World war ii victory parade next week. The u. S. Rally may not last. S p futures indicate u. S. Stocks will open lower today. The s p 500 is coming off its biggest twoday rally since 2009. Oil heading for its biggest weekly game since april. Wti up around 43 a barrel. Yesterday after reports the u. S. Economy grew faster than expected in the second quarter. Puerto rico being drenched by Tropical Storm erika. The storm is moving west after flooding the island of dominica. 4 people were killed and several more are missing. Erika could become a hurricane if it reaches south florida early next week. Thee has confirmed architects of its online radio strategy has quit. Ian rogers joined apple and has led the development of apple beats one. One is ae beats gateway to apples paid subscription. Apple is holding an event in San Francisco september 9. Central bankers have made their annual trek to jackson hole, wyoming. Taking part in the Kansas City Feds annual symposium. Randy greeley is there. How is the hiking . Brendan all i have done is taken a jog. Ive been bumping into famous people on their blackberries. Carney is here. We will talk to James Bullard of the st. Louis Federal Reserve in a little bit. He is not a Voting Member this year. He does have some interesting ideas on how to listen, excuse me, how to tighten policy using more sophisticated instruments than just getting up off of the lower zero bounds. Vonnie checking in with you shortly. We bring the. Bloomberg terminal on the conundrum of the morning. I saw the word conundrum and the ft. Pce core deflator. The nirvana of good inflation, 2 level. Here we are in the crisis below, 20082009. This is a great challenge, the rollover. Mark carney of the bank of england facing the same challenge as vicechairman Stanley Fischer and all of the fed. Lower,check, futures 14. The futures 120. The euro, a little bit of a bid. A little bit of a risk off feel. Oil with a big bounce yesterday churning a little bit of red,. Reen, red, green 50 intraday. Up to the spread between brand and west texas intermediate, five dollars or so. The economies made in wyoming. Reinhart,o carmen James Bullard, and green. Of calm. We are thrilled to bring you from citigroup bill lee, their head of north american economics. Ofning us as mike reagan bloomberg news. Mike do you remember ballad of bob dylan, there is something going on but you do not know what it is. You are left to trade on basically computerized trading programs that do not care about price valuation. Momentum following strategies. This is the case laid out by a strategist at j. P. Morgan. He said it started late last week with what is known as gamma hedging. Tom the accelerations within the market hedging the second derivative. Can we talk counselors on a friday . Can we talk calculus on a friday . Hedging, is that a jargon alert or what . Bill i know your viewers know what it means. Vonnie are you saying people who went to the beach were better off. Mike stay at the beach until you get the all clear to go back in the water signal. It is these gyrations this is a jp morgan strategist saying this, not me, i could have never figured this out. More mason chasers and portfolio momentum chasers and portfolio strategist that target volatility or reposition portfolios based on volatility tom is the strategist that you follow into the week and write for monday . Did that shift because of the week we saw . Or is it steady . Mike as far as the people that deliver year and forecasts for the stock market, none of them have lowered anything yet. We are still looking at a 2230 forecast close for the s p 500. Tom bill lee of citigroup here. Withf my great moments your colleague, he stormed out of the doors, i did not know who was more angry. Citigroup has been the bear on grexit and the turmoil of europe. Ll markets have a tendency to panic first and think later. Colleagues my colleagues are panicking as well, no rate increase is our equivalent of the grexit. I stay with september until we hear from Stanley Fischer. We have a hint from dudley, i think he was misquoted. He was hinting we were going to have some possibility of using. Tom this is a saturday Panel Discussions by vice chairman fisher. Looks to bloomberg. Com and across all the bloomberg digital spaces for headlines and comments on what vicechairman Stanley Fischer says. I believe we got a good gdp number yesterday. Well talk fantastic. Vonnie the First Quarter, what does this bring us to for the year . This confirms that we are solidly at the 2. 5 or 3 growth path. Would you explain why they did not raise three months, six months, 12 months ago . Bill they did not have the data. Since the meeting weve had better retail sales, better pde investment information. All of that said we have a good solid growth. What is missing is inflation, where is the price increase. Vonnie you pointed out early on, we are seeing we are going to get another pce. Tom this is not deflation, this 1 . Is inflation to bill the fed has told us we have to see if inflation gets to 1 in the medium term. Tom i want to go back to mike reagan. How much was black box algorithm trading . This is all different than the typical bogeyman of highfrequency trading. Tom this was not a flash crash. Defineepends how you flash crash. We had bad dislocations in the etf market. There was issues with a Computer System that prices the values of etfs on monday. That caused a lot of question marks to go out in the market. Bill one of the things the programmatic trading days, it matches liquidity. It is phantom liquidity because theres all this flipping that manufactures what appears to be a lot of trading. Mike they are not following fundamentals. Tom thank you. Get some rest. Get five hours of sleep here it mike i will sleep right until monday morning. Tom helping us with the numbers. Very i can green. An extended conversation with James Bullard. Of thet important voice president s and governors. Lets look at our twitter question. You want to hear from fed vice chair Stanley Fischer . Stay with us on this friday, bloomberg surveillance. Tom good morning. Futures pause after a big two days. Dow futures 109. A fragile type. Our top headlines. Vonnie in hungary, three people arrested in the deaths of 71 migrants sound in a truck abandoned on a highway in austria. The migraines probably suffocated. Some of them were refugees fleeing violence in syria. Teslas elon musk is going back to his days at paypal. If you buy a tesla model s after being referred by a current owner, you get a 1000 discount and the owner will get a 1000 credit. Musk had a similar Referral Service at paypal, which he cofounded. Donald trump may have settled the most pressing question of the campaign, is that his real hair . The answer came at a rally in greenville, south carolina. Mr. Trump i do not wear it to upe. It is my hair. Come here, look. It is. Yes, i believe it is. Vonnie trump said the New York Times accused him of wearing a toupe. Vonnie i want to see a certificate. Tom its there. Vonnie one of the things jumping out at me, wti back about 42 a barrel. Brent at 47. 40, seems like we found a bid. Citi calling for we has billy with us. Is oil playing into this . Bill oil and other commodities are holding down the problem we are facing, lack of inflation. We get a hint this is getting embedded into wage setting it could take longer. Vonnie how do we know that . Bill we do not know. There is so much uncertainty in the labor market. The link between labor market increase and price increase has always been weak. So well with your imf experience. Here is morse on oil from his citigroup note. The oversupply is likely to be shortlived in some commodities, especially metals. Crude oil prices are testing new lows. Disinflation and deflation in japan. Deflation peered it is Christine Lagardes new mediocre. Bill one thing the u. S. Has is a rising growth rate and we are expecting the economy to improve. The output gap is supposed to be closing. Potential is only 1. 5 . Tom with policy and looking at the trilemma of politics, Barry Eichengreen with us later, the idea that they will impute inflation and disinflation to our stronger economy, will that occur . And i keep hearing that yet when we look at what is going on, most of the imported inflation is coming from goods prices. Where are the Service Prices . Tom can i do this on a friday . Services, goods. It is that simple. We care aboute do inflation . Where the services are, that is the core set of non traded goods and services the fed is going to be worried about. Vonnie why isnt the oil getting passed on . Quality of Income Growth has dropped. Most of the Income Growth is coming from lowwage sectors. Tom hes like 02 on jargon alert. Marginal propensity to consume is the responsiveness of consumers to an Oil Price Drop . Bill to increasing income, increasing income is from Lower Oil Prices. Tom why didnt they spend it at walmart . Bill theyve gotten cautious. Consumers are more cautious today because of the uncertainty in job growth and the type of income. Tom how can that be . Vonnie Corporate America is not passing on bill without a doubt, gas prices are lower. Au can argue the spreads are little higher. The difference between gasoline prices and oil prices. And a lot of that is because refineries has had outages. A Technical Glitch has held up prices. Tom bill lee with citigroup this morning. We will continue this discussion. We have two first red economists to give you perspective. Will join usreen from the university of californiaberkeley. The worlds Great International economist. He had the privilege. Then a conversation with James Bullard of the st. Louis fed, the great centrist. On the st. Louis cardinals as well. Michael mckee and Brendan Greeley in jackson hole. Good morning. Tom it will not make the headlines in america. It is a big deal, yen at 1 10. 84. Of bloombergka tokyo reporting there is no inflation and japan. This is a big deal for asia. Outright deflation again in japan. Our morning must read. Vonnie kit juckes from socgen talking about the top macro topic of the month, the chinese fx regime shift here he says the objective remains a puzzle given the shift was followed by a tightly managed float. He goes on to say the u. S. Dollar will ultimately do well in a macro environment of declining global reserves. Bill lee of citi with us. How much was the yuan depreciation related to the selloff . Bill the listening was the Exchange Rate was an attempt to be imf friendly. It was not for macro purposes. What we conclude is the regime is trying to find its way to find a liberalization scheme it wants to continue. And they did a devaluation they have done days of depreciation and they are within thell a collar, strength to the bottom and weakness to the top of dollarrenminbi. Bottom. To the which way will they break out of that . The consensus is they must depreciate . Bill they want to widen the collar so they can show everyone tom they are not. They have an open mouth policy that says that. They are too afraid to allow the markets to have full force. They do not have the Financial Institutions to be able to withstand tom if they let the currency go, what happens to capital flight within china . Bill thats the big fear, where will the capital go . There is no confidence that the regime in place is able to manage the liberalization and social policy change they have to do in the next few years. The people are trying to find other places to put their money until confidence comes back and that is going to be a while. Vonnie you talk about open mouth policy, we dont know what they are going to do next even regarding the renminbi. Bill say as much as you can to encourage something, but not show what your plans are. Vonnie are they going to devalue further . They it is without a doubt want to because they want to encourage the economy to grow, but that is the wrong way. They are trying to shift resources and push capital into the service sector. Article thistant week showed the separateness of their janet yellen from beijing. , hownot buy that independent are there monetary makers . By our standards they are well controlled. But they are a market economy. They have controlled economy tools and a market economy infrastructure, thats a conflict. They do not have the policy levers they need. They need fiscal policy, how can they implement fiscal policy when their Corruption Campaign has gotten rid of a lot of leaders and frozen government spending. Vonnie what is growth like in china . Bel we think it is going to a growth recession. We may see some quarters with a three handle. Tom a three handle is a recession by their description. Bill especially given to her history, which is a doubledigit growth rate. The actualinced that numbers would be much worse. Tom great perspective. Our goal this friday is to look at the week and get you ready for the weekend. From jackson hole, coming up here to a harvard professor carmen reinhart, this time is different. A conversation at 7 30 eastern, James Bullard will join us. Tom bloomberg surveillance. 126 p 16, dow futures are a quiet morning compared to this week. Vonnie chinese stocks ended a volatile week with a strong finish, they rallied for a second day. The shanghai composite up almost 5 tiered speculation authorities are propping up president fore chinas takes the stage at a world war ii victory parade next week. Rally may not last. S p 500 futures indicate u. S. Stocks will open lower today. The s p is coming off its since twooday rally thousand nine. Former president george w. Bush visits the site of one of the low point of his presidency, he traveled to new orleans to mark the 10th in verse three of hurricane katrina. The former president was criticized for his response to disaster. President obama wasnt there yesterday, he walked through the neighborhood hardest hit. The president said new orleans is a model for resilience in the face of catastrophe. President obama on the larger project of a better, stronger, the just new orleans, progress you have made is remarkable. Vonnie mr. Obama called new. Rleans a work in progress defense secretary Ashton Carter and frienddraising raising mission to Silicon Valley. Techr wants to recruit firms such as apple and google to join defense contractors. Skepticaludience is of the pentagon, where he of privacy violations. We will speak with Ashton Carter at 1 00 p. M. Eastern on bloomberg tv. It is a milestone for facebook, Mark Zuckerberg says on monday, one billion people used the social network for the first time in a single day. One out of seven people on earth. In january, the company said that 20 of the worlds population is on facebook. One of the legendary figures in pro basketball has died, Darryl Dawkins was the First High School player to go to the nba directly. Seasons. 14 he became known for his backboard shattering dunk and was nicknamed chocolate thunder. Dawkins was 58, he died of a heart attack. Tom nobody thought he would have a long career. Boy did he deliver. Vonnie 611. Tom they thought he would be a flameout. Vonnie all the names for all the different shots. Coverageeed to begin from jackson hole. Brendan greeley and Michael Mckee are in wyoming. They have coffee at this ungodly hour. Brendan good morning. We spoke yesterday to carmen , she is known for her work with Kenneth Rogoff looking at the history of financial crises. Work sayingy, her countries should be worried about debt to gdp ratios greater than 90 . Reputationven her a as a champion of austerity. That is not necessarily true pitch she thinks countrys should be creative with nonausterity ways to get rid of debt. Michael a couple years ago she told me here that the u. S. Was going to come out of this slowly. That is what her work showed, it might be several years before the u. S. Returned to normal. Now she says we are getting the Great Recession past but that does not mean we are going to be returning to a prerecession economy. Reinhart if you look at periods, after world war ii everybody had high debt, real Interest Rates were very low for extended periods. For the past few years i have been saying i think expecting the economy to return to those were, 3 real rates, which not exceptional prior to the crisis, i think that is not the world we are going to be living in for some time. She sounds gloomy but there is good news. She told us that the United States is ahead of the rest of the world in recovery. Brendan we talked about greece and germany. She does not have any confidence there will be a nominal haircut there. Is necessary to pass an actual haircut and not just extend maturities, a pretend haircut. If you reduce the amount owed, some good things would happen. This is what she said about greece. Inhart if you are a citizen of that country and your money is outside of the country, that is the situation in greece. There is a lot of greek wealth outside the country. T if you think there if you think there is this debt burden in the out years, that probably means that some form of Tax Liability or confiscation is not unheard of. If those risks lie ahead of you, is that in inducement for you to invest in your own country . Michael we talked about greece for a while, extending and pretending is not doing a good job here at actual haircuts nee