2.15 on a 10-year. kevin: and can you stay long in the e.c.b. meeting on thursday? john mentioned gasoline. at one point it was over $2 a gallon. the issue now is are we going to have the supply? colonial pipeline has shut down different supply to the east coast. that could be an issue for this driving season, so watch that commodity. copper, nickel, zinc all on the upside on that better manufacturing data out of china. those metals have been a killer month. copper had the best month, highest level in three years. we'll talk about that as it relates to the 3% growth. now let's get an update on headlines. emma chandra is here with first news. chandra: a french chemical plant exploded in texas earlier today. the company, arkema, had expected that to happen after the storm knocked out power supplies needed to refrigerate volatile chemicals. meanwhile, the storm has now knocked almost 1/4 of u.s. oil refining capacity offline. fuel-making capacity is now at a seven-year low. harvey is moving into louisiana has made matters worse for the energy industry. in france, president macron lays out his labor reform plan today. macron wants to make it easier for companies to negotiate working conditions and pay and to limit compensation to severance. labor unions are opposed and plan protests next month. president trump is putting the pressure on congress again, this time on overhauling the tax code. the president kicked off his campaign to tax reform in springfield, missouri. president trump: and i am fully committed to working with congress to get this job done, and i don't want to be disappointed by congress, you understand me. you understand. [applause] understand. emma: still, the administration doesn't have its own tax plan. it's counting on congress to write one. global news 24 hours a day, powered by more than 2700 journalists and analyst in more than 120 countries. i'm emma chandra. this is bloomberg. alix? alix: thanks so much. he's throwing shade at congress, like your fault, your fault, guys. jonathan: i would love to have a group of people i blame. they're in the control room. that's what i do every day. three hours, things go wrong, i blame the control room. that's how it works, isn't it? alix: it is true. jonathan: they're going crazy right now, i'm sure. alix: he also present an optimistic outlook on the nation's growth. president trump: and i happen to be one that thinks we can go much higher than 3%. there's no reason why we shouldn't. alix: not everyone agrees. in a bloomberg exclusive, the bank of america c.e.o. gave an outlook that wasn't as rosy. >> we've got a good, solid economy. i think without the population growth at a faster rate, you're going see this thing fight to get between 2% and 3%. alix: joining us now is the chief market strategist at metlife investment management, let's start with the 3% growth. ok, i hear brian moynihan's point, but then you've got metal surging. you still have momentum in china. where do you sit on that debate? >> well, what he's arguing is its population versus productivity. our view is that productivity is low now, but not structurally lower that productivity can re accelerate. one of the reasons productivity is low is because growth is low, and we're just not operating at the efficient r.p.m., if you want to call it that, that the economic engine can operate at. so as growth accelerates, productivity should go up as well. alix: what does that do to stocks? you can say it's climbing the wall, short interest is rising. you can point to some of the cracks, 52-week lows are kind of rising. where do you stand? >> thinking about the stock market, it's really not that complicated. it's two variables, earnings and valuation, and the p/e multiple. getting those variables right is the challenge. but i think in the environment that drew is looking at, i agree with it. i think, on a global basis, companies can grow their earnings 5% -- their revenues 5% to 6%, and i don't know the profit margin can go up from here. i think earnings will continue to grow, and i think we'll continue to push the market higher. jonathan: in terms of tax reform, how aligned are the plans of the president with the work that congress is ultimately doing? he's still calling for a 15% corporate tax rate. are we going to get that kind of thing from congress in their plan? >> so, you know, there are a couple of things with tax reform i think we have to think about. tax reform is preferable to tax cuts. fine it takes a little longer and everyone's coming at it from different angles and everyone wants different things, it's better if they all sit down and you end up with tax reform than if you end one tax cuts by themselves. the actual, you know, plan -- everyone always comes out with their wish list and it gets negotiated around. the important thing is kind of the simplification factor. two taxes become simpler, easier for people to understand on the individual side, and on the corporate side. jonathan: the reason i raise the question, on the campaign trail, the promise was to really lift the burden from the middle class. that's expensive. can congress afford to do that? drew: whenever you're running a budget deficit, the sque can you afford tax cuts if you're running a budget deficit? that's really a replying question. does the question need a tax cut right now? that's an open question. could it need one a year from now, year and a half from now? probably more likely at that point. once again, kind of if they take their time and kind of put out a policy that kind of creates underlying reforms to the process to make it simpler for people to understand, i think that's kind of the best-case outcome. alix: what's priced in, ed? ed: i think what's priced in is an economic expansion for as far as the eye can see. alix: in terms of tax reform now. ed: in terms of tax reform, the entire president trump agenda, which seems to have been priced in overnight after election day, is now being questioned. so i don't know that there's much that hasn't been priced in. i think the market still may be pricing in some repatriation of foreign earnings, but i don't think there's much expectations for any significant corporate tax cut. alix: this shows most tax companies relative to the s&p. this is the election. high tax companies rallied, and now they've really sold off, even lower than before the election. can you make an argument there's too much pessimism, too much doubt? ed: not necessarily. not necessarily, simply because, you know, reality has set in, and the swamp is turning out to be deeper than trump thought, and he could -- his agenda could be buried there or drown there very easily the way things are going. jonathan: treasury yields this morning, 214, 215 on the 10-year. you kind the term bomb vigilantes. ed: it will object my tombstone. jonathan: if we took aday central banks, everything right now, where would treasury yields be? ed: that's a good question, and i think about it every now and then. i don't think about it every night. but i think the treasuries could very well be right here. there's some very powerful structural forces in the technological innovation that are keeping inflation down, and that's the key. i think inflation is dead. i mean, maybe an extreme statement, but all i mean by that is i don't see it going up from here. in which case the bond yield is probably going to stay around here as well. jonathan: drew, is that your thoughts as well? drew: i think we'd look at higher yield. in my opinion, we'd be closer to 3%. you know, i think you can't hoover up a trillion, trillion and a half dollars worth of debt and not have it affect the supply and demand. jonathan: 3% from 214, when you remove all the central bank stimulus, it's not a dramatic move, and it's worth exploring. when you think about it, we're getting the nervousness around the e.c.b., federal reserve, the balance sheet policy. a move to 3% and a removal of everything, it goes to show you where we are in the world, doesn't it? drew: we'd be moving up from there, given everything you just laid out, right? the e.c.b., you know, seeing higher inflation, that's very important, because a lot of the flows into treasuries that we've seen have come from overseas, and, you know, as things begin to improve overseas, there will be less impetus for people to go in and drive yields lower. ed: i think the markets are still thinking about it. the fed is still here and not going away. i think there's a perception the fed funds rate could get to 2% bit end of next year. think about it, 2% is still piddling . it's nothing to get excited about. jonathan: you're sticking with us. ed and drew. coming occupant program on friday -- payroll friday. bill gross and janice anderson, former u.s. labor department tom lee, mist, plus will all be joining us. from new york, you're watching bloomberg. ♪ emma: this is bloomberg daybreak with your bloomberg business flash. the new c.e.o. at uber has a time table for the company going public. he was introduced to employees yesterday and said there could be an i.p.o. within 18 to 36 months. one of hers first jobs will be to rewrite the code of ethics following multiple scandals. the c.e.o. of france's total says european oil refiners are benefiting from the shutdown of u.s. refiners due to hurricane harvey. that's good and bad for patrick. total had to shut down its refinery in texas because it lost power. that will toss total a few million dollars. inflation in the euro area rose more than expected this month. consumer prices increased at an annual rate of 1.5% in august. next week, european central bank policy makers will debate the future of their stimulus program. the e.c.b. has been pushing for significantly faster inflation and rising wages. and that's your bloomberg business flash. jonathan: emma, thank you very much. europe's second largest economy is facing changes under their newly elected president. it's a move that hopes to improve france's chronic 10% unemployment problem that continues to wow the region's growth. but the economic policy for the next five years hinges on the reception of the proposal, which may prove to be difficult as the popularity drops in the polls and unions threaten to protest. for more, bloomberg's paris correspondent joins us now from paris. caroline, let's just begin with the reality on the ground and the resistance of the unions, how difficult it will be to get this plan through. caroline: so we expect, of course, from an international point of view that we would see major strikes in france, but in fact, only the second biggest union they have called for a strike on september 12, and we had reactions over the past hour from the other unions in france after meeting the prime minister and getting the details of this. they are saying they are disappointed on some measures, including the measures regarding small companies, and including the means and the role of the unions at the local level. however, there is concern they will not participate on september 12 in the strike, and many executives and business leaders we've been speaking with actually say that france is not expected to be paralyzed over the next few weeks, and this labor front is likely to pass by the end of september. jonathan: let's talk about this labor reform package. you've touched on one of the issues within it. what is the most controversial aspect of this labor reform package, and what else the one thing that's getting the most resistance right now? caroline: the most controversial measure is the one about economy. at the moment, economy player, you want to invest in france, you want to settle, then if you want to do any economy play, you have to justify the layers based on your global company situation, not on the local french situation. now, this is disappearing. this is what the labor minister said is very important for investments, and she's saying she just aligning france with what it's done elsewhere in the e.c., and she is saying, along with the prime minister, this is what will move france more attractive for companies. jonathan: let's talk about the approval ratings of the president of france. they look ugly compared to a couple of months ago. i asked the question, how much political capital does this man actually still have? caroline: it really depends on protest, what kind of strikes we'll see with this reform. this reform is really defining macron's agenda the next five years. he called it during his campaign the mother of all reforms. this will determine whether he'll be able to take some other reforms, for example, unemployment benefits, and, of course, the very highly expected tax reforms of next year. so if i may mention one call as well, this is the whole contradiction among the french people, more than 60% of the french actually say they don't trust macron on this labor reform, but at the same time, more than 50% believe that the labor rules need to be revised. jonathan: caroline cannon, thank you very much. the politics and optimism around it in france, one of the ingredients in a recipe for the stronger euro throughout 2017 so far. euro-dollar throughout the week whippy, north of 120 at one point, now at 119 at 118.45, softer after a report by reuters suggesting on the back of comments by e.c.b. officials that there is some concern over the potential for an overshoot. the euro getting too strong in the minds of a few people. still with us around the stable drew and ed. drew, is 118, 119, 120 something to be concerned about for the e.c.b. ahead of their meeting next week? drew: they're going to worry about it, because they always worry about inflation and the currency. but i think they're going to take a lot of comfort in the fact that inflation has been accelerating. our view they're going to be moving to tape neither first half of next year, and i think if you're seeing global growth behaving the way it is today, that that looks reasonable to us still. alix: the trade-weighted index shows an even more powerful story. it's really at the highest since 2014. ed, talk about the trickle down from a growth perspective and equity perspective. ed: really, the big surprise i think since the end of last year has been the strength in the european economy, sort of came out of nowhere, because everybody got used to the notion that they were just going to stagnate forever. but the retail sales have been very strong, french, german retail sales have been strong, production has been picking up, exports have been strong. the i.f.o. business index in germany has been absolutely flying to new record highs, which is extraordinary. i'm not convinced it's all currency. i think there really is some fundamental domestic growth going on. it's not all exports. so i don't know that the currency matters as much as the e.c.b. is now worrying about. but i think the e.c.b. just really wants to postpone tightening as long as possible, so i think early next year might very well be how far they want to push it out and maybe push it out beyond that. alix: is the market going to be totally caught off guard on thursday then? ed: i think the fact that draghi didn't say much, if at all, at jackson hole on what was next may very well tell us what's going to happen at the next meeting, which is nothing. jonathan: can he explicitly reference the euro on thursday, next thursday? he's had plenty of opportunities to do so. i understand that the report today in another publication with some officials that remained anonymous, but go on the record and do it if you're really worried about it. we saw it in the account, but not the news conference afterwards at the last meeting. are we going to see it in the account in about a month's time and not in the news conference again? drew: you might. there's nothing for him to gain by referencing it. he can't control it. it's not a reaction to their own policy. jonathan: why publish it in the accounts if they're worried about it? why have you got officials at the e.c.b. leaking this stuff to another publication if they're concerned about it? if they're concerned about it, why aren't they on the record talking about it? drew: well, they put it on the record. they're not talking about it, because they're trying not to elevate it, but they have put it on the record that they're watching it. i think it's just, you know, it's a way central bankers act. they don't have complete control over currencies. they know they don't. but the same point, in order to basically show themselves to actually an wear of their surroundings, they have to reference it in some way. but that doesn't mean -- ed: they don't want to be too crass about it either because otherwise they get accused of manipulating their occurrence are you. jonathan: well, that's exactly what they're doing. it's ridiculous. if duke it anonymously, you are manipulating the currency. ed: this is how we play the central bank game. we all know how it's played. drew: ed and i were both fed watchers. we've seen this game play out before. jonathan: i think the confusion for a lot of people, it was in the account, and he went into the news conference, had several opportunities to address this, and dismissed them all and didn't explicitly reference it. drew: that tells you something as well. alix: you also saw what happened when he didn't mention it in jackson hole, so now he's stuck between a rock and hard place. ed and drew, both of you guys are sticking with us. coming up -- american electric power c.e.o. will join us. he supplies 1.5 million houses in texas. we'll talk to him about the effect of hurricane harvey. this is bloomberg. ♪ alix: the s&p is in its second longest bull market they've added almost $19 trillion to share value. our co-host spoke to warren buffett yesterday. he reity rated his choice for stocks over bonds. warren: we're shooting fish in a barrel in late 2008 and 2009, and then stocks have been steadily going up now for -- well, march of 2009 was the low, early in march. so it's eight-plus years. and stocks aren't going to earn much more, they're not going to earn more just because you pay more for them. so they've gotten less attractive as they've gone along. they're still very attractive compared to bonds. if you look at the 10-year, you recover, and that means you're paying 45 times earnings when you buy that bond, and the earnings aren't going to go up. if you put $100,000 in a 10-year bond, you're paying 45 times earnings for a form of investment where the earnings can't go up. stocks still look attractive compared to that. but they don't look as attractive nearly as much as they used to, and, of course, if interest rates go up, then comparison becomes far less dramatic. >> i wrned if there isn't a direct connection between the two, and how much of it is because the central banks, not just the fed, but also the e.c.b. and bank of japan have really injected trillions of dollars and euros and yen into the system, which has driven asset prices up. warren: no question, they probably wanted to drive them up, too. but interest rates are to stock prices what gravity is to matter. i mean, if interest rates were nothing, are they going to be nothing forever, you'd be buying stuff that would yield you 1% or 2%. you might be buying real estate, you might be buying stocks. if interest rates are on the short rate, 21% like they were in 1982, you can look at a stock at six times earnings and you can say, well, that's really not attractive. so interest rates, i mean, that's what drives valuations, and we've had these very, very low interest rates now for some time. a lot longer than i thought we would have them, and probably a lot longer than most people thought we'd have them. jonathan: that was warren buffett, speaking to our co-anchor, david westin, who should object vacation. alix: but he seems to come back every day. jonathan: he's on vacation now. i love the quote that rates are to stocks what gravity is to matter. and you wonder what's going to happen f. gravity does start to buy the stock market, that could be a big deal. alix: especially the yield differential with 10-year yield slowly eroding. the margin is this big in terms of dividend spread, so how much more attractive can you even make stocks? jonathan: we're going to get into that conversation later. coming up, the chairman, president, and c.e.o. will join us as we count you down to the market open two hours away, four days of games in the s&p 500, still slightly negative as we close out the month of august. i can tell you the dow is up just, just this much. from new york, you're watching bloomberg. ♪ so we need tablets installed... with the menu app ready to roll. in 12 weeks. yeah. ♪ ♪ the world of fast food is being changed by faster networks. ♪ ♪ data, applications, customer experience. ♪ ♪ which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. jonathan: from new york city, you are watching "bloomberg daybreak." hours away from the open in new york. futures are positive after a four-day winning streak on the s&p 500, despite geopolitical tension. gains have been solid. on the month, we were negative on the dow. we are not just about positive. the s&p 500 slightly negative for the month of august, potentially the first month of losses since august. yields are little bit higher, 2.14%. decisive move a for the dollar, a dollar strength story. $1.1850.ar at that is the story across assets. let's get you headlines. emma: explosions earlier today at a french chemical plant in texas that was damaged by tropical storm harvey. the company expected that to happen after the storm knocked out power supplies needed to refrigerate follicle chemicals. meanwhile, floodwaters are starting to recede in the houston area, and now firefighters to start searching for more victims. china has announced the start date for their communist party reshuffle that happens twice a decade. 2300 delegates will gather october 18. president she shaping will be there looking at scores of top positions. -- aolution with therapy revolutionary therapy for chemo patients approved that involves extracting a patient's immune system cells and modifying them. the company is developing programs that will only be paid if a patient response to the treatment. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. alix: you basically live and then you have to pay half $1 million? jonathan: a basic guarantee. if it works, it works. alix: and then you have to pay. jonathan: at least you only pay if it works. alix: well, tax reform has hit a new obstacle, hurricane harvey. , there has been as much as $90 billion in damages. a lot of the damage has come from the flood, which is not covered by insurers but by the federal government. michael mckee joins us with more on harvey's impact. how does the government pay for this? michael: it has to go into it, whicht to pay for complicates the techs are from issue to her tax reform is basically off the table right now. cuts.looking at tax it will be harder for republicans to justify tax cuts when it leads to higher deficits. you can look at g #btv 2846. every time we cut taxes i am massive amount, tax revenues go down, but they never cut spending at the same time. this will exacerbate that. the blue line is spending, and it will go higher. we do not have a good handle on the total damages yet. percent of gdp, it will make the budget deficit that above 3.5, could go percent of gdp. that is something that republicans, in the past, have sworn is a terrible thing. alix: with sandy, republicans said only if we get some offsetting cuts. is the same debate being talked about now? michael: it is, but it is not clear if republicans will come down on them. democrats were already saying we should do it as a clean bill and spend the money. republicans have to take a position on that. alix: of course, the fiscal budget is coming up at the end of september, and we have the debt ceiling, as well. i have heard that if we get money to texas soon, that will raise the debt ceiling timetable, are you contact the spending onto the budget or the debt ceiling and it goes faster. michael: we are hearing it may make it easier to deal with the debt ceiling crisis. they are talking about combining initial harvey aid, the rescue and helping people out, in the short run with a short-term continuing resolution to give the government open until december, and they will throat debt selling in there. -- they will throw debt ceiling in there. debt ceiling goes away is a really she appeared the problem will come in december when they have to vote on significant additional aid for harvey at the same time they deal with the budget and the presidents priorities for the wall. it looks like they may be able to kick that can down the road. the tax reform debate goes on. through mattis and ed yardeni are with us around the table. -- drew matus and ed yardeni are with us. : they probably do not see the need for tax cuts at this point. if you get a tax cut, they will worry about what in my due to the unemployment rate and whether it will put more stresses on it. for a lot of people and the fed, inflation is too low. so there is very low risk to their outlook for that. i think, broadly speaking, the fed is pretty happy with where things are. or is no real reason to get overly concerned. -- if there is no real reason to get overly concerned. you are not adding to the treasury that, it is just moving from the fed's balance sheet to the public sector to the investor talents she. jonathan: if i said in september 20 17th, a showdown over the debt ceiling would begin, and in the same month, the fed would unveil a plan to unwind the balance sheet. i imagine you would say there would be carnage in the market. is veryeconomy important, and the economy is doing fine. i agree, i think the economy needs a tax cut. having the usual chaos in washington and gridlock is not necessarily a bad thing. i think fed officials really want to keep the fed funds rate higher while they can because they may need to lower it at some point. i think they will stay on course to raise the federal funds rate. no big deal. alix: help me understand the market psychology. this chart checks fed fund futures for january 2019, looking at 1.4%. we currently at 1.15%. the fed is all the way up at 2%. this is very genetic. how much can markets rerate? ed: i think the fed has been pretty effective on the communications aside. alix: how? they remain clear they want to raise interest rates. they keep saying gradually, and the markets say we will take gradual. define gradual as we see fit. i think they are saying, well, the economy is doing all right but not great, and inflation is really not a problem. the fed may be on schedule to raise rates, but it may be more gradual than even the fed thanks. alix: gradual means one thing for the markets and one thing for the fed. does not some like it will end well. focused onwant to be the balance sheets side of it. for people who are worried about inflation, they are the ones worried about the balance sheet. this is om the perfect compromise on the federal reserve. are worried about inflation picking up and about the size of the balance sheet. the doves worry inflation is too low. everyone wins with a balance sheet reduction and putting off rate hikes. they will not hike rates again this year, but they will move to a balance sheet reduction. michael: the fed is not focused on when they are going to raise rates, but they are now looking at that as a possible december situation. there is a relatively thinly -rated market arbitrage. tomorrow,0,000 jobs that number will change significantly. so they do not pay attention to that. the hurricane is not going to deter the fed. katrina, 2005, the fed met 20 days later, and they voted nine leave interest rates unchanged but said it would cause dislocation and that area, but it would be temporary. they will see it the same way. ninehan: the one of the voted -- ed: the distraction could actually wind up to be pretty stimulative. the longer this lasts, there will have to be a huge infrastructure and housing boom to turn texas around. nobody a texas is saying we're going to deal with this in the next several years. they are going to want it done in the next 12 months p.m. michael: i do not know they will be able to do that. there are no laborers, that is the problem. this will be stretched out. ed: houses are going to have to be torn down and rebuilt. jonathan: thank you for joining us. michael mckee from bloomberg, as well. let's look at the fx market. sterling a session lows. rift between the negotiators for brexit come at can you believe it? the chief negotiator for the eu is saying that i detect a form of nostalgia, enjoying the and if it's of the single market while not being part of it. if it was not serious, it would be funny. alix: shocked you do not agree. in sixn: wake me up months when we get a greek-style some appeared alix: coming up, nick aikins, electric -- american electric power ceo, is joining us. he will talk about the effects of harvey. this is bloomberg. ♪ emma: this is "bloomberg daybreak." ." for u.s. on friday jobs day, bill gross, janus henderson fund manager. this is bloomberg. alix: earlier this morning, explosions rocked across a texas chemical plant for a french , this afterpany major flux knocked out power supplies meaning to refrigerate chemicals. is the bloomberg natural gas reporter. some say it is august they did not have a backup generator. was this expected? sure.m not i do not think anything with herbie was quite expected. they had evacuated workers, and local authorities had cleared the area. alix: is there any significant damage to the area that you know of? >> extreme flooding them chemicale around this triangle, what they call it. what it points to is how this will affect production going forward, how long these facilities will be out of commission. going back to my beach, natural gas, how long it will affect demand for natural gas. alix: that brings up utility generation and electricity. gas ines from natural texas. talk about commercial and residential outages you are noticing. residential, late afternoon yesterday, but there were about 300,000 people without power within texas, louisiana, mississippi, the biggest amount in texas. thatuestion remains residential will bounce back faster than commercial, so how long will these commercial outages last? that will depend on how fast natural gas bounces back. alix: thank you so much. speaking of electricity and demand, american electric power is seeing a big impact from harvey, one of the largest electrical utilities in the united states, serving over 5 million customers in the united states. texas serves one on customers with headquarters in corpus christi. at the peak of the storm on saturday, it had 220,000 outages. that number is now about 88,000 outages as of this morning. the ceo joins us from columbus, ohio, nick akins. talk to me about what it is like to turn the power back on, what it is like to get the supply generation to the public. nick: as you said, 220,000 outages, certainly dropping to 88,000, it is a tremendous activity associated with managing crews, making sure we have the right personnel in the right places, getting assessments done, which has been a challenge from a flooding perspective. when you have flooding and areas havenaccessible, you will difficulty getting assessments in terms of what the true damage is. a lot of work gets done around assessments, and then the resources are brought in. the industry has about 10,000 resources in the region at this time. aep alone has 5000 resources that are dedicated to working together to make sure that we was power as quickly as possible. alix: you brought up infrastructure, the energy infrastructure. you have natural gas, coal, nuclear, and renewables. fuelabout the ability to your natural gas power plants and your coal-burning plant. state,ur portion of the where the transmission and distribution provider in that we'ref the country, so focused on getting the infrastructure associated with transmission and distribution, which is devastated in a significant way. from an transmission perspective, we have several lines that are out. one of the lines, structures are laying on the ground, over 500 transmission structures. significant distribution losses, as well. that will be significant. we have got to get that put together for us, and make sure it matches up with the generation capability that is down there. as far as a no, generation is still intact tact, but we need to have the loads on the other side connected. as for his natural gas processing, we have two processing plants in our territory, corpus christi and inventory of, and both of those -- and victoria, and both of those were restoring power yesterday. alix: talk about the short-term and long-term. nick: there is a lot of activity in terms of restructuring and developing the infrastructure again, but it is going to take time. i was down there yesterday and the day before, and there's no question, in corpus christi, the good side of the hurricane, less flooding, more infrastructure damage, where we could get in and do assessments, but if you start moving towards houston, and our territory is really run port lavaca, victoria, aransas pass, those areas are substantially impacted by flooding and infrastructure, so that is very difficult. alix: how much does something like this impact your earnings capability? from the utility perspective, we typically get recovery of major storm-related expenses for our consumers. we file with the public utility commission of texas. we were cover the expenses to it we're not really worried about the costs at this point. we are worried about getting power back. alix: of course, but going forward. nick akins, thank you for joining us. american electric ceo. you can check out tv on the bloomberg terminal to watch us online. this is bloomberg. ♪ 'snathan: president trump focus on tax reform has put health care policy on the back earner. what senate republicans could take another stab at rebilling the affordable care act next week. exit the exchanges, sensing the largest medicaid pair and biggest obamacare sinces -- the strategies to be paying off. the stock is up nearly 48% this year. michael neidorff is the centene corp. chairman and ceo, with the company since 1996. it was a small health insurer, and it has expanded to do you continue to expand in an area other people are pulling back. why? >> we learned there are key factors for success. among them are your systems, your net worth, and your medical management. we have been applying those consistently since 1996. this product has worked very well for us. one.ke being the only when we haveit competitors because it shows how good we are by comparison. we also insist on making decisions based on the fact that they are today -- you can do the what-ifs and look at analysis-by-analysis and we avoid that. jonathan: aca, one million customers. how big can you get? that and double continue to exponentially grow it. what ishink about contracting and how we do it, we will continue to put the kohl's to this and expand. jonathan: is it unreasonable to expect you to carry on the momentum, the levels of growth? >> i think you will see us continue to grow the product exponentially. we are a growth company with a lot of opportunities. we are excited. jonathan: is the size of the pie going to get smaller but you are slices just getting bigger? >> you have a $1 trillion market by the end of this decade. let's say 40% is in managed care. we added nevada this year. we are adding other plans and other states. $5 billions a new contract. get your share of that. we tend to be the leader in the markets. alix: what if it goes away? >> aca? alix: yes. >> i do not think it is going to go away. you are not going to leave 20 million people uninsured. s, they do not get the csr' it will cost them more money or jonathan: what is your best case? >> that they continue to support it. in the legislation, premium support. they cannot take that away. so we will continue to have support for it, but it will cost them more money to do it. we talk about tax reform, and we support that. you are going to take insurance away from 20 million people? alix: but they could take subsidies away from you. >> they could take the csr's, but they cannot take the premiums. alix: if they took away the subsidies, do you feel like your growth in earnings would be fine? >> they would be fine. it would cost the government more money is the premiums would go up. if they continue the csr's into next year, i am going to reduce premiums in arizona by 9%. if they do not do it, that will be 2%. jonathan: michael neidorff, great to get your perspective on a market a lot of people are worried about. coming up, grocery wars -- we will talk to our guest about how he's taking on the amazons of the world. and avocados, as well. from new york.up you are watching bloomberg tv. ♪ jonathan: light on the till, heavy on rhetoric -- president trump has a warning for congress. -- light on detail, heavy on rhetoric. china's factory sector beats expectations, and eurozone inflation accelerates at her again harvey takes out 23% of u.s. refining opacity. gasoline surging above two dollars a gallon. from new york city, good morning. a warm welcome to "bloomberg daybreak." i am jonathan ferro, alongside alix steel. let's get to the market action. futures are positive. .p about .17% in the fx market, a strong dollar story. by .4%,lar down $1.1838. by about ahigher basis point, two .14% on the 10-year rate. alix: boeing lower, off i about .5%. it is said that her exit talks are far from sufficient -- brexit talks are far from sufficient progress. to look at gasoline futures. they went over two dollars a gallon, up by 5%, a huge move here it heading into the long labor day weekend. supplies could cut from the closure of the colonial pipeline, which transmits gasoline to the east coast. copper grinding towards $7,000. it had a great month of august. surprising. zinc at a 10-year high. how did that make it onto your board? alix: because i am alix. it is at a 10-year high. zinc on your radar, michael collins? alix: you are missing out. president trump putting pressure on congress, this time on overhauling the tax code. he was in missouri yesterday. president trump: and i am fully committed to working with this job done, and i do not want to be disappointed i congress. you understand me? understand? the administration does not have a tax plan on its own it is counting on congress to write one. us, our is joining bloomberg correspondent. who was he talking to? talking to paul ryan, mitch mcconnell, the moderate republicans who potentially could pull in some democrats, but he is also talking to some of the republicans who want to spending thatet would go towards the tax cuts with offsets. what the president is doing is telling everyone, if there is a problem with getting a tax cut plan through, it is congress' fault, not mine. alix: are the mitch mcconnells and paul ryans of the world, where he did not communicate with them during health care, are they listening or do they care? margaret: republicans very much want a tax cut plan, but there of relationsaying during the august recess between president trump and the republican leadership here it they will potentially have a chance to get back on track and everyone comes back next week. but look at hurricane harvey and the impact that could have on all of these debates, whether it is tax cuts, whether it is getting a spending bill and trying to avert a showdown over the debt ceiling. plan,as president trump's to come in with him controlling the narrative, coming back from the august recess. now the storm and the need to keep the federal government open and services running and services running in operating has overshadowed his earlier plans. jonathan: if president trump takes on congress, and it looks like political tension is escalating, is it reducing between the democrats and the republicans as we go into a critical month? margaret: republican leadership has to figure out a way to revert any troop standoff over the debt ceiling. that is their intention. what you have now is a search for the rate strategy to pursue -- for the right strategy to pursue. do not forget about the fight over the wall, which is also in play. hard president trump wants to push for that. republicans in congress very much have on their minds the idea that they need to show that the government can provide key services to texas, louisiana, the affected areas. jonathan: going into the long weekend in the u.s., what are you watching, a specific thing we should all be watching for? margaret: storm management. this is still a very real and unfolding crisis. the president will be talking with some of the storm survivors today. see howbe looking to president trump approaches congress heading back in as everyone comes back to work. jonathan: bloomberg's margaret your time.eciate michael collins joins us, along with paul quinsee. michael, as we going to september and it looks like the political story is bubbling in a critical way, treasury yields at the low end of the range for 2017. what do you think? michael: we have seen rallies post-election, and at these levels, we are actually a little less bullish than we have been our view generally has been that rates are going to be low for long. at 2.10%, that is the lower end of the range. there are very few rate hikes priced in for the next year or two are jonathan: i wonder whether, when we kiss 2.2%, where you guys selling? michael: we have been cutting over the last week or so. alix: paul, where do you stand? paul: the great american profit machine rolls on, no end in sight. you want to stay with markets. think theentally, we dollar is a better investment outside the united states than inside. europe and emerging prices -- markets, there is just better prices. alix: perhaps the buying is overdone, and valuations are so pricey and the relief rally we saw, the buy the dip, it was not that extreme. i mean, are there cracks? there's still opportunities. the financial sector has been under a little bit of a cloud this year. investors and financial stocks would rather have treasuries at 3%. alix: your fault. paul: always the fault of the fixed income guys. big returns to shareholders in terms of dividends and buybacks. not particularly expensive stocks. jonathan: a headwind to financials is what has happened to treasuries. the yield curve has not steepened the way you thought it would. michael, you guys have been front and center with the bullish calls in treasuries. seller- you might be a around 2.2%. back up ae hope rates little bit so we can buy more of them. i think that will be the world we live in for the next several years, if not longer. shouldk ups in rates be viewed as buying opportunities. jonathan: you said something that stuck with me a couple weeks ago. i asked how we look back at this in about 10 years time, whether we regard it as crazy that we had negative yields and crazy that companies were at 0%. you said, i wonder if we will look back in 10 years and think, i wish about treasuries when they yielded 2%, because i missed out. michael: i still think there is a good probability that over the next five or 10 years, our treasury yields spend more time above2% then certainly 3%. maybe they are stuck in this range. but you have to think that sometime in the next five or 10 years, we will have a recession at fed funds will be a zero. alix: so there is a recession grows call? michael: the cycle is getting longer. we do not think there is a recession imminent, maybe not for several years. but there are clearly more emerging signs of late cycle indicators starting to pop up, whether it is profit margins or employment or speculative behavior. so it is going to happen, just a matter of what shape it takes and what the implications are. alix: paul? sure, one day there will be a recession, but i think there is to money to be made in the stock market between now and then. it just does not feel like anything is pointing in that direction. alix: even with high yields and the spreads widening a little bit? paul: still pretty tight in long-term standards. we are in the ninth year of expansion. it has been a slow burning expansion. everything we see suggests it goes on for the for siebel feature. jonathan: what about credit? credit spreads a really important, and profit margins and corporate earnings a really important to credit investors. as the cycle expands in the ,abor market gets tight companies do not have the ability to push prices higher. it feels like there a price wars spreading across different industries. you saw the amazon effect, and we had airline or telecom price wars. stay down, margins get squeezed. i do not know of that is priced in. we are looking at companies with a lot of debt on the balance sheets come a how they perform dopared to companies that not. jonathan: overall, margins are still going up. the ingredients are the same. mid-single revenue growth. companies squeeze more out of it. capital spending is subdued. you are not seeing that aggressive expansion. cash flow is great. companies are paying more dividends and buying back shares. on it goes. for paul isxt leg 12 to 18 months, and you are buying now and for the next three years. good conversation. coming up tomorrow -- by the way, jobs friday. l gross of janus henderson. in two former u.s. labor department chief economists on different sides of the aisle. this is bloomberg. ♪ alix: berkshire hathaway has been piling up cash, and warren buffet says it is due to rising stock valuations per at he is positive on equities over bonds. he spoke with david westin. >> shooting fish out of a barrel in late 2008, 2009. stocks have been pretty steadily going up now. so itof 2009 was the low, is eight plus years. stocks are not going to earn much more, not going to earn more just because you pay more for them. so they have gotten less attractive. there is very attractive compared to bonds. atyou look at the 10-year 2.15%, that means you are paying 45 times earnings when you buy that bond, and the earnings are not going to go up. a form of investment where the earnings cannot go up. stocks still look attractive when you look at that. if interest rates go up, then the comparison becomes far less traumatic. david: i wonder if there is a direct connection. >> there is a david: how much of it is because of the central banks, not just the fed, injecting trillions of dollars in euros and yen into the system, which is driven as a prices up? >> they probably wanted to drive them up, too. but the interest rates are, to stock prices, what gravity is to matter. if interest rates were nothing and were going to be nothing forever, you would be buying stocks that would yield you 1% or 2%. on therest rates are, short break, 21% like they were you look at a stock at six times earnings as attractive. interest rates, that is what drives valuations. we have had low interest rates now for some time, a lot longer than i thought we would have them. alix: that was worn off it, berkshire hathaway chairman -- that was warren buffett. his conversation is nothing new, but what is happening is interesting. the white line is the s&p dividend yield, 2%. the blue line is the 10-year, 2.15%. the gap is closing. michael collins and paul quinsee are with us. what about that rising above the 10-year? paul: it is a critical relationship to this bull market. stocks dramatically cheaper than .onds since the crisis that has affected real behavior. companies have been raising money and the debt market, turning it out, buying back stock. buybacks in more of the s&p 500 this year. that continues until interest rates move up or stock prices move up and that arbitrage no longer makes sense. it is less attractive than it was but still fairly attractive. for issuance, etc.? michael: i do not buy the fact that bonds look really rich versus stocks. given where stock valuations are today and the notion that profit margins have peaked already, you are expecting return on equity's for the next five to 10 years, maybe it is single digits. on high-yield bonds, you make it 3% to 4%. 5%, maybe relatively speaking, bonds and stocks is still fairly valued versus each other. jonathan: michael, when you look at credit, talk about the fundamentals and the last 12 months. it is not quite yet in the price, but something is bubbling underneath the surface. michael: leverage has definitely gone up. i think leverage is at record levels, even higher than he for the financial crisis. related, the regulators the banks because they blew up in the last cycle, and they did not really regulate the leverage as much. and that isen off, something we are increasingly concerned about. jonathan: telecomms or something more specific? michael: the industrial sector as a whole, mostly the higher-quality companies. the bbb companies want to stay investment grade. they have levered up a little bit but the aaa, aa, single-a, a lot of the tech and bio care committees that have had no debt in the past have levered up. alix: what are you looking for? paul: myself as one of the big drivers. the big thing we are looking at is potential tax changes. policies thatuple could be instrumental in changing the outlook for supply. one of the things we're talking about in terms of generating revenues to offset the tax cut deductibility of the interest expense for corporations, and that could significantly reduce the amount of supply or issuance of a massacre to corporate debt, which would be a windfall for spreads. jonathan: appreciate your time. about one hour and 10 minutes away from the cash open. a decent tone for risk. futures are positive. stocks up in europe. yields are higher. 2.14% on the u.s. 10-year. the move in the fx market, euro-dollar down by about .5%. the dollar showing strength today. dollar-yen up to $110.65 from new york , this is bloomberg. ♪ emma: this is "bloomberg daybreak." the new ceo ed uber has a timetable for going public -- the new ceo of uber. yesterday, he said there could be an ipo within 18 to 36 months. he will rewrite the code of ethics following multiple scandals. rosetion in the euro area more than expected this month. consumer prices increased at an annual rate of 1.5% in august. european central bank policymakers will debate the future of the program, pushing for faster inflation and rising wages. that is your bloomberg business flash or jonathan: big euro falling to session lows against the dollar there it it is not because of the inflation story but after a report that some ecb officials are concerned about the currency strength. perhaps, qe tapering will be only slowly implemented. our guests are here around the table. michael, what you make of ecb communication over the last couple months? michael: i think they have done a decent job. they have been really coy. draghi is doing his super mario impersonation, like always. he wants to make sure the eurozone economies continue gaining momentum. they have outperformed expectations than even peripheral countries. spain and greece are growing faster than people thought. you see this playing out differently across asset classes? the euro is stronger. but bund yields are not higher. european stocks peaked back in may. why? on the euro is 1% profits, a straightforward relationship. the markets in europe stopped going up when the euro had its big acceleration. but things look good. we still think profits in europe grow this year, probably around 13%. it is better than we were expecting and the start of the year. it has come down by a few percentage points. by the way, when the euro goes up, you make money as a dollar investor. european stocks up 19% in dollar terms. europe, it is not so ok. bund market?e michael: the bund market was at 20 or so for while and jumped to 60. it sold off 80 basis point spirit we thought it was a buying opportunity. it has rallied back, high 30's today. .e bought at the higher levels now we're a little more cautious. there was a big rally, and now we think -- the five-year is at -35 basis points, close to that -40 basis point oc rate. not much value left. tom: there seems to be a disconnect. how does that reconcile? if the ecb is not going in or yields need to catch up. michael: people have said that about all global bond markets. i do not know if it is a disconnect. testing markets are telling you that global growth girl -- going forward will continue to be very low and return expectations has to come down. jonathan: michael collins, thank you for your thoughts. he is sticking with us, along with paul quinsee. from new york, you're watching bloomberg tv. ♪ jonathan: from new york, this is bloomberg daybreak. we will await breaking economic data in the united states. futures are positive about 0.25% on the dow. the s&p 500, down by about 0.2%. futures -- that is the story of the equity market. the bond market, treasury yields are higher by a single basis point on a u.s. 10 year. the story in the fx market, a stronger dollar story. let's walk through the data. --tial jobless claims 236,000, the estimate 238,000. putting much bang in line with what we have seen. 0.4%, aomes in at slight upside surprise. personal spending a little bit lower, at 0.3% from an estimate of 0.4%. the previous read it revised upwards to 0.2%. year, just a little bit softer, as expected, coming in at 1.4%. previous number, 1.5 percent. the estimate, 1.4%. that sticky low-inflation story -- it has not been trending higher. that story continues. the savings rate, just to show the spending -- the saving rate moving lower. to put that personal spending into context, where joined by the chief u.s. economist at barclays. michael, your initial reaction to the data? michael: i think what you mentioned is right, about stickiness on the inflation front. i think the rest of the data looks fine. labor markets are fine. the claims data have been very consistent. the income and spending numbers in line with expectations the real open question, as we have debated many times, is if and when this materializes into stronger inflation. or are we stuck in a 1.5% inflation environment that makes the fed's job a little tougher? these numbers very much in line with expectations. demand goingth and forward. some questions around the impact of heartbeat and ongoing questions about where is inflation. alix: core pce in line with expectations, but down sequentially. if you are at the fed and you are a hawk, don't you think i might have to change my view? michael: what you are going to see, though, is they will probably say labor markets are quite strong, and i am concerned about financial stability risks, even asset valuations. in some sense, you shift your tune. i think they can continue their gradual path of normalization if on year forpce year a while. if it gets lower -- this is my benchmark. if it gets to 1.3%, you have to have a bigger debate, and you may consider a longer pause. labor markets, and financial stability concerns are what the hawkish elements will focus on. emma: i am not -- jonathan: i am not about to compare apples to apples, but in europe today, the core cpi at 1.2%. the print in the united states is at 1.4%. there is not much in it anymore. what do you make of that? michael: we have been highlighting what we think is the incredible synchronized nature of growth and inflation, in a way that is quite unique. if you look at the number of industrial economies globally that are growing versus contracting, we have only hit this type of balance in the mid to late 90's and the mid to thousands. virtually every industrial economy is growing. virtually none is in recession. normally that means a dispersion in inflation, and inflation across industrialized economies would start to divert. divergence,icy causing volatility in financial markets. we are not getting that right now. the lowest level of dispersion across industrialized economies we have had. growth is fine, but it is not tingling inflation anywhere. i think that is what you are seeing in the data. jonathan: michael collins and paul quinsee -- look into the story with inflation in the united states and europe. that is not the spreads you might expect. it is more of the same. it is a global world, a global consumer products world, a global bond market. companies have the ability to shift their labor resources and products from other parts of the world. i am not surprised to see uniform shortcomings in inflation. i think it is symptomatic of what i was talking about earlier. companies cannot raise prices on their goods. even if you think wages are going up, they are going to have to eat that. alix: michael capen, is europe where we were, and is that going to start to go higher? or is what is happening in europe little different than the u.s.? little capen: i would put their cycle even a little further behind hours, perhaps three years in some areas. still high ins many places across europe. i think what you are seeing in the u.s. most recently is evidence of structural disinflation, whether it is the platform economy, retail. we have had price wars in retail, cellular, airline fares. i think there are structural factors starting to come to the forefront in the u.s. alix: airline fares, avocados, you name it. the story of central-bank diversions at the beginning of the year was between the ecb and the fed. we also had data out of canada of human it's ago, crushing it. gdp is 4.5%, gangbusters. the bank of canada started raising rates. is this going to be like can i do and everybody else? is that where the divergence is going to be? paul: canada is resource-driven, benefiting massively. alix: is it even more beneficial? paul: the metals prices have come tearing back. michael collins: not just think. iron ore, copper. they are all surging. paul: now he likes it. i do like the way the bank of canada conducts communication. they mention it once, and they just do it. why can't the others do that? michael collins: it is amazing. it seems there is more volatility around the anticipation sometimes. i think they should meet once a year, set their policy, and have at it. jonathan: we sit and debate for hours about the next move, the next move. could the monetary stance of the fed and the ecb be appropriate right now? michael collins: that is the camp we have been an. we might be at the appropriate neutral policy rate in the u.s., just above 1%. we have a zero real funds rate now, or close to it. and maybe, given demographic headwinds and all the debt we global growth,r maybe that is the right policy rate. the fed may be done. if that is true, the stock market could have a long way to go. equity investors do not really believe that. we all think a big increase in rates is coming. the stock market is not priced for this being the normal rate. michael collins: one reason they should hike is not because i want to slow the economy or inflation. it is just financial asset prices. alix: the third mandate that is unwritten. michael collins: the third rail. , is this the capen most asked -- and exciting we have ever had? the: -- michael capen: labor market is a must turning boring. we are tightly packed around number 180 to 200. the claims data has been really stable. that is the information we got, with no movement there. i think the number should be good. there are some issues around seasonality in august, but it should be a healthy report. maybe not a lot of evidence of wage growth. spin up with you said about labor markets last month, and that is likely what you can say tomorrow. the base case, give me the expectation for the team at barclays tomorrow. michael capen: we are 200 at the headline. we do not look for continued rises in the participation rate. i do think wages will creep a bit higher, a little bit above where consensus is. we are a touch above the consensus, but broadly in line with what people are thinking. jonathan: really appreciate your time. guys, thank you very much. i want to turn to emma chandra and get you headlines. texas, a french chemical plant damaged by tropical storm harvey exploded early today. the company had expected that to happen after the storm knocked out power supplies needed to refrigerate volatile chemicals. meanwhile, the storm has now taken almost 1/4 of u.s. oil refining capacity off-line. au'll making capacity is at seven year low. harvey's move into louisiana has made matters worse for the energy industry. bexit talks do not appear to going anywhere. the e.u. chief negotiator said the talks are far from the progress needed to move on to a trade deal. u.k. has refused to reveal its hand on crucial issues, and accused the e.u. of being too rigid. china has announced a start date for the communist party congress that happens twice a decade. 2300 delegates will gather october 18. resident xi jinping will have the opportunity to reorder scores of top positions, and as many as five to seven officials in the politburo standing committee could be replaced. bybal news powered journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. alix: kerley cap, we had the core pce coming in at 1.4%. steady as she goes when it comes to equities. futures up by about five points, following the rally in europe. at the real effect can be seen in the dollar. really, only the canadian dollar is moving higher against the u.s. currency. euro/dollar is off by about 0.3%. dollar/yen slightly higher. nothing happening with the 10 year. we are flat on the day. zero point 2%. zinc at a 10 year high. ♪ emma: this is bloomberg daybreak. this is the greenroom. ,oming up on friday, bill gross jennison henson fund manager. this is bloomberg. bloomberg business flash. best buy is trying to keep case with amazon. the consumer electronics retailer is bringing its same day delivery service to a dozen new cities in the u.s. best buy will cut its delivery fee by more than half, to $5.99. his knee may cut costs by as much as 10% at its abc-tv unit -- disney may cut costs by as much as 10% at abc. they have lost viewers in the most recent tv seasons. abc finished last among the big for broadcast networks in the prime viewing demographic. independent researchers are hoping for a windfall from new financial rules in europe. but that payday may not happen. rules require banks to charge for research they previously gave away for free. that puts the research firms in competition with big banks. and they will have to do more to justify their value and their prices. that is the bloomberg business flash. alix: in a pricing documents seen by bloomberg news, they chargeerica is going to asset managers as much as $80,000 a user per year for a research division full package of services when the european ban goes into effect, what's higher than j.p. morgan and ubs. we sat down with brian moynihan, bank of america and ceo. he said he is confident clients are going to pay. brian: i am sure people will pass for that. >> $80,000 a year? brian: i assume they will, because that is how they get it. with our customers and clients that do tens of millions of dollars of volume in this stuff, this is kind of -- to me, it is not the biggest issue i could worry about. alix: joining us from london is caitlin's all of bloomberg news. we heard something similar from morgan stanley. they said we are huge when it comes to markets. we will get more business. are they emerging the winners of this debate? ate: it is too early to say. there is a lot to be done before january, when method 2 comes in. still room to maneuver for the different banks to say what their final levels are. the banks ceo's to be saying, they are going to pay for it, because that is the only way they will be getting it. maybe there is a war of words going on at the moment. we do know investors are looking again at their research budget. it will be interesting to see who does come out as the winners. you are basically separate your research from other offerings, so there is more transparency to markets. there is more competition. at least that is the hope here is steve englander has been writing quite a bit about how this is going to put the smaller researchers out of business. you will not have a lot of different, new, bold ideas out. is that what we are hearing from the independent guys? i would not say the size is what matters. it will be a proven track record of independent firms. if you have been able to heat clients rolling year after year with your service, maybe you could be confident they are going to stick around. for new vice -- new guys, they are going to have a difficult job convincing investors to sign on. what will be interesting going forward is the second tier banks , for example in credit, do not have huge credit businesses. i do not have the street. it is going to be tough to see how investors want to pay for this research. going ahead, they are likely to only pay for the best. investors going to hire their own research team? are they going to pay up? katie: some investors are going to hire more in-house. we have seen a trend of more and more sell side analysts going to the buy side. these firms are growing in might and power. it is all on the table, really. i think these investors need to see what is worth paying for. you would hope that with only four months to go, they could already know where their value is. but other banks have not come out with their final levels. jonathan: i am guessing brian moynihan did not go to the boardroom with a dartboard and c were it landed. where are they getting the prices from? how do they come up with $80,000, $50,000, $200,000? what do they get the price from? katie: in execution and equities, you know what the numbers have been before. you know going ahead how much they should be charging. the can look at the size of their team, the hit rates they get, and how popular they are. in fixed income, it is harder. there is the idea that there is an execution spot -- spread in bonds. as we have noticed, that is not really the case. are this does come in, we not going to see bond spreads tighten. you are not going to see a difference. it is a struggle for fixed income, knowing what the value is. alix: caitlin fill a bloomberg news. a bloomberg terminal, you can watch tv . through, rewatch some interviews. this is bloomberg. ♪ alix: if you are driving along the east coast, get ready for higher prices. throughline that goes 11 states shut its diesel line yesterday and will shut its gasoline line today. they do not have the supply. the blue line is the colonial pipeline. the red dots are the spread between branded and unbranded gas. those yellow dots show that unbranded gasoline is pricing higher than branded gasoline. joining us from london his hobby ass, and-- is xavier bl a senior petroleum analyst. talk me through the supply issue. what is not getting through colonial pipeline? how long will that last? >> the problem is we have a lot of refineries in texas. that is the main reason the colonial pipeline cannot supply. the do not have enough gasoline to put in the pipe and take it from florida to maine. is florida, north carolina, south carolina. georgia. those areas really rely on the pipeline, because they have no local refineries to supply those markets. the moment that colonial stops supplying gasoline later today, drawingeas will start down stock, and it will go down quickly. i want to emphasize the situation is not nearly as bad as it was 10 years ago when katrina hit, because in the terri -- inventory in the region is much higher. has: if you look at what happened to unregulated gas prices, they really spiked. we are making big hay against to dollar gasoline prices. is there really a big deal? how much more of a spike can we expect? time 10you look at this days ago, before the storm really was developing into a full-blown hurricane, with the associated flooding that was starting to become a going concern, you were 1.59 dollars a gallon. you are now above two dollars. that would impact, as javier pointed out, the eastern seaboard. it will also have a cascading effect. canada has seen in major cities a $.40 a gallon increase. mexico, of course. not bencerned there will enough fuel on the eastern seaboard. i see tankers are already turning around, prepared to help supply that region. --ernors in three skids states have asked for variances to get winter gasoline sold as a stopgap measure. tankers cannot run. crude cannot be displayed or moved through the gulf, back up to the eastern seaboard, because there is no oil to move around at this point. and what is there is captured. alix: the story has been that we spreads ino get europe. is that where we are going to get stockpiles, in europe? dan: with potentially as much as 31% of total u.s. production off-line, that is a lot of movement. everyone is ready vacuum.that if i look at the refineries off-line, colonial down -- it is not as serious as katrina, but it is serious in terms of if it goes through september. it would not be unusual to see situations where we have shortages through parts of the u.s. alix: that really brings up -- how quickly do fighters get online? nick akins is the main provider houston.icity in here is what he had to say about the infrastructure. >> this is going to take time. i was down there yesterday and the day before. there is no question when you move from corpus christi -- there is a good side of the hurricane. that is where it was. less flooding, more infrastructure damage. we can get in, get work done. you start moving toward houston and our territory is really around port lavaca, victoria. rince's pass. those are affected by flooding, so that is difficult. alix: what is the corrosion level? javier: we are seeing some refinery starting to restart in the area of corpus christi. that was the area affected last weekend when the hurricane hit the coast as category four. the main problem is going to be the houston area. i think we are looking at seven more days before the refineries could come back. the good news is most of the shutdowns of the refineries were on a very controlled matter. capacity,o 60% reduced to 40% capacity, and then was shut down. it was a slow, controlled shutdown. that is a lot better than when you have to do it in an emergency. javierobby or blass -- blas joining us. ♪ so new touch screens... and biometrics. in 574 branches. all done by... yesterday. ♪ ♪ banks aren't just undergoing a face lift. they're undergoing a transformation. a data fueled, security driven shift in applications and customer experience. which is why comcast business delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. jonathan: lie on detail, heavy on rhetoric. president trump has a warning for congress. do not fumble a once in a generation opportunity to rewrite the tax code. the global growth story shows momentum. china's factory dated beat as european inflation accelerates. hurricane harvey takes up 23% of u.s. refining capacity. above twourging dollars a gallon. from new york city, good morning. i am jonathan ferro. alongside me, alix steel. david westin's away today. the open about 30 minutes away. the story as follows. /4tures are positive by 1 percent. it was a soft august, burning up going into the close. the data in the united states may be a cause for concern. taking away some of the dollar strength we saw earlier in the session. dollar strength is still the story in the g10 space today. no big moves. the real story -- yields near the bottom of the range for 2017 on treasuries. alix: look at individual equities. some earnings are trickling out. campbell soup misses on the outlook. expects a negative sales trend to continue. the ceo citing challenging environment for packaged foods. by 4%. same-store sales were up by 2.6%. they get a lot of revenues from food, soda, and candies. if you are drinking coke, you are not buying noodle soup. gross margins did fall by half a percent on higher store manager pay. they did see a rise in inventory level by about 6%. they have like a thousand stores in texas. glencore had a tremendous month. a 9% rally for the month of august. nickel,think -- zinc, copper, iron, seeing this really large rally, really divorced from the broader risk on/risk off market for the last few weeks. an interesting stock as we head into september. jonathan: i have another start to watch, wells fargo. a little bit softer on the back of breaking news at bloomberg. wells fargo increases the fake to 3.5 estimate why 67%, million. wells fargo said employees more bonus accounts than initially thought. it is a sign the bank is still struggling to move past the scandal. there are congressional investigations. the stock just a little bit softer. of stockrama in terms action. it goes to show how difficult it , and how it is still playing out. alix: does warren buffett stay in wells fargo? jonathan: it is a big question to ask. you would think you kitchen sink it. it has gone a lot deeper. alix: the p.r., the optics, bad. jonathan: absolutely terrible. the market is digesting it and saying the optics are terrible. at the same time, you had the congressional investigations. maybe that is the end of it. a little market, just bit softer for wells fargo. the author of the story here at bloomberg will be joining us this hour, a little later. but give you an update on what is making headlines. here is emma chandra. explosions rocked a chemical plant in the houston area that lost its power in tropical storm harvey. warned the plant was without power to refrigerate chemicals that become volatile as the temperature rises. they make organic peroxides there. headwaters are receding in houston today. firefighters plan to conduct a block by block search in areas that had been inaccessible. the death toll from the storm has risen to 31. harvey has now knocked out u.s. oil refining capacity. steelmaking capacity is at a seven-year low. the cost of rebuilding from the storm may be a roadblock for president trump's tax cut plan. the president calls on congress to quickly deliver a harvey a package, that the multibillion-dollar cost means stiffer resistance to tax changes that are not offset by new revenue. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. jonathan: economic data from this morning revealed u.s. consumer spending rose less than estimated in july, with annual inflation increasing at the slowest pace since late 2015. turning us to discuss what it could mean for the fed, bloomberg intelligence economist cardica donna. you thoughts on the data? >> this is one of the last clean reads we are going to get. mra of data starting with motor vehicle sales, extending over the next couple of months. a little more significance in light of that. place as are in a good we crossed to the back of the year. income growth is decent. trends, they might be accelerating, meaning that consumers have the capacity to continue driving the expansion over the course of the next couple of orders. jonathan: let's talk about inflation in the united states. we have had soft inflation and a 1.4% year on year today. it is not moving in the right direction. carl: it is not moving in the right direction for the fed, absolutely. 2%. want that closer to i think we are close to low tide for inflation data at this point. inflation is telling us what is happening several quarters ago in the economy. if we look back to the middle of last year, gdp growth was only 1.2%. we have been consistently accelerating from that point in an environment from a relatively tight labor market. at supply disruptions due to the hurricane. we are in the near term, going to see the inflation trend starting to move higher. an earlier- alix: guest called the end to inflation. here is what he had to say. >> there are powerful structural elevationd technical keeping inflation down. i think inflation is dead. maybe that is an extreme statement. all i mean is i do not see it going up from here. the bond yield is probably going to stay here as well. carl: we have an unemployment rate at 4.3%. it might go down to 4.2% tomorrow when we get the data. the economy is accelerating. they are going to need to hire workers. you have a bottleneck in the system. it does work. it is a little different than event, notarea broken. we continue to move to tighter labor markets. changeof that, supply disruptions will further contribute to goods inflation, which is something we have not seen for a while. the strength in the dollar previously would add another layer. we have had this weakness in the dollar since the start of the year. that is the another -- that is another source in inflation in the economy. i do think inflation is not necessarily alive and well and thriving. that is going to come back from death's door. paul, we had a conversation earlier about consumer price tolerance. could companies with pricing power put up prices? can they? that it does not seem like in this environment. getting back to the inflation in the prior segment, it reminds me of the business week cover, "death of equities." we could see inflation come up, but we have not seen that inflation level come up. that puts the fed in a decent bind. they have to lower their inflation estimates. over in europe, you have inflation coming much stronger than expected. diverting goods, but the market is position for that. most people -- in the u.s., investors are not expecting a real the cup. in europe, they expect the ecb to take back qe. in the short run, it is not to dollar negative. the dollar beat late last year. these trends tend to go in years rather than months. ofhink or a prolonged period dollar weakness with short rallies in between should be expected. --x: we saw an income pigot pickup. you highlight consumer confidence less, jobs plentiful. that is today. what about the next three to six months? paul: the jobs component in consumer confidence is one of one of the -- largest six-month increases in the history of the survey. there have only been for other times that saw a larger six-month increase. and you look at job growth, it is better than average versus long-term averages. versus the short-term trend leading up to that point. we would expect to see some storm adjustment. we have seen that in the lot of jobless claims just close to a new cycle low that will spike in the next couple of weeks given the harvey effect. think the overall employment picture remains strong. week or two, in a we see jobless claims up by about 100,000. which companies are having success to pass along price increases to the customers? it is landlords, medical care services, transportation services, recreation services, and other types of personal services. there are pockets of the economy where we do see significant inflation. jonathan: one of the services, i think you said -- the wage debate people have talked about. whenever we have a conversation many of these companies had to take on extra costs because of health care costs. that could underline the wage debate. there is something else going on. if there are higher associated costs with adding each worker, that does slow down the degree to which employers hire. it does not prevent it. health care and other benefits are a substantial cost for employers. it slows it down. it does not prevent it. businesses are facing significant capacity complaint does constraints, especially as the economy accelerates. of thethe back half year. they are going to be forced to bite the bullet and offer higher wages so they can attract talent. alix: we are ready for it! [laughter] i think she just asked for a raise. jonathan: on live tv. alix: you are going to be sticking with us. it is jobs friday. you have bill gross and labor department chief economists. plus, tom lee. he is bearish. nicely stocks are at their 52 week lows. ♪ alix: president trump pushing for tax reform in a speech yesterday, trying to pressure congress, but one obstacle is the cost of hurricane harvey. the cost, $90 billion in damages. this dust is this limit the tax cut goal? we are joined by michael mckee and paul hickey. is goingsue because it to take funds away? what is the issue with tax reform and hurricane harvey? cost a lot of to money. there seems to be general agreement that the people of houston are going to get the money. fromoney has to come somewhere. as congress debates, they have to figure out how they are going to pay for this. if it just adds to the deficit, this is a problem for republicans who have pushed for lower deficits. when you look back at superstorm sandy and how many in the republican party -- almost the entire texas delegation voted against aid for the northeast because they said it added to the deficit. that is going to be a question for the administration, how they can fold this in if they want to cut taxes and lower revenues. you can see what happens to the budget deficit right now. we are getting a larger deficit as a percentage of gdp. we are at -3.3% right now. 3.5ould be as much as percent or more if you add in the harvey money, and that does not even account for the tax cuts they are talking about. alix: on the flipside, is there some thing positive to be said? you are going to have some payback later. republicans have to lay it out. but that could help propel growth. it could make a better case for making better tax cuts. michael: it is going to be a long, slow we build and repay. it does not show up as a major hit in gdp and may eventually wash everything out or be a slight game with the rebuilding money. ,ut what is going to happen is it is going to delay consideration of what is going on. in an odd way, it might help us get through september, because they could attach the debt payment bill to the harvey repayments, and kick the continuing resolution to fund the government down the road for a couple of months. there is enough in there for everybody to like and hate. you have the government getting through september. you have a fiscal cliff later on. you have a lot of impact in the long run for gdp. jonathan: paul, does this reduce the likelihood that we get that government shutdown, that we get rid of the debt ceiling debate at the end of september? paul: it really diminishes. the debt ceiling i do not think is a worry at all. the government shutdown -- that is politics. it would not surprise me to see that. i think the markets would have a shutdown. the market, as far as tax or form is concerned, is not pricing much in. there was a lot of optimism, but most of the trump stocks that rallied have given up again. infrastructure rallied after harvey. i think most people are expecting very little in the way of expectations right now. jonathan: the president's campaigning. congress is coming up with a plan, apparently. i wonder whether the disconnect between what he is campaigning for -- a corporate tax rate of 15% -- and the kind of plan they can come up with -- paul: i think the greatest thing, the smartest thing you can do -- anything trump says in a campaign speech, completely ignore. he is playing to the base and his supporters. what happens policy wise is what you should pay attention to. michael: you are hearing a little bit from washington after yesterday's gdp report -- if we get a strong report on jobs tomorrow, maybe will hear the same. why do we need a tax cut when the economy is growing at 3%, corporate profits are up? things look good. why add to the deficit? you could make the argument for tax reform. the tax code is very complex, costs a lot of money to comply with it, but straight tax cuts do not seem to have a lot of purpose. to bring it back to hurricane harvey and affecting the markets, shorter and longer term growth. the markets -- what shows you after natural disasters, what happens to equities? looked at the hurricanes that hit the gulf coast area going back to the early 1980's. three months later, the s&p averaged a gain of just under 3%, 2.7%, i believe. alix: trying to bring up that chart. paul: that includes three hurricanes during the fall of 2000 eight, when you had the financial crisis. even including those periods, it is a healthy gain, but excluding those periods, you see gains 3/4 of the time. there is the chart. i think it is a short-term boost to markets in a three-month period, because you are going to see money coming out in increased spending. hadoverall impact -- you estimates earlier of $90 billion. i think it is too early to come up with a reliable forecast. jonathan: it is a crude way of assessing what is happening in houston, in texas. i wonder whether it has a lasting effect in how people think about investing in the oil patch. maybe there is a once in a generation phenomenon. people will carry on the investing. what are your thoughts? michael: meteorologists will tell you it is happening more often. houston has flooded three times in the last 10 years. houston did not get the publicity this one gets. infrastructure, refineries, a port that brings them so much. they may want to do something about that. that would add to spending. but we seem to have an attraction for building near the coasts. maybe you-- alix: will get approvals for export terminals in the east coast. offshore was not effective in that way. that is a positive. michael: you know the idea of building refineries somewhere else does not go over well. they're happy to have them in that area, but most people say "not in my backyard." paul: houston was growing more four years ago than it did now. houston accounts for less percentage of the growth in the u.s. right now. alix: it is diversified. michael mckee, thank you. paul hickey is sticking with us. this is bloomberg. ♪ alix: bloomberg's newly appointed ceo has not even had his first day -- uber's newly appointed ceo has not even had his first day and is already talking about going public. in his opinion, the company should go public. or more on a potential ipo, we are joined by the bloomberg ipo reporter. still with us, paul hickey of the spoke. it is a pretty large spread. >> the release is he year and a half from now? that could be three years from now. covering companies going public -- that is a very long time frame to me making these decisions. it does make sense that he is putting a number out there, even if the number is a bit of a shrug. all hands meeting with employees. he is trying to quell fears about the future of the company. there are a lot of things he has to do to fix the company to get it ipo ready. to come in and say this could be a mature company is a good thing for him to do right now. as well as on the investor side, you had some angst within the ranks. you had some new investors like softbank potentially trying to get in and take a stake. the idea of an exit and the fact he is focusing on some kind of timeframe -- a tangible timeframe -- is important to bring down a bit of the hysteria that has been brewing around uber. jonathan: we have to discuss the spread between private valuations and public valuations. does he have to do to justify some of the investments? alex: $69 billion is where the last round was. that is a big number. for a company that still loses money, in the second quarter of this year, they had million dollars of lost just in the second quarter. will end up in the poster child as to whether or not this kind of exuberance in the private funding market can actually hold out in terms of valuation. jonathan: i wonder whether they are not getting much pressure from investors to go public because they are not going to realize much profit, are they? alex: they have realized the company is not going to, given the drama, but that is going to be why this idea of the exit -- why they put it out there is so important. these investors need to show returns on paper. a lot of other companies have not gone public either. they have paper returns, but not any money to give to their lps. you are going to see pressure for investors. last year, investors were knocking on the ceo store. door.an: -- on the ceo's jonathan: about four minutes away from the open. a four-day winning streak on the s&p 500. futures in the united states positive i 0.3% on the dow. and on the s&p 500. the opening bell just around the corner. . ♪ closing out the month of august on a four-day winning streak on the s&p 500. futures are positive by a third of 1% on the dow and s&p 500. august, down -- a bit of a gain. follows market story as , inflation declining from the previous month. yields were higher on 10 year treasuries. they are unchanged. the dollar was stronger but it onains strong by 2/10 of 1% the dollar index and stronger against pretty much everything in the g10 space throughout the morning so far, until we got canadian gdp. crude is positive by 1.2%. that is your crossed asset picture. alix steel there is -- here is alix steel. alix: positive for -- the dow up. the s&p up to tens of 1% and the nasdaq of the same -- 2/10 of 1%. for all of the geopolitical risk with north korea, stocks still having a banner month as volume -- individual equities, individual stocks moving today that have a connection with warren buffett. united airlines is up 3/10 of 1% , united, delta, resuming limited flights to houston. conversation about continued price wars in the space. houston airports expecting. rules by the weekend. -- full schedules by the weekend. warren buffett owns 27% of heinz. cents -- down six 6/10 of 1%, they found more fake accounts. warren buffett the top holder that with a 10% stake. david westin spoke with warren buffett and discussed equities and how much more upside there actually is. that brings us to this chart comes the dividend yield for the s&p versus the 10 year yield. the blue line is the 10 year yield, trending a little bit higher than the dividend yield. the story is when you have the dividend yield higher than equities and you want to buy stocks. closes,pens as the gap where will the value be? jonathan: we can't up with warren buffett yesterday. -- caught up with warren buffett yesterday. >> you are paying for a form of investment. stocks look attractive. jonathan: that was warren buffett speaking to david westin. joining us is our stocks reporter. let's begin with the spread between stocks and bonds, and how important it is, and how you expect it to close or expand. >> extraordinary the s&p 500 is yielding more. just because the tenure starts yielding more, that would not be a reason to sell equities like in the 1980's, 1990's, the yield was never there. from a short-term perspective, you have a higher yield and nsa class that can appreciate in that canasset class appreciate value. -- in value your stocks provide a longer-term a lot more attractive. jonathan: treasury yields pinned to the floor come in the stock market, arman proxies outperforming? >> there has been a little bit of a move away from those. a good strength in utility throughout august. not across the board for the higher yield stocks. utilities, telecom, staples. telecom has company specific, down 2.5%. to the point and to warren buffett point, when you look around the market, that has still been sitting in the backdrop for equities, a gap of 2.5% between the s&p and the 10 year, earnings yield versus the bond yields. that is in the back of investors mind. where is the best place to put your money? alix: value versus growth conversation? hard to go with value. >> exactly, despite economic data, economic surprise index, three months where we are surprised to the downside. which is a stretch. in that type of environment, you may expect investors looking for growth companies, that is what we see. we have another outperforms this month of growth companies versus value. jonathan: a test for the stock market earlier this year when treasury yields went through 260 and the market was ok. do some people make too much over treasuries and what it means in the short-term at least? >> where treasuries are, i do not think -- you could get yields 3%, 3.5% -- if they win in a straight line, it would be difficult but a gradual uptick. throughout the bull market, but .1% and 4% and when interest rates are rising, the best equity performance. theou get a sharp spike at negative, the market can tolerate higher yields. alix: talking about financials and technology. i want you to walk me through this. the trades in the last few months. financials have come off at tech has stayed pretty steady. what are you looking at? >> this overlays the bubble and crash of the financial sector over the tech sector and the relative strength versus the s&p 500 over that time. financials are following technology pretty well. they are getting about in 2011 for the tech sector was. what is working for the financial sector is three things come in that interest margin, less regulation on the part of washington coming, and you have overcapacity in the sector, we had a lot of capacity in 2007 which takes time to get worn off. jonathan: wells fargo down a quarter of 1% on the s&p 500. on the back of headlines, that are not very good. employees created six point 7% more bogus accounts than initially thought, a sign they are still struggling to move past the scandal that sparked record find and congressional investigations. miss -- how many? >> 1.4 million. jonathan: how do you miss them? >> wells fargo said we went back and reviewed this time, and added additional years, twice as many. and we found 1.4 million accounts, bringing us to 3.5 million accounts potentially created without authorization. jonathan: let's not let the price action set the narrative, stocks down marginally. if this is significant, why? >> more of its story of reputation, as it has been for more than one year. congress is just getting back into session, september 5, this could be something that lawmakers want to know more about, pressuring the back, saying we need to change the rules because we cannot have banks like you doing this. jonathan: talking about warren buffett and bank of america yesterday, he made huge money, talk about warren buffett and wells fargo, what will he be thinking when the headlines ross the wire this morning -- cross the wire this morning? >> he believes in wells fargo but believes they messed up. he has consistently said that for the last year. he will not be pleased, but he has been well aware of the is. alix: this versus other headlines, lawsuits, fines, in terms of -- it will never end and we do not know how much legal costs and how much damage financially it will do. >> wells fargo has not given a figure and this is the amount that it will cost us, which investors want to understand, the final amount. when we get new headlines, every time, additional numbers. today, wells fargo said they had to a $10.7 million in client refunds. -- pay $10.7 million in claim refunds. i do not know if they have a good handle on additional lawsuits. every time we hear about wells fargo, a new scandal. ,uto account information insurance contracts that customers did not want. another set of lawsuits coming up. jonathan: did wells fargo get too big? >> some regulators would say that, some lawmakers, when you have senator elizabeth warren and maxine waters saying these banks are too big. jonathan: great to have you with us. nine, 10 minutes into the session, stocks positive for a fifth straight day on the s&p 500. up by one third on the dow. can we close in positive territory on the s&p 500 on the month? yields a little bit higher. enthusiasm off of risk -- drain enthusiasm of the risk. 2.13 the yield. a stronger dollar cory on the fx market. -- story on the fx market. this is bloomberg. ♪ ♪ >> this is bloomberg daybreak. coming up on friday, bill gross will be talking about the u.s. jobs report. this is bloomberg. ♪ jonathan: the average price of avocados on the rise because of surging demand and a smaller crop in mexico and california. you could not tell by whole foods where they have cut the foods by 29% to $1.99. tweeted out the following during my shopping trip, i looked at the price and whole foods and compared it to my $4.49.tore, we were outraged. the owner said he wants a conversation and i invited him on tv. great to have you with us. let's talk about the $4.49, how did we get there? >> all the pricing on our produce and across the store are strictly on a cost plus basis. we know what the cost of goods is an we add gross profit margin required. that is how the number came to be. just like every other retailers across the united states, we have contacted our major suppliers and told them that this is embarrassing us and needs that are pricing. we have been able to secure better pricing on a number of items. jonathan: how responsive are they? if jason cap -- if jeff bezos calls, they are responsive, what about you? >> amazon is a much larger fire then we are. -- buyer then we are. -- than we are. with are supermarkets greater footprints, many with over 1000, kroger has.600 and walmart has over 4000 -- kroger has 2600 and walmart has over 4000. our purchasing power is similar to whole foods purchasing power. not amazon. point,t raises a good how are you going to avoid a price war when you have amazon with deep pockets and investors that do not mind a lack of profitability taking on the market with whole foods? how do you avoid that? >> that me share with you that there is a difference between reducing a price in a small number of items and reducing the price across the board. monday morning, when i saw your tweet, or any other business owner in the united states would wake up in the morning and check before wes -- emails get out of bed to make sure nothing bad happened overnight, i saw your tweet. you can imagine my reaction. whooke to my daughter starting her career in booz allen this week and she said she and her friends were freaking out that the price of avocados has gone down. this was a wake-up call for us. we sent our supervisors and to a number of whole foods stores and we looked at avocados and bananas, and we discovered that, that theye, six items permanently reduced price on that averaged 400 skus and you produce department, 1.5% of the items. they are masterful at public relations. headlines across the country highlighted the 43% reductions. any rational consumer in the united states would want to go to whole foods to see what this is about. jonathan: i will ask you a question that some may say is unfair, how hard would it be to stay in business in the coming years when your stores in new york city are so close to those of whole foods? how hard do anticipate it will be? >> it will be a challenge. we have been in business for over 60 years and have 15 supermarkets, primarily in manhattan. we have -- we are a fourth-generation family-owned and operated. we survived many other competitive threats. this is one of the largest and most significant competitive threats and the cost of doing business in new york city is far higher than about anywhere else in the united states, in terms of real estate and payroll here w. we pay $200 per square foot in rent, compared to suburban locations of $20, $30. amazon cannot come into new york city on a retail basis and lower the cost of retail rent. we do have an advantage. we have wonderful locations in new york city. we know how to operate in new york city. basis,cro neighborhood which whole foods and amazon cannot really do. our store at 48 and 2nd avenue has foods from dozens of different countries. our store -- every store caters to the neighborhood. alix: good stuff, thank you, avi. glad to work that out. out.rked that jonathan: he has to come defend himself. alix: for more, we are joined by scott, a senior retail and stables analysts. an underperform rating on kroger. he covers walmart and target. he said he can stay in business and stay competitive. in companies you cover, what is the cost of doing that with amazon and whole foods front and center? >> the cost of doing business is going up tremendously. combinatione foods is somewhat revolutionary. of the he nailed it, one biggest competitive threats the industry has seen. part of the reason is the consumer is reevaluating where and how they want to purchase consumable items. particularly center for items are going online fast. ,ith amazon owning whole foods one of the best brands in food retailing, particularly fresh, it gives them another big arrow to fire at the consumable space. alix: who is best positioned to deal with this, who has the deep pockets to deal with this, and who does not? that in the marketplace, we are looking for winners and losers. someone wins and someone loses. with what we see right now in the consumables retailing space, we think, for the next couple of years, no one wins, and all-out war. who has the biggest pockets, amazon is like an atm machine. likely the long-term winner. walmart, a very deep-pocketed company. target and kroger, you get less certain. do they have the financial strength to compete in a new environment? these are big companies but things are changing so rapidly. we think there will have to be some m&a. companies do not want to talk about it because it is not their strength but we do think some of the companies you would never think of subscale, let kroger, maybe subscale in this new environment. alix: do they buy or get bought? >> merger of equals? i think this is one of the situations where you think m&a, maybe i can make some money, not so sure. you are trying to put two assets together to maximize cash flow that will have to be reinvested right back into the business. , one of the biggest things with the amazon-whole foods, the prices went down initially. the private labels already on the amazon website. we did a fresh order and the first products came in. but the biggest deal is that will become part of your prime perks. further discounting. that is a big challenge for the industry. alix: good to get your perspective, we appreciate it. thank you very much. with the10 of 1% nasdaq closing above its record high here trading above -- record high. trading above its record high. this is bloomberg. ♪ ♪ son-in-lawt trump's has a 41 story problem. his company owns half of the $1.2 billion mortgage and has not paid anything, forcing him to look overseas for investors. we take a deep dive into his struggles with the property. great stuff. what me through what is new. >> we had new -- known that your customers companies had look for funds in china -- jared kushner's companies had look for funds in china, saudi arabia, talk to israeli banks and insurers. trying to find one of two things , a way to refinance the mortgage on the tower, or common most cases, to buy into this very expensive and grand redevelopment plan for the building. alix: what happened? >> nobody has committed funds. they are still looking. alix: how much time do they have? >> the mortgage is due february of 2019 and we talked to the president who said that is plenty of time in real estate finance to find someone to do this deal with them. they have been looking for a long time. alix: any chance it will get done? and theyng is possible say they have a lot of contingency plans. story building81 with condos that government $9,000 per square foot and a huge retail mall. or maybe they update the opposites and get people to move in that way. alix: thank you. 666, when you buy that building -- jonathan: you may expected. -- expect it.i the longest winning streak since the end of may, up one third on the dow. from new york, you are watching bloomberg tv. ♪ so we need tablets installed... with the menu app ready to roll. in 12 weeks. yeah. ♪ ♪ the world of fast food is being changed by faster networks. ♪ ♪ data, applications, customer experience. ♪ ♪ which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. ♪ >> 10:00 a.m. in new york and 10:00 p.m. in hong kong. i am vonnie quinn. >> i am mark barton. welcome to bloomberg market. -- markets. ♪ >> we will cover tax reform and hardy recovery in the next two hours. we start with breaking economic data. desk are looking at a pending home sales for july, month over month basis, down a 10th of 1% and a survey had called for a gain of 3/10 of 1%, a decline of half a percent. the survey had called for a gain of half a percent. maybe not entirely surprising --sidering that july;s po july's pop had been an anomaly. missing the survey. ,ains for the major averages the dow, s&p 500, nasdaq solidly high