traders university will get you up to speed quickly with short videos, webinars, courses and more. We thank Interactive Brokers for their support. Skewered. He went after us 15 years ago. Robert schiller at a small school up in boston. Robert schiller on exuberant reporting media and misinformation in the markets. Is that what we saw last week with rfid coverage . Is it just too much information . Our fed coverage . Media likes to focus on concrete stories instead of deep psychological or what people are worrying about stories. The fomc gets too much attention. This idea of whether they will raise now or in december tom you are in the corner of our Bloomberg Radio studio. We will close the gates. Mike what is important to the economy these days . , whatis not the fomc should americans be paying attention to . Robert this will sound very commonplace, but we have seen a stock market that i between 20092014 almost tripled. Now, its bouncing around. It has not really moved since a year ago. It went up and then came down. People are wondering, hey, is they are to get out . Tempted to stay in because its been going up. Mike what is the relationship between the stock market and the economy . If people get out, does that affect the overall economy . Out. T people cannot get the price can fall. One thing that george and i emphasized in our previous book is thatnimal spirits the economy is driven by stories. One very prominent story is the story of stock market crashes correctionsng being a leading indicator. People are worried. I dont know what that means for the future of the economy. You do tremendous work on economic history. Is that story true about the stock markets and corrections . Indicator, leading when it was first born around 1920s, immediately picks the stock market as a leading indicator. Not reliable, but wellknown that it does sometimes forecast often. Forecasted 12et of the last nine recessions. Something like that. Tom with the speed of information, are we asking too much of our institutions . Are we asking too much of the Federal Reserve with bank of england, the ecb, the bank of japan . Robert we should thank all of those for averting a depression in 2008. The psychology was changing in a nasty direction and people would have curtailed their spending much more if we had allowed things to happen. To International Coordination they did not stop us from having a week economy. We are still suffering. Tom is it weak enough now for a new demand stimulus . Think some kind of fiscal stimulus would be appropriate now. On the other hand, maybe a small Interest Rate increase would be a way of showing concern about the high valuations. We are in this funny situation high asset prices. The fed and other Central Banks over did a global depression. Did they go too far . Lack ofof the fiscal action. Robert it would have been better if the physical action had been stronger. We have Central Banks that have gone pretty aggressively. Physical action had been stronger. Once he push the Interest Rate down to 0 mike should they have gone as far as they did . Central banks assume roles they in a functioning market economy. Robert it would have been better if we had more fiscal stimulus. At this point, i think we should also ask there is an old idea around een bounced the public work reserve was set up by roosevelt in 1942 to plan ahead for the next recession. Stimulus to do fiscal because you cannot start these projects instantly. You have to have a plan for it. Thats what we should be doing right now. I like the public work reserve. Its emphasizing what to do when we have the next mike the public work reserve. You have to speak of overvaluation. People are either agreeing with Robert Schiller that the market is of high valuation and others say Robert Schiller is nuts. Describe how you value markets and are we overvalued . Robert i have a couple of indicators that ive developed. One of them is the cape indicator. Cyclically adjusted priceearnings. Another is my valuation confidence index. It measures the actual valuations of the market. The other one is a survey data that asks people whether they think the market is over or under priced. Seeing saying slippage of these confidence this is very important. Not only is the market highly priced, but the public think so. That is a problem. After we get volatility in a market like weve seen lately, theres a chance the public will decide if fairly. They will take action on their fears. Tom then why are we in a sixyear bull market . Robert i did not predict it. I cannot claim special knowledge. Book a new edition of my i like to list our precipitating factors that drive the market. Theres feedback that amplifies them. Theres a number of precipitating factors. The end of a depression scare. 2008 and 2009, people were genuinely worried about a return of the great depression. Michigan Consumer Sentiment minister every prime around the road wasnt win to take action to avert a depression around the world we need to take action to a bird a depression. We had some government stimulus policy that brought confidence back. Effect, a perverse kind of fear and anxiety that promotes people buying stocks. Its a fear of new technology and a fear of inequality. Maybe i will be on the wrong end. Its a longterm fear that people have now. A taxi, asked the driver, do you know what your children will be doing when they grow up . Iset an answer up in that filled with anxiety. The world is changing so fast. Tom thank you so much. Phishing for phools is the new book. There is a moving forward in the vw story. Mike an investigation into volkswagen. That story continues. Tom you will hear more of that through the day. We are produced by richard truman. This is bloomberg surveillance. Good morning. It is 10 00 a. M. In new york, 11 p. M. In tokyo. Of wheels are coming off volkswagen, the whitening admissions scandal may have cost the ceo his job. Germany opening an investigation. Emergencies to political, european leaders are meeting to tackle the migrant isis. Crisis. Your migrant severe stress on russia, we look at how the country is turning a path out of recession at the ceo of one of russias biggest banks. Fugood morning, im scarlet we will get a look at the market check. Stocks in the rent. By can see large declines 190 points in the dow jones, s p losing 1. 1 . Extending weakness. The s p 500 yesterday gaining almost nine points but today it is getting back all of that advance and more. If you look a