Continue on. The u. S. Moving to we will take a look at mba mortgage applications. Earnings before the bell. Tiffanys, michaels, express. More retailers. More retailers. Here is one item to note. Antiaa College Football season begins today. Labor negotiations began last week. Tiffanys will be interesting because of the japan influence. Absolutely. I find there to be a big asterix around it. Substitutable goods. Yes, they are. Lets do a data check. Stocks, bonds, currencies, commodities. 2002 was the closest. 500. On the s p there is the vix. The dow well above 17,000. Was really smart on this yesterday. Flatter yield curve, higher twoyear yield compared to what you to a lower 10 year yield. Lets go to the other side of the world. Versus south korea. Here is the asian crisis. This is ugly korea. Japan does better. This is the churn. Stronger yen. This is the abenomics pullover. This is really moving. Stronger korean. This profoundly affect south korea. Theou can just look at success of autonomics. We need to qualify it. You cannot just look at the success of abenomics. We need to qualify it. To the point of a quiet august, there are a lot of things going on out there that affect the world over in asia. Koreanmuch more the economy is in the japanese economy that is a slow rolling story that is hitting us in a surprising way. Sam grobart will join us in the next hour on illness in the Senior Leadership of samsung. A busy day on the front pages. Here is scarlet fu. We start off with markets. Rallies around the world. Should i get out of cash . Maybe not. Stocks are now valued at 66 trillion. They have added 2. 2 trillion since august 7. Remember the correction we had . Stocks are about four times the american economy. As a rough estimate. You showed us of the s p 500 pushed to its record. Brendan, tell us about brazil. Brazil is part of this equities surge. What is happening brazil in brazil is that investors are hopeful there will be a change in leadership. Much like in india. The current president is seen as a continuation of what her predecessor did. Restrictive inry terms of what companies can do. And it is her fault they lost the world cup. It is not her fault. If you want to get into that, i have a soapbox. To we have an extra hour of bloomberg surveillance . [laughter] what you see with stocks moving in brazil is the hope that she will lose the president ial election. Our nextdoor it. A quick wrapup of geopolitics. Ukraine and gaza. Prospects for more. For more airstrikes against the Islamic State. Have the contract between two side starting talks about political resolution with battle still taking place on the ground in ukraine. These images of suits and ties meeting against multiple battles and many dying in eastern ukraine. You have guys at a summit that is not a summits order exchange. We are not sure what is getting accomplished. I love hearing putin say he is an active partner for peace. [laughter] give us a more geopolitics. Israel and hamas agreeing on an openended ceasefire. Hamas is claiming that we have one. Won. Israel is demanding that gaza be demilitarized. Account of truces is nine. Peace,he game theory of this is the hardest thing for israel to accept. They have to offer what looks like a densely a victory of hamas to get peace. Look seven monday, as we see celebrations as we looked at on monday, as we see celebrations in the gaza strip, we have syria. The u. S. Is putting Hillary Coalition together a willing against the Islamic State. U. K. , jordan. What does that mean . It is not a nato action. We are doing what we have gotten used to doing over the last decade. Figuring out what we want to do and finding a couple of partners with us. With all due respect to our military, its own sake is spielberg movie. Last sounds like the decade of american foreign. Coalition of the willing. That is not what the president is calling it, however. Richard haas writing this morning. We have another story. Boys, get ready. Apple is preparing to come out with its biggest ipad ever. They will make an ipad with a 12. 9 inch screen. The current ipads have an eight inch screen and a 10 inch screen. That thisointing out is part of the whole incrementalism that apple has evolved into. It is a proud lack of innovation. This feels like they were sitting round and were like, make it bigger. Idea . You buy the it is not just apple. They have shifted away from consumer alert products electronic products. I dont understand how the bigger screen is a part of that. You need bigger for spreadsheets. I have seen to ipads fault on off fancy bars and break. Not with the sapphire glass now. Biggerhire glass and screens. Tom, that says more about our you spend your time than about the ipad. Hardback books . I read dickens leather bound. Those are our front page stories. I have a twitter question. This has been a huge success. They said, lets put up a twitter question. I said, nobody will respond. I was wrong. Our twitter question, what would you do with a bigger tablet . You samsung people can tweet in and tell us that you will throw it out the window. Who says tablet . Samsung says tablet . Ipad, apple does not. Our best host for the hour is joshua wright. Writing for bloomberg briefs. Lets talk about the linkage of corporate earnings into our economy. Say the market just better economy is ahead . Not necessarily. The fed has recently been talking about traditional ratios. The fed has been saying were within historical norms. Dont worry about the stock market. We have been looking at other things. What we found is that although on the earning side, things look pretty good, other things do not look as good. We hear and investment. Capex and investment. Investmentot seeing in the Capital Stock that creates our ability to be productive. And creates jobs as well. I wonder what the fed thinks we are seeing inequities overall across the world. Do you look at that and say, this is indicating complacency . There is too much froth in the markets . I think there is concern about that. Janet yellen has been pretty clear that she is not going to focus pretty much as much on that area. Nobody said he did not target specific sectors. Did you study with schiller . I did not. She is very transparent. She is keeping it real. Shes keeping it real. [laughter] we will look at real estate later in the hour. Right now, lets get your company news. For those of my be traveling isn, American Airlines fighting over a new contract. They will drop orbitz for now. General motors grows and tennessee. Hill willin spring grow. It is already home to the chevrolet equinox. Wesson slashes its forecast. The reason . Declining demand for guns. That is the company news. Coming up, Vladimir Putin calls talks with president poroshenko positive. We are also positive that there is fighting in eastern ukraine. We will talk to hans nichols who is just back from minsk after the break. It is bloomberg surveillance on bloomberg television. Streaming on your tablet, phone, and bloomberg. Com. The morning, everyone. Bloomberg surveillance. Glenn hubbard is the dean of the Columbia University business school. Look for this on market makers. He is always interesting. Always controversial. Is bloomberg surveillance. Im tom keene. Joining me, scarlet fu and brendan greeley. Adam johnson is rumored to return before october. He is doing his maverick tricks. This is is on russia. Russian president Vladimir Putin rett with ukrainian president met with ukrainian president poroshenko. He called the talks positive. Fighting continues on the ground. Fromnichols joins us berlin this morning. We set up this contrast between fighting on the ground and the diplomatic happy talk that has emerged from the meeting. Did each side get with they wanted . Little sides got a progress. Both sides were forced to me with each other. One note of caution on what seems to be the optimism this morning. Yes, there are going to be further meetings. Poroshenko did not get a continuation of the talks into today. His meeting with putin went about 90 minutes, by my count. Progress, but not a lot. European Union Officials were at the meetings. What kind of role do you expect them to play or are you hearing they will play in the months to come . They will be part of this contact group. Russian,e ukrainian, and european Union Officials as they try to have some sort of ceasefire that could eventually lead to a longterm solution. Is the problem. Petro poroshenko was democratically elected. He has elections at the end of parliament. Here is my morning mustread, folks. The russian publics natural reaction will be to rally to their leader. Support for putin, though broad, may not be deep. It is support before, not after, the debate about the cost of putins policy has taken place. What was the backstory on mr. Putins support in this . Feels veryn solidified and very supported by his people. After the depth of those polls and how solid that support is, it is often a tough question. Right now, his support is stratospheric. No matter what happens in ukraine, Security Policy has changed for good. Finland made more noise is about the possibility of joining nato or getting closer to nato. Is that is huge of a deal as we think it is . These are very real steps from finland to join the European Union to have nato troops stationed on the ground. Most trade with russia of any European Union company country. It is significant they are doing this. It will antagonize russia. Length of thee california coastline, the border finland shares with russia. They feel vulnerable. Sweden has upped their defense spendings. Sweden wants to spend more on defense as a direct result of the actions in ukraine and crimea. Nice job linking all that together. Hans nichols giving us a bit of eography lesson, giving us showing that altar was. Stocks rallying. Iz ann sonders will join us as guest host in the 7 00 a. M. Hour. This is bloomberg surveillance. Streaming on your tablet, your smart phone, and bloomberg. Com. Good morning, everyone. Bloomberg surveillance. Futures up one. Dow futures up 18. Here is scarlet fu. Florida democrats selecting a former republican as their nominee for governor. Charlie crist won the nomination. He will face the incumbent governor this fall. An american journalist has returned home. He was released in two days ago by syrian extremist group. He was in captivity for 22 months. He is back in boston. Christine lagarde says she has been cited in a french corruption investigation. She is accused of negligence and a case that dates back to her time as finance minister of france. She does not plan to resign as from the imf. Up onave to read negligence in france. In france, it means that she failed to have an affair. I dont know the exact details on this. Im intrigued. She erred in agreeing to and the arbitration and the arbitration. I think it is a different organization. She laughs at my french. That is what i know. [laughter] what do have for us brendan . Martin wolf the cup on the idea of shareholder value this morning. Picked up on the idea of shareholder value this morning. We talked about this a lot yesterday in the context of burger king and tim hortons and the justification for these inversions is that you need to maximize shareholder value. That is seen as a truism and accepted. Has that idea run its course . Are we ready for a more complex idea of corporate governing . I think were way overdue for a more complex idea of corporate governments. Working School Started on ethics courses. We are still struggling with it. It is an ageold question. How do you manage other peoples money . Could this be solved by teaching mbas better ethics . It depends on how you define teaching. Largerteach them in a culture of being ethical, then yes. I would respectfully said that martin is doing academic navelgazing. Doing with cash flow . The major number with burger king is they generate 140 of net income as free cash flow. That is to die for. The point is that martin wolf is making is that you have to look past that. They are not, is my point. The room more obligations beyond there are more obligations beyond financial. Just because you are a shareholder in a company does not wash you of all obligations. Brain freeze in august . Continues. Ate we will discuss how equities are rallying. The s p 500 is above 2000 after positive economic data. What is the data telling us . That conversation is next on bloomberg surveillance. Good morning, everyone. Bloomberg surveillance. Welcome back. Tom keene with scarlet fu and brendan greeley. Adam johnson is off this week. Let me do one more data check. The euro gets my attention. Much weaker earlier this morning. Still very important. A quick surveillance correction. Thinking of a book by Benjamin Friedman of harvard university, the moral consequences of growth. Harvard wasedman of my brain freeze for this morning. Lets get your single best chart. No brain freeze there. It is unamerican shrinking wealth. Onhave been it is american shrinking wealth. The assetsen from owned by different u. S. Households. Starting want to thousand one, American Families but increasing amount of wealth and housing. They took on more debt. That came at the expense of other kind of investments. If you look at what happened since, the peak was 2007. The valued 2010, of the Housing Market has dropped off. What is so important there on the right side of the chart, you see the decline in the yellow bar which is the pain and agony on housing. What is far more important is the decline on the two blue bars over to the right. That is the equity markets. Brendan greeley, if you went to cash in 2009, you cannot catch a certainare over age. You keep talking as if i have any cash to do anything with. [laughter] that highest yellow bar, that is one about a house. Important isis is because this affects the middle class the most. Disproportionately. If you are rich, you have lots of money to diversify assets. If you are poor, you are much less likely to have a house. The second you have some money to invest, you stock it in real estate and you put your whole portfolio in one asset. To the does come over tax differentials here versus europe. You mentioned this in europe. There is a lot less homeownership in europe. In germany it is 44 . Here it is higher than 70 . Exceptionalot that to other countries compared to is thisip to rid cultural or driven by taxes . There is a huge policy component. Americans have been grossly over encouraged by a variety in policies to over invest in housing. It is over concentrated. There is no question. Joshua wright looking at the entire span of the american economy. What did you learn about the cultural aspects . The cultural aspects of the debt . You are a loser if you rent. You are a loser if you dont own. But etc. Know why this is considered to be an american dream. The we left behind our hands. Dont know why this is considered to be an american dream. Dont we laugh behind our hands . My hair does not go great, it disappears. I have twins who are turning five. Will they rent or buy . Of god. Can we get them through College First . Get them through kindergarten first. [laughter] you are dead on about this, scarlet . Have put whatever money we into housing and then we kill ourselves over keeping the money there. People like to put money in , theng and the real issue thing that i notice is that home equity is declining, but home debt is not. We are at little overall thomistic about the process the consumer has made. Optimistic about the process the consumer has made. Does it harm us . I think we have already seen a lot of that in the last year. That is why we have such a soft Housing Market this year. Something you wrote really interested me. We all talk about how the household has improved quite a bit. You say that is a misnomer. That is not the case. We are about 50 of the way there. Sincee made huge progress 2012. We are not there. I dont think consumers are basically done. Wage growth. There is a school of thought that wage growth will click in. There is another school that says, forget about it. I thinking keep thinking back to the capital share of the gdp at an alltime high or very high. I think that seems like a significant statistic we should think about. A question ofust the consumer balance sheet, but the consumer thinking she. You dont have that equity in your house, you have the income. You will not have the ability to trade up. The lack of moment in the Housing Market. Is a conversation of the haves. Trading up . Yes. A lot of people these people are trapped under student loan debt. The story of the last decade was mortgage and overhang, which is still with us, unfortunately. On top of that, you have student loans, so people can join the Housing Market. Reject ahead for us what that means. Project ahead for us what that means. How do you factor then that in for the Economic Outlook in five years . When you look at how it is concentrated in terms of demographics, they are crucial for household formation and the Housing Market and consumer growth is much more a concern in that 510 year horizon. This goes back to something that business week said. Maybe people just dont make enough money. I felix story after story is coming back to that. I feel like story after story is coming back to that. To you look at america as a or with wealth and the quality, income and ecology, income inequality, have we become the haves and the havenots . That is the danger. If we take a serious look in the mirror as a country and think about, what do we need to support the broad middle class . We can have 20th Century Growth without 20th century style balance sheets. What do you need to try to have . That is my note for the day. 20th Century Growth and 20th century balance sheets. Josh wright is our guest host for the hour. He is a chief economist here. Coming up, restaurants across the country closing because of soaring real estate rents. How they are pushing back and ganging up for the food hall revolution. We will discuss on bloomberg surveillance. Autumn comes early in new york city. It has been the best summer in new york city in 10 years. The days are little shorter. It is getting really hot today. The hottest day in ages. It is new york city. It is bloomberg surveillance. Good morning. Lets get right to work