Transcripts For BLOOMBERG Bloomberg Surveillance 20160811 :

European political news. It is about currencies and the new zealand centralbank news. When was that, last evening that i saw that . It is wonderful to have Holger Schmieding with us to go over with that signals. Is that a butterfly flapping . Is that the phrase you would use . It is not a small deal. Francine we could open it and see more troubles were Central Banks only looking at new zealand. There is a linkage with currencies. Lets get to the bloomberg first word news with taylor riggs. Taylor the white house commenting on Donald Trumps accusations. The republican candidates as you can blame the white house wreaking havoc in the middle east. Is honoringsis president obama. He is the founder of isis. He is the founder of isis. He is the founder. Lamed trump has long president and Hillary Clinton for creating a power vacuum in iraq that was exploited by the Islamic State. Forces in libya are close to retaking the Islamic State strongholds. There taken over a hall that was used by the militants. Have to find the Islamic State of their only base outside of syria and iraq. Prosecutors will question julian allegationst rape in the Ecuadorian Embassy in london where assange has been since 2012. He refuses to go to sweden saying he would be extradited to the u. S. Wikileaks released emails stolen from the Democratic National committee. Parliament that britain must do more to tackle inequality faced by muslims. Unemployment by muslims in the uks more than double the national rate. Existing measures to promote integration are linked to counterterrorism strategies which may raise tensions. At the summer olympics Katie Ledecky has won her third gold medal. The 19yearold brought the u. S. From behind on the final leg of the four by 200 freestyle relay. She has one more, the 800 meter freestyle. She is the defending champion. U. S. Has 32 metals. China has 23. Japan has 18. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Am taylor riggs this is bloomberg. Tom . Tom struggling this morning. Theres the screen. Oil is a little sake. We will get with that in a minute. Wanted, green, if you 11. 93. The twoyear yield down 0. 9 . We had 2 issues with the u. K. There is a soggy british pound this morning. Francine i will tell you what is not soggy. The new Zealand Dollar jumping. This is significant. It was searching for a oneyear high after banks in new zealand cut Interest Rates and signaled more than investors anticipated. This is Central Banks fighting back. It goes back to a lot of the asian economies and how they are struggling to put inflation higher. Tom lets go back 100 years. This is u. S. Industrial production. Average. Year moving only twice does the 15 year moving average been breached. 1937, the depression on the left. Up top, where we are now. I will come in and resume in. And zoom in. The white line is Industrial Production. It has flatlined for the last number of years. Three and four years. The blue line is where we feel we ought to be. We are to be there, booming in america. It aint happening. That is part of the political debate in the united states. A killer chart. Francine i really like that. Earlier. O jim his thoughts were interesting. He said the problem is every time we say someone fails, it puts a damper on sentiment. This chartched before, but i bet it was significant for the oneyear being ally of the won over the place last august. Every day we talk about bonds. I picked out the china 10 year sovereign yield for you. There at the lowest level since 2009. This is the 10 year in china. Chinese sovereign bonds rallying with foreign inflows and haven hunters driving the benchmark. These are the yields, 2. 6. What is interesting is that this i would argue has to do with what the government has been doing, especially to stop capital outflows. Tom donald mentioned that yesterday. Ore isi yields coming in in china as well. Francine something of a greedy to explore further. We have the right man to do that. For markets, china, and bonds in general, lets get to Holger Schmieding. I dont know what you find more significant, whether we should look at what the yan did last year and say that what the yuan did last year and say that they stabilized. Holger china is the big economies in the world. We watch it closely. The yields testify to the underlying story. China has problems, but it has a grip on its problems. View managing to keep the that it is attracting capital inflows into parts of the market. But it is big issue, not something that looks like it will implode or explode in the foreseeable future. It will likely have quality adjustments remain for the Global Economy. You can say that it is more bow weather. Ambitions tona has be a global currency. They need to take a step back because theyve managed the currency so much. Holger the chinese wanting to be a global reserve currency is for the long term. Tradems of trade, financing, reserves to cover trade needs, the chinese currency is getting more important. Currency,obal reserve the ultimate store of value for Global Investors like global Central Banks, you need to be a very trustworthy economy with a trustworthy political system. That is where china is behind a lot of other contenders. The u. S. And many european countries, including switzerland. Tom help me with a phrase that i associate with the great cypress and tro banker working three years in 10, the toolbox. Veryone will go we will all hang out and jackson hole. Exactly how many tools are in the toolbox of draghi, carney, cowrote carney, karoda, and yellen . They have a lot of tools in their toolbox for one purpose. To reserve financial stability. If they have to, they could do a lot. They could buy a lot of equities, this and that. When it comes to stimulating Economic Growth, that is a very different issue. The westerns of world, Economic Growth is not far from trends. It just happens to be the case in some countries like japan and to some in the u. S. , strength gross is strength growth is no longer what it used to be. On trend is with the Central Banks have more or less run out of. That is what they should not be in the business of doing in the first place. Tom we could have a cup of coffee over this on a beautiful august morning, but can central an economy . E do you see evidence that they . An prescribe a reflation holger they cannot do much in terms of reflation. They can keep the economy on an even kill close to current growth, and the to inflate the economy beyond that would require extreme needs, which hopefully they will not employ. As far as strengthening growth, that is up to other areas structure reform especially. Tom it is almost a soup here of what is next. I will be a theme through the morning. Francine i know that august is quiet, but for the past six years, the canary in the coal mine was always in august. Tom i always 100 agree on that. And october, october is always crazy. We will come back with Holger Schmieding of their birth tank of berenberg bank. Where are we . The energies one last night. Night. Yankees won last doug kass of sea breeze is next. This is bloomberg. Francine we would like to welcome you to bloomberg surveillance. I am in london, tom keene is in new york. Here is taylor riggs. Taylor there is a report that valiant pharmaceuticals is the subject of a criminal investigation. According to the wall street journal, it is a question if they have ties to him mail order pharmacy. Valiant is cooperating with the investigation. Deutsche telekoms secondquarter profits rose giving credit to tmobile where sales have been surging. Tmobile has been luring subscribers were american characters without squeezing the companys bottom line. Brexit hit the British Housing market. The role institution of charters in surveyors say the index of sales pointing to the fastest decline since 2008. It is home prices rise in july at the slowest pace in three years. You have more of the Property Market . Francine we do. At bloomberg news, the meeting at bloomberg news, Holger Schmieding is still with us. Housing look at the market it is sentiment. If the Housing Market gets better because we have triggered article 50 at some point and i feel better but my situation, or will he get worse because in london foreigners will be leaving because they do not have the right to stay . The big problem is uncertainty. If you are in an ester in any industry, especially the housing or get, you want to know the plan. At the moment we dont. The government has not set its stall. We dont know when article 50 will be triggered. What were seeing is a reflection of uncertainty. Keeping prices at a certain level. Francine i hear some people saying we can become like monaco. And can be outside attractive for the chinese and rich new yorkers. Other saying people will leave and london will be on its knees in five years. Svenjia i think that the key issue is london. All sorts of questions about passporting rights. Whether we will remain in a key market. That is key for london as a financial center. The problem is all these questions are very big and complex questions. We will not have more clarity for another three to four months. Like to buy in london, but i have to buy 140 miles outside of london because i cannot afford it. Are you talking about the growth rate of being a little bit . Svenjia at the moment, it is the growth rate not growing is quickly as you have seen. Sell your house, unless you really have to, you will weigh in the. He will wait and see. That is because you will take a financial hit. Tom give us a shot of london with the new office building. The third floor looking over the wonderful christopher yen. When you look at at london there are cranes everywhere. It looks like to buy a bunch of years ago. There is a live shot. Are the cranes going to be there for multi Family Housing in london, or is it still i am trying to buy some 19thcentury thing that i cannot afford . Svenjia a lot of the development that you have seen has been the regeneration of areas. A lot of Foreign Investors have been driving the market. Suddenly, antidotal evidence is that these investors may be putting deposits on these developments and are now pulling out. Or, they are not overly keen to seal the deal so to speak. In terms of families, this is a huge problem in london. I suspect his is a huge problem in cities like new york. Francine i need to translate very tom keene for the global audience. Multi family come here we only call it flats. Tom i know the language is different. In new york in the luxe area, what they are doing is they are taking what used to be large apartments and splitting it into 2. Going from 70 million to one unit being 35 million and the other being 28 million. I know that is svenjias price range. I mean 70 million was just outrageous. Francine looking at residential prices, were seeing the demand for luxury homes with waning a little bit. They buy the most expensive luxury houses here, but they are talking bout splitting it. The cranes are definitely commercial, not that much residential. Go exit, is it going to downhill . Again, we have not really seen people move out. Holger the brexit vote is a significant shock to the converter Property Market. We are to see that more to the residential Property Market it is less of a shock. It will be more of a longterm phenomenon depending on how the u. K. Settles issues with europe. As for the overall brexit street, with 10 downing we have a calm approach. That is the first risk, that of an ideological confrontation between britain and the e. U. Largelyk is gone. Second, how much the british economy will be hit in the long run by cutting ties to its Major Trading partner. That will take probably three years until we find out. In the meantime, the u. K. Economy will probably continue to grow most of the time, just less than it would have without the uncertain tea. Francine and maybe differently. Thank you. You are allowed to go luxury house shopping. Coming up, we continue the conversation on brexit. Is there a Brexit Effect on america . We ask the head of north american economics. This is bloomberg. Francine this is bloomberg surveillance. I picked up something for you. This is my morning mustread. It is a Bloomberg View contributor talking about china. Who he talks about is constituents. Chinese Companies Taking advantage of the openness that the u. S. Led Global Economic system ensures. Aging is not reciprocating by allowing Foreign Countries in china. Berties the imbalance is becoming an impediment to western companies. He is looking at the teacher, editor, and politician from china that was 479 bc er. s get back to holg it is amazing how someone 3000 years ago saw this coming. Holger this is not a credit of him, but something about open this could easily be something from confucius. Is anke over here, there imbalance. It is bad, both for china and Global Companies that should have more liberty working in china. Many Global Companies have over the last 10 to 15 years not done badly playing the chinese system as it is. There is a more upside, but it is not that we the western world would really need china to do a to prosper. We can prosper with china as it is. A key for us is that china does not get it wrong Going Forward, which is the issue given the rising debt and china. That is the key issue, not foreign access. Tom american companies, the venture. Rase joint you want to go into china and do. Jv everyone knows those terms have changed. Is the tone that you see on china just a reaffirmation asked him what is rule of law in china, or is it Something Different . Holger rule of law in china is something that we would very much love to see eventually, but we are not seeing much of that yet. It is unclear which direction china is going. There are communications, and have been for years, that they realize the importance of rule of law and a somewhat more reliabled system to be partners for Global Companies, especially more liable for citizens. Under the current leadership, china is also in some respects turning more authoritarian. More thanfocused before, i counter waiting trend. Generally will do well would be good in the concentration of power at the top, the balance of that, how it plays out is far too early to tell. As a foreign company, i would be in there but remain cautious. Francine there are risks. Up next, the debate on helicopter money. Cohead ofith the ubs fx and rates strategies. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Tom good morning. Bloomberg surveillance. Francine in london, i am in new york. We need the first word news. Here is taylor riggs. Taylor president clinton is promising to respond to write he calls ukraines terror attacks in crimea. Putin is promising to respond to what he calls inaines terror attacks crimea. Russia plans to expand the military footprint in syria. According to a newspaper the kremlin will create a full scale base and constant air force presence. Pressure sent forces to backup in the civilsad war. Wildfires in Southern France and portugal. 4 people have been killed. Thousands have been evacuated. The airport in marsailles had to be rerouted. There has to be an easier way to donald trump. This was incredible. A man who wanted a private audience with the republican president ial candidate used suction cups to climb up the trump tower. He was pulled into an open window on the 21st floor three hours after he began the stunt. He has been taken to a hospital for psychological evaluation. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Francine i have to say, we are less dramatic than they are. Several years of rockbottom Interest Rates has not done enough to convince investors of a rosy outlook for Global Growth. Is helicopter money the solution . Ubs seniorfrom the investor . Helicopter money, would it work . His dedicated his whole economic career in discussing that. In reality, if you are central bank and you want to signal you will raise inflation and guide Inflation Expectations higher, the more dovish you come across, the more reckless, in theory that has a bigger impact than Inflation Expectation. In many ways, which we have seen is Central Banks not doing enough to stimulate Inflation Expectation. Francine not doing enough . Im not sure what they can do. It has been seven years. Almost every major economy has done so much. That is not forcing politicians. Themos think of japan. 2015 has been a year of major Holger Schmieding<\/a> with us to go over with that signals. Is that a butterfly flapping . Is that the phrase you would use . It is not a small deal. Francine we could open it and see more troubles were Central Banks<\/a> only looking at new zealand. There is a linkage with currencies. Lets get to the bloomberg first word news with taylor riggs. Taylor the white house commenting on Donald Trumps<\/a> accusations. The republican candidates as you can blame the white house wreaking havoc in the middle east. Is honoringsis president obama. He is the founder of isis. He is the founder of isis. He is the founder. Lamed trump has long president and Hillary Clinton<\/a> for creating a power vacuum in iraq that was exploited by the Islamic State<\/a>. Forces in libya are close to retaking the Islamic State<\/a> strongholds. There taken over a hall that was used by the militants. Have to find the Islamic State<\/a> of their only base outside of syria and iraq. Prosecutors will question julian allegationst rape in the Ecuadorian Embassy<\/a> in london where assange has been since 2012. He refuses to go to sweden saying he would be extradited to the u. S. Wikileaks released emails stolen from the Democratic National<\/a> committee. Parliament that britain must do more to tackle inequality faced by muslims. Unemployment by muslims in the uks more than double the national rate. Existing measures to promote integration are linked to counterterrorism strategies which may raise tensions. At the summer olympics Katie Ledecky<\/a> has won her third gold medal. The 19yearold brought the u. S. From behind on the final leg of the four by 200 freestyle relay. She has one more, the 800 meter freestyle. She is the defending champion. U. S. Has 32 metals. China has 23. Japan has 18. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Am taylor riggs this is bloomberg. Tom . Tom struggling this morning. Theres the screen. Oil is a little sake. We will get with that in a minute. Wanted, green, if you 11. 93. The twoyear yield down 0. 9 . We had 2 issues with the u. K. There is a soggy british pound this morning. Francine i will tell you what is not soggy. The new Zealand Dollar<\/a> jumping. This is significant. It was searching for a oneyear high after banks in new zealand cut Interest Rates<\/a> and signaled more than investors anticipated. This is Central Banks<\/a> fighting back. It goes back to a lot of the asian economies and how they are struggling to put inflation higher. Tom lets go back 100 years. This is u. S. Industrial production. Average. Year moving only twice does the 15 year moving average been breached. 1937, the depression on the left. Up top, where we are now. I will come in and resume in. And zoom in. The white line is Industrial Production<\/a>. It has flatlined for the last number of years. Three and four years. The blue line is where we feel we ought to be. We are to be there, booming in america. It aint happening. That is part of the political debate in the united states. A killer chart. Francine i really like that. Earlier. O jim his thoughts were interesting. He said the problem is every time we say someone fails, it puts a damper on sentiment. This chartched before, but i bet it was significant for the oneyear being ally of the won over the place last august. Every day we talk about bonds. I picked out the china 10 year sovereign yield for you. There at the lowest level since 2009. This is the 10 year in china. Chinese sovereign bonds rallying with foreign inflows and haven hunters driving the benchmark. These are the yields, 2. 6. What is interesting is that this i would argue has to do with what the government has been doing, especially to stop capital outflows. Tom donald mentioned that yesterday. Ore isi yields coming in in china as well. Francine something of a greedy to explore further. We have the right man to do that. For markets, china, and bonds in general, lets get to Holger Schmieding<\/a>. I dont know what you find more significant, whether we should look at what the yan did last year and say that what the yuan did last year and say that they stabilized. Holger china is the big economies in the world. We watch it closely. The yields testify to the underlying story. China has problems, but it has a grip on its problems. View managing to keep the that it is attracting capital inflows into parts of the market. But it is big issue, not something that looks like it will implode or explode in the foreseeable future. It will likely have quality adjustments remain for the Global Economy<\/a>. You can say that it is more bow weather. Ambitions tona has be a global currency. They need to take a step back because theyve managed the currency so much. Holger the chinese wanting to be a global reserve currency is for the long term. Tradems of trade, financing, reserves to cover trade needs, the chinese currency is getting more important. Currency,obal reserve the ultimate store of value for Global Investors<\/a> like global Central Banks<\/a>, you need to be a very trustworthy economy with a trustworthy political system. That is where china is behind a lot of other contenders. The u. S. And many european countries, including switzerland. Tom help me with a phrase that i associate with the great cypress and tro banker working three years in 10, the toolbox. Veryone will go we will all hang out and jackson hole. Exactly how many tools are in the toolbox of draghi, carney, cowrote carney, karoda, and yellen . They have a lot of tools in their toolbox for one purpose. To reserve financial stability. If they have to, they could do a lot. They could buy a lot of equities, this and that. When it comes to stimulating Economic Growth<\/a>, that is a very different issue. The westerns of world, Economic Growth<\/a> is not far from trends. It just happens to be the case in some countries like japan and to some in the u. S. , strength gross is strength growth is no longer what it used to be. On trend is with the Central Banks<\/a> have more or less run out of. That is what they should not be in the business of doing in the first place. Tom we could have a cup of coffee over this on a beautiful august morning, but can central an economy . E do you see evidence that they . An prescribe a reflation holger they cannot do much in terms of reflation. They can keep the economy on an even kill close to current growth, and the to inflate the economy beyond that would require extreme needs, which hopefully they will not employ. As far as strengthening growth, that is up to other areas structure reform especially. Tom it is almost a soup here of what is next. I will be a theme through the morning. Francine i know that august is quiet, but for the past six years, the canary in the coal mine was always in august. Tom i always 100 agree on that. And october, october is always crazy. We will come back with Holger Schmieding<\/a> of their birth tank of berenberg bank. Where are we . The energies one last night. Night. Yankees won last doug kass of sea breeze is next. This is bloomberg. Francine we would like to welcome you to bloomberg surveillance. I am in london, tom keene is in new york. Here is taylor riggs. Taylor there is a report that valiant pharmaceuticals is the subject of a criminal investigation. According to the wall street journal, it is a question if they have ties to him mail order pharmacy. Valiant is cooperating with the investigation. Deutsche telekoms secondquarter profits rose giving credit to tmobile where sales have been surging. Tmobile has been luring subscribers were american characters without squeezing the companys bottom line. Brexit hit the British Housing<\/a> market. The role institution of charters in surveyors say the index of sales pointing to the fastest decline since 2008. It is home prices rise in july at the slowest pace in three years. You have more of the Property Market<\/a> . Francine we do. At bloomberg news, the meeting at bloomberg news, Holger Schmieding<\/a> is still with us. Housing look at the market it is sentiment. If the Housing Market<\/a> gets better because we have triggered article 50 at some point and i feel better but my situation, or will he get worse because in london foreigners will be leaving because they do not have the right to stay . The big problem is uncertainty. If you are in an ester in any industry, especially the housing or get, you want to know the plan. At the moment we dont. The government has not set its stall. We dont know when article 50 will be triggered. What were seeing is a reflection of uncertainty. Keeping prices at a certain level. Francine i hear some people saying we can become like monaco. And can be outside attractive for the chinese and rich new yorkers. Other saying people will leave and london will be on its knees in five years. Svenjia i think that the key issue is london. All sorts of questions about passporting rights. Whether we will remain in a key market. That is key for london as a financial center. The problem is all these questions are very big and complex questions. We will not have more clarity for another three to four months. Like to buy in london, but i have to buy 140 miles outside of london because i cannot afford it. Are you talking about the growth rate of being a little bit . Svenjia at the moment, it is the growth rate not growing is quickly as you have seen. Sell your house, unless you really have to, you will weigh in the. He will wait and see. That is because you will take a financial hit. Tom give us a shot of london with the new office building. The third floor looking over the wonderful christopher yen. When you look at at london there are cranes everywhere. It looks like to buy a bunch of years ago. There is a live shot. Are the cranes going to be there for multi Family Housing<\/a> in london, or is it still i am trying to buy some 19thcentury thing that i cannot afford . Svenjia a lot of the development that you have seen has been the regeneration of areas. A lot of Foreign Investors<\/a> have been driving the market. Suddenly, antidotal evidence is that these investors may be putting deposits on these developments and are now pulling out. Or, they are not overly keen to seal the deal so to speak. In terms of families, this is a huge problem in london. I suspect his is a huge problem in cities like new york. Francine i need to translate very tom keene for the global audience. Multi family come here we only call it flats. Tom i know the language is different. In new york in the luxe area, what they are doing is they are taking what used to be large apartments and splitting it into 2. Going from 70 million to one unit being 35 million and the other being 28 million. I know that is svenjias price range. I mean 70 million was just outrageous. Francine looking at residential prices, were seeing the demand for luxury homes with waning a little bit. They buy the most expensive luxury houses here, but they are talking bout splitting it. The cranes are definitely commercial, not that much residential. Go exit, is it going to downhill . Again, we have not really seen people move out. Holger the brexit vote is a significant shock to the converter Property Market<\/a>. We are to see that more to the residential Property Market<\/a> it is less of a shock. It will be more of a longterm phenomenon depending on how the u. K. Settles issues with europe. As for the overall brexit street, with 10 downing we have a calm approach. That is the first risk, that of an ideological confrontation between britain and the e. U. Largelyk is gone. Second, how much the british economy will be hit in the long run by cutting ties to its Major Trading<\/a> partner. That will take probably three years until we find out. In the meantime, the u. K. Economy will probably continue to grow most of the time, just less than it would have without the uncertain tea. Francine and maybe differently. Thank you. You are allowed to go luxury house shopping. Coming up, we continue the conversation on brexit. Is there a Brexit Effect<\/a> on america . We ask the head of north american economics. This is bloomberg. Francine this is bloomberg surveillance. I picked up something for you. This is my morning mustread. It is a Bloomberg View<\/a> contributor talking about china. Who he talks about is constituents. Chinese Companies Taking<\/a> advantage of the openness that the u. S. Led Global Economic<\/a> system ensures. Aging is not reciprocating by allowing Foreign Countries<\/a> in china. Berties the imbalance is becoming an impediment to western companies. He is looking at the teacher, editor, and politician from china that was 479 bc er. s get back to holg it is amazing how someone 3000 years ago saw this coming. Holger this is not a credit of him, but something about open this could easily be something from confucius. Is anke over here, there imbalance. It is bad, both for china and Global Companies<\/a> that should have more liberty working in china. Many Global Companies<\/a> have over the last 10 to 15 years not done badly playing the chinese system as it is. There is a more upside, but it is not that we the western world would really need china to do a to prosper. We can prosper with china as it is. A key for us is that china does not get it wrong Going Forward<\/a>, which is the issue given the rising debt and china. That is the key issue, not foreign access. Tom american companies, the venture. Rase joint you want to go into china and do. Jv everyone knows those terms have changed. Is the tone that you see on china just a reaffirmation asked him what is rule of law in china, or is it Something Different<\/a> . Holger rule of law in china is something that we would very much love to see eventually, but we are not seeing much of that yet. It is unclear which direction china is going. There are communications, and have been for years, that they realize the importance of rule of law and a somewhat more reliabled system to be partners for Global Companies<\/a>, especially more liable for citizens. Under the current leadership, china is also in some respects turning more authoritarian. More thanfocused before, i counter waiting trend. Generally will do well would be good in the concentration of power at the top, the balance of that, how it plays out is far too early to tell. As a foreign company, i would be in there but remain cautious. Francine there are risks. Up next, the debate on helicopter money. Cohead ofith the ubs fx and rates strategies. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet<\/a> and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Tom good morning. Bloomberg surveillance. Francine in london, i am in new york. We need the first word news. Here is taylor riggs. Taylor president clinton is promising to respond to write he calls ukraines terror attacks in crimea. Putin is promising to respond to what he calls inaines terror attacks crimea. Russia plans to expand the military footprint in syria. According to a newspaper the kremlin will create a full scale base and constant air force presence. Pressure sent forces to backup in the civilsad war. Wildfires in Southern France<\/a> and portugal. 4 people have been killed. Thousands have been evacuated. The airport in marsailles had to be rerouted. There has to be an easier way to donald trump. This was incredible. A man who wanted a private audience with the republican president ial candidate used suction cups to climb up the trump tower. He was pulled into an open window on the 21st floor three hours after he began the stunt. He has been taken to a hospital for psychological evaluation. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Francine i have to say, we are less dramatic than they are. Several years of rockbottom Interest Rates<\/a> has not done enough to convince investors of a rosy outlook for Global Growth<\/a>. Is helicopter money the solution . Ubs seniorfrom the investor . Helicopter money, would it work . His dedicated his whole economic career in discussing that. In reality, if you are central bank and you want to signal you will raise inflation and guide Inflation Expectations<\/a> higher, the more dovish you come across, the more reckless, in theory that has a bigger impact than Inflation Expectation<\/a>. In many ways, which we have seen is Central Banks<\/a> not doing enough to stimulate Inflation Expectation<\/a>. Francine not doing enough . Im not sure what they can do. It has been seven years. Almost every major economy has done so much. That is not forcing politicians. Themos think of japan. 2015 has been a year of major Fiscal Consolidation<\/a> rather than expansion. The market wasen thinking that is a come after easing, guiding the yen higher and higher, than weaker and weaker against the dollar, would you have seen is a lukewarm response was central bankers not meeting expectations for the market. That has driven the yen stronger, working against them. Think of the fed. The fed has the potential that labor markets might need some kind of inflation and has warned against rate hikes by september 2014 and is partly responsible for the market volatility around january and february. Tom congratulations on ubs and the single best page on helicopter money yet. Dou go through the mun fleming structure. You put in geometry and talk about the need for monetary easing. Ring up the yen chart. Yen stronger . Ubs beautifully walks through this. You get tightening and a stronger yen. Is monetaryent easing on the backside. Almost a sterilization of the policy. Are we going to see that . Themos when youre delivering fiscal easing, one to one foot 5 of gdp, where economy growth is 1. 5, it is a significant amount of easing. The market may expect that there is a point that you take that further out in my lead to higher real rates in a typical standard economic approach. Real rates go higher. We have seen that since the last bank of japan the yen strengthens, the higher rates. Saying that, you need a central bank that convinces us that no matter what the effects of and inflation they will keep doing more and more. If you want to push Inflation Expectations<\/a> higher and offset the increase in real rates. Tom this is absolutely critical. Are we going to see that . This is about, courage and will. Do detect that courage from the bank of japan . Themos we had hoped that they would demonstrate that kind of 2015. Result cents late their behavior over the last nine months could mean more close to soulsearching rather than some kind of determination to push the needle. Shiftedall policy has from an easy monetary environment to a place where the market has been expecting helicopter money. More recently the last couple of months helicopter has become closer to submarine. Francine thoughts . In japan for the last 25 years has done a lot with fiscal and Monetary Policy<\/a> to stimulate growth. It has never worked for long. We know what japan is structural need to what japan Structural Reforms<\/a>. Helicopter money or anything are reallyf they aggressive they could weaken the currency for a while. They could even get inflation and Inflation Expectations<\/a> up. After a year or so, it would be over and they would be back to their trend growth rate. For me, the japanese debate should be about Different Things<\/a> than helicopter money. Francine helicopter money is what it is. Which is why the image of the helicopter distributing money is so appealing. You could argue that qe and a low Interest Rates<\/a> gives you extra money in your pocket. You do not have the inflation for wage growth. That is extra money. If people are not spending that, why would they go to helicopter money . Those are beautiful questions that beat economic intuition. The main thing in the crisis environment is the transmission mechanism retooling what policymakers do and what ends up seeing the ultimate result in the economy tends to be quite broken down. Therefore, policymakers need to find different ways of distribution money. Qe has been about inflating assets and giving people disposable income. Helicopter money is a different way of forcing people to spend conceptually. The epidemic let work. I would disagree in one big thing. 2012, due respect, sent in 2012 Inflation Expectations<\/a> between 2012 and 2015 have increased from zero percent to 1. 5 . All of the progress of economics has been underwhelmed within six months of the bank of japan sending the wrong signal. Growth, we can discuss the last 30 years of growth. It was quite promising and was interrupted. Holger i would say just getting Inflation Expectations<\/a> up is not the purpose of any economic policy. Themos allow me to disagree. The single biggest driver of inflation is not the labor market. It is Inflation Expectations<\/a>. Holger japans problem is not deflation. A very lowblem is rate of trend growth, which is where the third arrow of abenomics was supposed to come in, but never came in. Francine i would say japan has many problems, structural, demographics, they dont have enough immigration, not enough women labor participation. Inflation is only a part of growth. Key thing. Is not a switzerland has been living happy with an inflation rate like japan for a long time. Switzerland has a sound structure. Francine would you be worried if europe became japan . Would you not be worried about the economic an the economic concoction . Holger i would not be worried an inflationaving rate. I would be worried about the no immigration of japan, the structural rigidity is in japan. If you look across europe, the difference across economies is not zero inflation to 3 . Zero inflation in the recession. The difference is structural or rate policy. Tom it is very important. I want to dovetail this wonderful debate. When i think of structural rigidities i think of the fabulous work of rigidities of the real economy. If i look at the leicester of the real economy, the is curve in your analysis, does the bank of japan have the tools to affect a real economic outcome for japan . Im not convinced that they do. Themos when it comes to real or nominal Interest Rates<\/a>, the bank of japan can affect the ellen curve in many different ways. Real rates can move so much over the last three years, which in as that we are not state where Monetary Policy<\/a> shifts has no effect on real Interest Rate<\/a> or Inflation Expectation<\/a> as standard arguments about the liquidity track would argue. The bank of japan has a lot of tools. I think inflation rates are highly misunderstood at this point. Inflation is a very global phenomenon that requires very global attempts to raise Inflation Expectations<\/a>. Policymakers have not done enough to foster that. In terms of structural, i would like to highlight gdp per capita in japan for the last 30 to 40 years has grown not that far from what the u. S. Or europe has. A lot of growth, but that doesnt mean tom i take your point. Do you have confidence the dynamics of the money system within japan is signified by the lm curve and can move over to the real economy . To help mr. Abe with voters . Can they shift all of the to aary mumbojumbo over real economic good outcome for japan . All, i agree of that Monetary Policy<\/a> still works to some extent. The transmission mechanism is impaired but not fully broken across the western world. That to some extent still hopes for japan. , youint is Monetary Policy<\/a> could only by a modest. Hortterm boost you cannot fix the longerterm problems of any economy, including japan. The significantly more Aggressive Bank<\/a> of japan would be able to do something about the shortterm cyclical outlook for japan, but one year later we would be back to where we were with inefficient trend growth in the economy, which is paying for its current inventors current adventures with piling up too much debt. Tom this has been spectacular. Holger schmieding and themos fiotakis. We protect the copyright of our guests research. We will not send you the ups research. Contact ebs to get that. We will send you the discussion with these 2 good economists in a moment. Coming up, a conversation with stephen ratner. Look for that later this morning. Worldwide in japan, this is bloomberg. Francine it is bloomberg surveillance. Tom keene is in new york, i am Francine Lacqua<\/a> in london. Thats good to our morning movers. Focusing on oil. Overall, oil extending its losses. We have u. S. Crude stockpiles unexpectedly expanding. We opec meetings in september. Delving a little deeper into oil, seeing the market rebalancing, we are joined by hobby or boss were joined by javier blas, Holger Schmieding<\/a>, and themos fiotakis. Do we trust what they say . Saudi is keeping pumping, but we are rebalancing. Rebalancing is coming later and later. You will be a billionaire, but it will be next year. We will balance, but next year. If opec keeps pricing in, it will be a further delay. A record high, kuwait, the u. S. Producing close to record highs. Opec production at an eight year high. Opec is doing a good job in delaying the rebalancing of the market, offsetting all of the problems we are having with falling reduction in the united states. Pricene does it mean the of oil, which is difficult to predict, is 10 what we saw six months ago . Javier absolutely. 10 is a good number to take off of the forecast. We have seen that the market is really struggling to recover the 35 a barrel mark. The market made an attempt on the 100 day and 50 day moving averages. They are coming back, and we were probably again be testing the 40 per barrel uti. Where we at oil and are. I like the testing of 40 a barrel. What is the confidence on demand analysis . I get supply, the barrels and the boats. Isnt demand a mystery . Javier well, we obviously do not know. We do not know how the Global Economy<\/a> will behave next year. We need to have a very clear view of what is happening in china. That is a big question mark, china in 2017. We have seen demands to prices outside. Very strong consumption in india. Reasonably good consumption in china. Since then, demand has been slowing down. Anticipate 2017 because of concerns of the Global Economy<\/a>. That is a big question mark and will very much depend on what happens in emerging markets next year. Tom where is the marginal oil analysis coming out of africa and the middle east . What are you focused on . Javier i think the key at the moment is what will happen between saudi arabia and iran. Are we going to see an increase in production in iran . Since the beginning of the year when sanctions were lifting, tehran has increased by 700 barrels a day. That surprised the market that was not expecting is much. Saudi arabia is reacting, increasing production to a record high. Reacting to high production in the summer. They need more oil to produce electricity for airconditioning. I would like to see what the saudis do with the production when the summer ends. Will it stay there or come back . The i cannot convey disparate opinion on oil that we hear off the desk in new york. Everyone is all over the place. Francine but i also like is that there is a concrete linkage between inflation, i do not know that has to do with oil Energy Prices<\/a> or the deflationary pressure from china. We will explore that thing later on. A you for joining us. Thank you for joining us. A lot of focus on currencies. A lot of focus on what happened with the kiwi dollar after the surprise move by the kiwi central bank. Kiwi, another word for new zealand for those less familiar with the term. Look at the pound, below 130. Here is london. European stocks practically unchanged. Tom good morning, everyone. Bloomberg surveillance. Thrilled youre with us this morning. Francine lacqua in london. Holger schmieding and themos fiotakis. We have to get where Bloomberg Business<\/a> flash in new york. Taylor we have good news for wall street traders and dealmakers. It may not shrink as much as expected. Tot is according compensation consultant johnson associates. They say that bonus pools for fixed income trading they fall to 15 . Dealmakers could see bonuses decline 5 to 15 . Concerns posted secondquarter profits that fell 10 . Pressure on premiums make it difficult for insurers to maintain profits. They are struggling with low Interest Rates<\/a>, slow growth, and stricter regulation. Here is how big china mobile is. The Worlds Largest<\/a> phone carrier added more subscribers in the first part of the year than the population of the u. K. And spain combined. China mobile side 116 million 4g users as more made the switch from slower services. Profit rose 6 , beating estimates. That is your Bloomberg Business<\/a> flash. Francine thank you. What are the keywords for 2016 that could spook the markets . We are back with holger they areg, who says political rather than economic. Were back with themos fiotakis. Thank you both for sticking around. We had a spirited conversation about the effects of possible helicopter money. Thats go back a little bit on inflation. What is the biggest concern to deflationary pressures. Is it imported from china . That is putting the sharing economy, or something deeper to do with the Energy Market<\/a> . Themos first, we have devoted a lot of energy on understanding inflation. A lot of research for the last year. It is probably the single most important driver of the low rate environment hear it and the single biggest risk. It becomes higher for a broader risk asset as well. I think it is important to understand. The second thing is contrary to most research, academically from policy makers and industry, inflation is more global than people think. 75 of developed markets inflation rates are driven by one single global factor. Now, there is a combination of drivers for the global development. A global output gap. An output gap in europe and china. Competition for firms trying to keep costs low and in an environment where regulators are not picking up that fast. And environment where policymakers have not figured the rising high nation. Tom Holger Schmieding<\/a>, i want to take the ubs analysis, fiscal stimulus followed by need for monetary using. I want to talk about the courage of mario draghi. He is not in the united states, not in japan. To me, his very alone in frankfurt with the odd european structure. What kind of courage is mario draghi going to need to assist europe to a better outcome . Well, actually, theres not much he can do. He has delivered. The eurozone has a fairly aggressive Monetary Policy<\/a>. Domestic demand in the eurozone is at its trend rate. If we do not like the trend rate, we have to discuss structure reforms. Mario draghi Going Forward<\/a> will make sure nothing bad really happened. That if there is an accident, a Global Economic<\/a> accident, a political accident that affects the outlook for eurozone domestic demand, he would have to hold against it. Francine what is the percentage chance of the accident and the eurozone imploding . Holger that i think is very low. Francine 10 . Holger much lower than that. Francine quickly . A third. Would be chancee one third of a that the eurozone breaks up and 5 . Tom well have to leave it there. Thank you. Thank you. Stay with us, worldwide. This is bloomberg. ,l this morning, sterling weakens as the brexit affect affects all of his there an effect upon america . William lee of citigroup this hour. The Boston Red Sox<\/a> go down in flames to the new york yankees. Will the stock market follow . Who wants to be president most, clinton or trump . Hillary clinton talks economics today. Surveillance berg we have almost moved on the Brexit Effect<\/a>. Francine i think it was put perfectly that someone said nothing has happened yet. We dont know what negotiations will look like. We dont know about the trigger kind ofont know what person the city of london can keep. Nothing has happened. Something may happen eventually. Tom lets go to first word news. Taylor the white house is not commenting on the latest donald trump accusation. Says you can blame president obama for the Islamic State<\/a> group that is wreaking havoc in the middle east. Honoring president obama. He is the founder of isis. He is the founder of isis. He is the founder. Taylor trump has long blamed Hillary Clinton<\/a> and president obama. Forces in libya say they are close to retaking and Islamic State<\/a> stronghold. A defeat would have the Islamic State<\/a> of its only base outside syria and iraq. Prosecutors from sweden will be allowed to question Julian Assange<\/a> about leaks. The interview will take place at the Ecuador Embassy<\/a> in london where he has been holed up since two to help if he has refused to go to spin saying he wants to be extradited to the u. S. Publishedrecently emails the Democratic Committee<\/a> an. No word on the loan for egypt which asked of billion dollars over three years. Its economy has been struggling since the ouster of longtime leader mubarak in 2011. At the summer olympics, Katie Ledecky<\/a> has won her third gold medal. She has one more event, the hundred meter freestyle and she is the defending champion. This is the metal scoreboard global news, 24 hours a day can up powered by to 600 journalists and analysts in more than 120 countries. Tom thank you so much. Lets go through our data check with not much going on. Oil has a little bit of a softness. Vix is fairly low in the sterling is weaker earlier but still weak the day. We looked at brent crude and there is a difference between that and wti and brent is is slightly on the higher side. Oil is still retreating. Dollare new zealand going to a oneyear high it the central bank has cut Interest Rates<\/a> so they will do more easing. The oldests one of charts going back almost 100 years Industrial Production<\/a>. The depression is on the left in 1937 with a 15 year moving average. How rare a dip in Industrial Production<\/a> is. It happened in 1938 and you could see it up to the right recently. It has been a struggle in many ways for the american economy. Francine i want to focus on china because we are celebrating a big anniversary it its one year since we had that turmoil with the chinese renminbi. Toook this chart back thousand nine. Its the chinese bond government yield curve for the 10 year in china. It is declining steadily it it tells us that once have been rallying. This is because of foreign inflows and haven hunting investors. Its significant because it goes back to global bond yields. Tom thank you so much. A lot abouthearing the nifty 50 lets talk to someone who is a fossil and remembers that. Douglas cass worked at putnam and at Kidder Peabody<\/a> and he lived it and joins us now if only back to that environment . It is to a certain degree. 50, yournk nifty bloombergs bigpapi. Tom i wish i had that paycheck. I think back to was the that great oftor the nifty 50 and those of the Bank Trust Department<\/a>s. I joined putnam, the Mutual Fund Business<\/a> was in the embryonic stage of growth. It was not until the late 70s that it blossomed. Much different and todays dominant investor is no longer the Bank Trust Department<\/a> but the rest parity tragedy, the volatility trending strategies, these strategies which have elevated stocks. These are strategies that are agnostic. For those of you who are too young to remember what popular 500 is was a largecap stocks on the New York Stock Exchange<\/a> in the 60s and 70s that were regarded as solid buys and then they turn out to the contracting. The contrary. Tom lets look at this chart. This has been an extended adjustment. Legged out to a new level. High stock by prices . Do you describe it to janet yellen . I would say in a narrative is a where valuations are discussion of the Central Banks<\/a>. To me the question is, the Central Banks<\/a> are to the markets as charles and schultz is the,linusblanket same. Will it interrupt the market advance . Tom do you need to be an cass or participate long but are skeptical . Im a short biased investor. I am rarely net long. It depends on the individuals. Depends on ones time frames and ones Risk Appetite<\/a> and profile. Clear, youo make it argue that the world central bankers have taken control of the asylum. I imagine you refer to all Asset Classes<\/a>. Ifs is what they want to do you look at europe and the bond spreads. The spanish bond yields and the italian, they dont want to price risk. This could be said about world Central Banks<\/a>. They dont want us to price risk like we used to. Ago said to tom a few weeks getting back to the new york one player may have a but alexverage of 15 rodriguez who retired as a batting average of 170 but it does not mean that the first player is valuable to the new york yankees. If central bankers could dominate markets so, why wouldnt rates be zero or negative for the last century and i didnt the central bankers longerthe world pimp monetary largess in the same manner they havent last seven years . It always ends badly. Francine how does it end . It ends badly, will we see Central Banks<\/a> do more . Right now, there is no fear. I call it a market and complacency and i do find it aat we know the spread in survey between bulls and bears is back to 2014 levels, very bullish. No one expects a larger make it or major market drawdown because we are protected by the Central Banks<\/a> around the world. We may not be protected forever. Bubbles,re creating these bubbles will burst. Right, it always ends abruptly and it usually ends not or a healthmistake concern or a black swan event. It happens in a blacks on event and we dont know what that will black it happens in a swan event and we dont know what that will be. Tom why cannot companies adapt to your world and cut expenses and continue to develop Free Cash Flow<\/a> . Why cannot they remove themselves from the macro analysis . , because the forces of nature the most mean regressing economic Profit Margins<\/a> have a mind of their own. At 26 times cap earnings and 19 times noncap earnings. The differential has never been wider in history. They should relearn their cfa textbooks. Im quite concerned. Doug kass, william lee will join us next from citigroup. This is bloomberg. A bloombergs surveillance. Lets get straight to the Bloomberg Business<\/a> flash. There was report that Valeant Pharmaceuticals<\/a> is the subject of a criminal investigation. Its a question whether they defrauded insurance by hiding its ties to notify message. Valeant says it is cooperating. Its ties to online suppliers. Shake shack has relied on its brandon new stores to post scored but the company and analysts say the sector may be headed the recession. Brexit has hit the British Health<\/a> market good they have had the fastest to clients in 2008 and british home prices continued to rise in july at the slowest patient years. A little bit of a touch on brexit. A productivity report was absolutely stunning. Is with us from citigroup as we look at the american economy. Can brexit make it across the atlantic . Its already here because we see it in politics. Have visit people have rising incomes. The parsimony issue is the main issue in the world that is keeping real income low francine isnt the Brexit Impact<\/a> the same fear that we have with the donald trump candidacy . Means that markets need this can happen . Right, where it starts to manifest and break up the political unity and breakup political cohesion to get fiscal policy going, that is dangerous. Tom i want to link this angst and uncertainty with over the market lets look at cap ask. Its part of the activity vision. This is the two red bands of the recession. Ask cap ask capex is absolutely original, the lack of investment. Its even more stunning we about what Monetary Policy<\/a> is doing. We have no investment. If you remember economics, we dont have acceleration so why do firms want to invest . We dont know where the risk free rate is . Some people say they dont know where it is but we are making it up. You cannot do the regular models because we dont know the risk rating . Are given awe distorted risk rate. That is what i think firms are saying regardless of what i calculate, i will not invest on until i see sales and pricing power. Stuff flying out the door, i am not going to invest. Corporations are buying back their stock with reckless abandon. They are doing stock buybacks. Tom not to mention the financial engineering. What is the market psychology. Do they think about the future with the fed raising rates or Global Growth<\/a> which could take 10 years . We have distortions we have to get rid of and they come from eight years of zero rates. They want to let Capital Markets<\/a> work against the reason we dont have it is because of the conviction on the part of the traditional textbook analysis which are used to teach which says the key is to keep o and that has not happened i. Was a geniusith and talked about low debt can he was one of my mentors. Tom the distortion in this market is extraordinary. There is something that felix smith never see. He probably would be buying deep value stock and deep value debt. Tom he literally has to go to the equity market in ali in a bond or equity bubble . I said on march 9, 2009 we are a were at a generational bottom and equity. Monetary policy is trying to steal growth and keep rates low. We are trying to bring demand and for the future. Were just getting it from our neighbors. Monetary policy just moves growth around. Coming up, and up in conversation the beleaguered chairman of macys. Terry lundgren on macys and unlike records and on michael kors and on coach. Good morning, bloomberg surveillance. This is the morning mustread. Terrific barclays research. Where are we in the two and 20 world right now . Are so much artificiality in this market that the veteran guys, the billionaires now, the hedge huggers, are throwing their ares up and saying they they will be materially in cash because we dont know what the risk rate of return is. We dont know equilibrium in any market because there is no natural price discovery. If i dont want to have my own portfolio and i dont want to buy a boring fund and maybe i dont want a portfolio of etf, i will get some smart guys. Back atways looking their track record. Investorsdividual bias,f you do the recency at some point the glow wears off it things have changed from the days when my uncle, sam and myitz, an accountant dad from the idea of trying to get 100,000 and they commingled contract negotiations with don drysdale. Send folk sandy koufax got out at the right time. If you want to talk hedge, i want to talk funds. What role do Pension Funds<\/a> have here . Pension funds should start looking for alternative return Asset Classes<\/a> soon because there will be a huge crisis. It has not been touched by the distortions of the market and thats the problem. Tom i totally agree. We are seeing a steady drain away from hedge funds. Driven and that will probably continue to tom we will take a break and come back and billlas kass league. The secretary will speak and she , lookave economic plan for Hillary Clinton<\/a> later on bloomberg today in francine good morning, this is a beautiful picture. A lot of the medical events the world is watching will be happening in d. C. Over the next six month. A lot of the political events in the world we will be watching will be happening in d. C. Over the next six months. Uplor fighting has flared in Russian Forces<\/a> and ukrainian rebels and Vladimir Putin<\/a> says it will adopt tougher measures. Russia plans to expand its military footprint syria. The kremlin will create a fullscale base. Russia sent forces to syria to back up president assad in the civil war. Wildfires are moving through france and portugal and for people have been killed and scores of homes have been affected. The airport in marseille had to reroute incoming planes so firefighting planes could land. And take off. Firefighters in silver spring, maryland had to rescue people from upper floors of a building outside of washington, d. C. There may have been explosion. The has to be an easier way to meet donald trump. A man who wanted a private audience with donald trump used suction cups to climb part way up the trump tower. An openulled into window on the 21st floor three hours after beginning the stunt and has been taken to a hospital for a psychological evaluation. Tom thank you so much. Be nice. , you made a comment about one of our president ial candidates. He is with seabreeze partners and william lee is with citigroup. You have been way out front. It was a joke. I have a blog called real in november and early december every year, i would say Hillary Clinton<\/a> would win the nomination and donald trump would be over 10 candidates. Tom what did you see . I talked about the disenfranchised society. Its no longer accepting the status quo. No longer accepting the notion that their futures are less favorable than their past. Clinton, secretary when she gives her economic speech, does she stay to the left or moved to the middle. . I dont they can matters because i think donald trump will withdraw it he will have trouble because the lack of Campaign Financing<\/a> and the growing schism in the popularity polls. I suspect he will be roundly defeated by clinton and will see his own franchise being impaired. He is not like to lose. If that were to happen, that would reduce the huge drags on the u. S. Economy. Policy uncertainty is at the top level. The debt crisis could try them gdp. Its just because of policy uncertainty. Since Monetary Policy<\/a> a keyically is becoming to losing its effectiveness data with draws, irump suspect we will still lose the house. Does donald trump not need to be selfaware to pull out . I cannot answer that. I have an mba, not a doctorate in psychology. Tom the house ways and Means Committee<\/a> had to explain to Richard Nixon<\/a> that it was over. Donald trump listens to his family. Are you suggesting his family would have him out of the race . I think thats going to be the case. A andnk it will be ivank her husband. They are neophytes in the political area, his family, and i think they will see a threat to his personal franchise. I dont think its a big deal because the checks and balances of the system. Francine what is your fiction . You predict that donald trump steps down and what happens to the republican nominee . Do they scramble around and resurrect someone . No, its too late to get anyone else on the ballot in david brooks wrote a beautiful article in the New York Times<\/a> positive ifd be donald trump had a devastatingly largest of the because it would force the Republican Party<\/a> to recast itself. If be 5 of the people of her donald trump, he will not go anywhere. I disagree. The recent polls have deteriorated him get tom the electoral analysis is what has been missing. I have not seen a single electoral vote analysis that has the guy the main concern is that he is appealing to the crowd that will not be springing this instate it they are split up by a lot of minorities and they are democratic leaning. You live down in florida which is important. Describe to our global audience the anger engendered by this candidate toward immigrants, toward secondgeneration immigrants, which affects people in florida. Market is hostile toward the trump candidacy and he will go to an overwhelming defeat. Florida is almost a nation unto its own. You have the Redneck Riviera<\/a> to the left and the immigrants from cuba on the other side. There is so much complacency. Disenfranchised Trump Supporters<\/a> have to come out in record numbers. I feel like i have insert insight into pauls because we got exit so wrong. We got brexit so wrong. Do you see a donald Trump Presidency<\/a> . A remote possibility but we still think that Hillary Clinton<\/a> wins. Selfdestructing, the walls are separating. Even if donald trump were to get in, the checks and balances of the system would prevent trade wars. Wenk that will be think there will be a recession sooner rather than later under a donald Trump Presidency<\/a>. Sentiment is that checks and balances and minimize his damage. Will this in danger Foreign Policy<\/a> . On the campaign trail, there is talk and craziness but once in office, they have to get legislation through and thats congress. The massive tax cuts and fiscal spending he talks about, you have to get it through paul ryan. Wars, we thinkde thats the biggest source of angst because the president can do a lot with executive action but there is a lot on the line. Can say all imports have to come through the of boston and it stays up for two hours week. Tom a couple of weeks ago i looked up the dates before the election. Report in be a gdp october. What will greet the two candidates in october . We think there will be a rebound with the Third Quarter<\/a> coming back stronger. We think we are in the 2 kind of world from here on out. Enough to get growth for incomes and people will be as disenfranchised in november as they are now. Tom with your bold call on donald trump, what would it Clinton Presidency<\/a> look like . I think it will be middle of the road. Political impasse and more entitlement spending. I think there will be continued gridlock good i think the house will be retained by the republicans in the senate will go democrat and we will have this fiscal inertia which is unhealthy in an environment where Monetary Policy<\/a> has reached its end game. How do we get the Infrastructure Spending<\/a> and acted . Lee is with us citigroup and doug kass as well. At 1 15 p. M. , the secretary will speak on her economic plan. We will have that across all of bloomberg. From new york and london, this is bloomberg. Francine this is bloomberg surveillance. Lets get up to speed with some of the corporate news. Taylor mercedesbenz is on track to reclaim the luxury car title from bmw. In theiveries rose 12 first seven months of the year and bmw sales grew slightly less than 6 which gave mercedes a 30,000 vehicle lead over their german rival and bmw has been the luxury car sales leader since 2005. Deutsche telecom secondquarter profit rose 9 and give the credit to its u. S. Unit, tmobile, where sales have been surging. Tmobile has been luring subscribers from other american carriers. Its good news for wall street traders and you makers, their bonus pools may not track as much as expected a few months ago. Says fixed income sales could have declines of 515 to francine thank you so much. Doned low rates of not enough to convince Global Investors<\/a> for positive growth. Dougkass at h kass andck with doug bill lee. No matter who wins the election, many people are paying them up on infrastructure and worldwide fiscal spending to get us out of this rut of Global Growth<\/a>. If it were that easy, it would have been done at absolutely, you cannot create growth in Government Spending<\/a> or Monetary Policy<\/a>. The way to create growth is to increase productivity and the comes from Structural Reforms<\/a> that make markets more efficient if you take away regulations and you take away a lot of the obstacles that prevent getting fromand you prevent people investing. Thats the real source of growth in the future it were policy is supposed to do is allow that to happen and Infrastructure Spending<\/a> and enables to grow or the internet to be more efficient but so far, there is so much political gridlock, that has not happened in if anything, we have produced the ability of the economy to deuce real Income Growth<\/a> and profit growth. Do we care about Income Growth<\/a> . We care about wage growth which is what the fed looks at but if you have deflationary pressures, we feel richer even if we are not paying more it we still havescrewflation of the middle class. Flationill have screw of the middle class. You see it in the core service sector. Exactly, we face a number of societal problems as well as economic problems. Tom we had a great conversation on the dual nature of helicopter money. You can have fiscal action but you need to combine monetary action to make the process work. Will be that coordinated in our policy . Can central bankers get their act together and coordinate with fiscal authorities . I think thats a hope and a prayer. The textbooks of always said coordinated Money Monetary<\/a> fiscal policy is ideal but i have yet to see that. The obstacle is in the implementation. Back to thees followon question is there any evidence that an institution or nation could reflate an economy . I dont observe that, do you . They did it in germany after world war i with hyperinflation. Thats the most effective use of helicopter money we have ever seen. Tom but it never works. It breaks down social institutions that if he is that mechanism consistently without trying to improve real efficiencies the market place, then its a disaster. I love that you bring up the hyperinflation because it the germans are so fearful this comes back and underpins any kind of eu decision on whether you bail out structuralhey have problems which my they were against keep me from mario draghi. Does he need to do more qe . One thing we can do is to say if we are going to distort markets, lets do it in a smart way and tell everybody would need to change the relative price of assets in a way that induces more investment in just lowering the nominal Interest Rate<\/a> i think is the wrong way. You go to negative rates in europe and japan, it hurts the banking system. The Bank Intermediation<\/a> is imperative to allocate capital and that destroys the possibility of getting real growth. Tom bill lee is with us and doug kass as well. Its a rather quiet morning but sterling is moving in futures are advancing a bit and the euro is weaker. Big churn for brent and west texas intermediate. Worldwide, this is bloomberg. Bloomberg surveillance and write to foreign exchange. Stirling is the way to look at it. There is a eurosterling. The pound has come back off this morning but any kind of reach over 1. 28 down to that handle would be of importance. Francine coming up shortly, its bloomberg. You have a cracking show coming up. We will spend a fair amount of time talking about Hillary Clinton<\/a> and her economic plan. Andave the head of alibaba we will spend a lot of time on retail. We have macys and kohls and nordstrom coming out after the bell. It has been rough and retail. Terry lundgren has been six lies but it is grim. David we want to ask a much of this is the market and how much of it is decisions they are making at macys in tom ask them why they took out the wooden escalators. David bless you, tom keene, i love those. Tom you must watch. Bill lee is with us as well as doug kass. You sure did apple so bring it up now. Every time around, there is not a reason to buy apple. What about this time around . 1. 20. Re did it at about i resorted the stock recently after its rally from the high 80s. My view is that the apple upgrade, the product upgrade cycle, the series of six, was the last important upgrade cycle for the company. Victimlike disney, is a of its past successes and it will be difficult with new products to move the needle. Tom i agree but cannot they engineer cash flow . They have a cost of capital under 2 . The ceos have to get bold employ cash fast . They get better but thats the heart of product to the ravens in general. They dont deploy cash. You have thoughts on whether they should spend on dividends but they dont spend because they dont see the environment and that seems fair. Way you can do huge m a when you think the world will end and of months. It depends on the company in the stock price. Hasrpillar most recently been the worst allocator capital. Tech Companies Like<\/a> cisco and General Electric<\/a> have been terrible allocators of capital. Is what you can value is what you get. Francine we are getting breaking news First Quarter<\/a> revenue 32. 2 billion so we need to break it down to look at the various divisions. Im trying to understand whether they have been able to shift away from selling so many pcs and Smartphones John<\/a> doerr pressure to the retailing. Overall, the First Quarter<\/a> revenue is better than estimated. 2 billion. Its a bellwether for the chinese economy. Tom do you trust the accounting . I knew you were going there. Its a total nonstarter in terms of being along on the stock. In thek of Transparency Company<\/a> plus accounting precludes it from being long and might put the the imf are wondering why there are no Capital Markets<\/a> in asia its because there is no transparency. Tom we will continue on radio. We continue the discussion tomorrow and Gideon Rhodes<\/a> will join us from Foreign Affairs<\/a> magazine. This is bloomberg. Jon brexit hits home. U. K. Properties ball the most since the financial crisis. David crude the. Oil extends its losses after u. S. Crude stockpiles unexpected crude declines. Oil extends its losses after u. S. Crude stockpiles unexpectedly grew. August 11, 2016. From august 11, 2015. David the anniversary of the depreciation of the yuan. Alix they are trying to keep the Exchange Rate<\/a> stable. Deutsche bank warning of continued caution. 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