The dow and s p 500 retreating from records yesterday. Group in the best in s p 500 after a 3. 5 move wti. Joe energy the best performer. Telecom and materials laggards today. I want to talk about nordstroms. There has been doom and gloom around retailers. This morning, a disappointing piece of retail sales of data. However, look at what has happened to nordstroms. This is on the back of a betterthanexpected secondquarter report, reporting . 67, . 10 better than analyst anticipated. Nordstroms has been able to reverse some leakage to places like amazon by stocking its rack with more attractive merchandise. They held this big promotional event, anniversary day. We should look at the major health insurers. These stocks have taken a beating since before the doj announced it would block mergers between anthem and cigna. Have recovered a bit today. Indication that they might the willing to make concessions to allow consolidation happened. Joe on the government on front, yields lower. Policy sensitive to year yield. You saw expectations of a fed rate hike a decline. Bottom line, lower yields. Lets talk about the dollar. We have seen dollar weakness. There is a growing expectation that perhaps the dollar will continue weakening between now and the election because of all the antitrade rhetoric from donald trump and hillary clinton. That is some people say a trade, short dollar come along latin american currencies. The argentine peso has been one of the big losers against the dollar. There is a new president and power. In power. In fact, latin american currencies are way up this month. List,ia is the top of the unleavened returns in excess of 4 . Joe oil having a strong day today, up 2. 7 weekly gain. Oil had been in a rare market, but starting to pick up some steam. Having a wild day after usda reports. You see the drop after reports that there would be a huge supply of corn, but traders reevaluated that data. Those are todays market minutes. Lets take a deeper dive. Joe i want to look at retail sales. We got that overall weak retail sales report. , the white line is the percentage of retail sales at nonstory retailers, internet is a big part of it, over 10 of all retail sales are nonstory now. The blue line is Department Stores. It is a beautiful crisscross. Standpoint,ar trend charts dont get much clearer than that. Not much more to say. It helps to illustrate why the nordstroms numbers were so surprising. Joe the fact of a had any growth at all was a surprise. For my deep dive, i want to first introduce oliver renick. My deep dive has to do with my meeting with one of the kings of private equity. , but he was him saying how striking it is that the ua should from a private Equity Perspective are getting awfully high. What is a private equity valuation . Enterprise value against the cash flows that support it. Lets look at enterprise of value against price to earnings. Going back to the beginning of 1990, we know that in 1990, early 2000, the market peaked from a price to earnings perspective and from an ditdaprise value to an e perspective. Tda isrise value to ebi almost at record high. That may raise some questions about the sustainability of this rally. Oliver i love it. This is really important. This is ultimately one of the Big Questions. How to determine if stocks are overvalued . Is there any predictive are you to the metric you are using . Bank of america surveys every month 20 different valuation metrics. The one we charted recently is the price to ebitda. Wellng at debt levels as in addition to market cap, but they are very high. Tdan you break it down to ebi earnings, youre basically looking at the highest ever. Key point. Ed a how much Predictive Value does this have . Joe we have been talking for a while about high valuations. It is all expanded valuations, so what are strategist saying in terms of their forecast for the rest of the year . Oliver they have come down a little bit. The average estimate for strategists has come down. It usually goes up and up, but this year has brought it down. Unless you are tom lee long and strong. Oliver he is standing by that number, 2325. I want to go back to this idea of Predictive Value. Lets go back to that chart about enterprise value against ebitda. Now i am looking at it against the s p 500 price. The red lines are selloff going back to 1990, and what you see is that every single major selloff in u. S. Stocks in the broad market was precipitated by a run up in this metric. Past is not prologue necessarily, and as you can see, there has been a long run up without anything in the way of a significant selloff in the s p 500. That could mean we are due. Oliver i like this chart. When you drill down to the different types of valuation ,etrics and look longerterm they are not very predictive when you look at ons. At bonds. That chart, if you look at where those red lines are, those violations do get high and drop. However, on the way up, there are higher points. The higher valuations dont necessarily beget a market downturn, especially when they index andcing the earnings are a road it. One thing is the question about the credit markets and the relations between highyields and stocks. The credit markets are supposed to be smarter than the equities market. What has been happening in highyield . Spreads have continued to compress. Again, you can choose which relationship you want to put stock in or credibility and come but that one is not sending a signal right now. You have a reverse situation with the stocks and bonds, we talk about this a lot where you have investors going , bondsks for the yield for the capital appreciation, so a difficult time for investors to wade through this mock and figure out what is a meaningful signal, what in the past cancer for prologue. So many of those previous indicators are breaking down because you dont know where you are in the economic cycle, where you are in the Business Cycle. And whether those cycles even matter anymore because of the distorted value and extraordinary monetary policy. While all sorts of indicators correction,shing investors are on this hunt for return which may drive them into stocks. Joe people feel they cant go anywhere else so they go with u. S. Stocks . Oliver there was one of those stories we hit on this week. It may be broken, it is certainly justification that investors use. A person from j. P. Morgan ask , she said we are hesitant and encouraging people to get some protection on the s p 500. At the same time, they are aware it is considered a safe haven. With an 11 vix handle, that protection comes cheap. Oliver you look at that volatility and think do we have to get a correction to bring that volatility back up. When youretty hairy use things like the vix as a predictor. There are a lot of questions with people trying to figure what kind of effect that volatility will have on the market. Oliver, thank you for joining us. Coming up, what is behind soft retail sales. We will get some insights for you. This is bloomberg. Mark lets get to first word news. Rnc chairman is on the road with donald trump. He introduced donald trump at a Campaign Rally today in pennsylvania. Thatd trump told the crowd his lack of Campaign Ad Spending does not matter. And one in ass landslide. Other people spent much, much more, and they came in seventh. Want to havedo you as your president , right . Right . Right . Mark Donald Trumps campaign has placed strong infosys on winning pennsylvania. Polls consistently show him trailing hillary clinton. Mrs. Clinton has widen her lead in three battleground states. Finds clinton with a bigger lead in colorado, virginia, and north carolina, while maintaining her advantage in florida. To 32 . Ado, 46 virginia, 46 to 33 . North carolina, 48 to 39 . Fox, 20th century box, copresident s named. Ill the leadership voids after roger ailes step down. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Thank you very much. Whatd you miss . Perhaps cooling consumer spending. U. S. Retail sales flat last month as americans cut back on discretionary spending. What is driving the weakness . Lets check with the chief economist at the National Retail federation. As i say, retail sales flat for july if you take out autos and fas, down. 1 , but the nr numbers paint a different picture. What are you seeing . Take out autos, gasoline, and food services. Expected weaker than today, but i dont think it signals a transition to a slower consumer spending. In fact, one of the things we have in front of us is data that has to be seasonally adjusted. July tens to be a difficult month in some ways. This year, we had 54 weekends and the fourth of july on a monday. A differente had scenario, and that causes a different pattern for spending. The adjustments for the seasonal factors can play into this. Another issue is these are not adjusted for prices. We have seen some deflation in retail sales over the last couple of years. It is mixandmatch depending on the sectors. We have to look at the consumer and the fundamentals. They are good. We have seen payroll growth, a rise in wages. Wealthly there are some benefits from the rise in equity and homes and the stock market. I think consumer fundamentals are here. The pattern of spending, i think we have to sit back and not be able to suggest we will see this fall back on ourselves. The rise intioned wages good for consumers, clearly it is. How does it affect your constituents in the retail margins, ad their tighter labor market where they might have pay workers more . That is certainly an issue. We did see today some good numbers from retailers. At nordstroms, macys, so a large part of their expenses are labor costs. That is only part of the equation. We have to understand what is going on in terms of inventory, inventory management, the use of technology, and where they see themselves in terms of competition with one another and with ecommerce. What about Pricing Power . Some economists say retailers like Pricing Power now. Perhaps that is underscored by what we see in some of the earnings reports, with the bestperforming parts of their business being the offprice stuff. Thats true. Index look at the monthly , june for instance, there are sizable differences year over year. Down 5 on as yearoveryear basis. Clothing is the same, may be off a little bit, but starting to stabilize. A lot ofsee there is price deflation in retail. Im not surprised to a certain arent, because consumers looking for value and good prices. We condition them in many ways. It is often times difficult for retailers to get out of that mode. A chart here, the percentage of retail sales that are nonstore retailers, largely internet versus Department Store sales. Going in opposite directions. From your perspective, how should we look at retail Sales Numbers and try to figure out how much of what we see is the result of secular shifts in the way americans consume and how and is cyclical changes where we are in the Business Cycle . That is a good question to lets talk about ecommerce. It does represent somewhere around 8 to 9 of total retail sales. It has been growing. Our forecast for the rest of the year is up on a yearoveryear basis. Our overall retail Sales Forecast for the year, we bumped it up from 3. 1 to 3. 4 . Companies are adjusting. We have heard about macys yesterday in terms of how they are closing stores, but they are one of the larger retail Internet Companies out there, so it is a matter of adjustment that is occurring. I am not surprised. The companies are making the best of it and trying to apply what they think is the best technology for customer needs. If i knew what amazon was going to be like nest year, i would probably be a rich person in all honesty. Player and have influenced pricing. The ability for consumers to go online and be able to price shop easily has changed the complexion of retail overall. I cant predict the future in that regard. I think we will see more of it, but if you take the largest supercenters that exist in terms of brickandmortar, they are still two times the size of all internet transactions. Rick and mortar will not 00 way. It will adjust. Good seeing you this afternoon. This is bloomberg. Whatd you miss . How about one of my favorite charts . Thatad heard over and over this is the most hated bull market ever. Says this chart, courtesy of jim chanos. Datates Federal ReserveEquity Holdings as a percent of household assets and net worth are higher than they were in the depths of the crisis when they bottomed out at 12 . Now they are 20 . The caveat is Stock Holdings are largely held by wealthier americans, so this is not aggregateom an standpoint, it has rebounded, but it is skewed. In the late 1990s when stock investing became this huge cultural thing that everyone got into it, and even after all these years and this rally, it does not feel as though people are into the stock market. Money away, but the relationship between people and stocks is quite different. That is fair. Also peoples relationship with the stock market is changing because of the products. When you own an etf or index fund, increasingly popular if you have a 401 k , you really dont feel that connected to the stock market, do you . Up, how will economic status play into next years election . We will examine the numbers. This is bloomberg. I am mark crumpton. Lets get to first word news. Islamic state leader in pakistan and afghanistan has been killed, citing the afghan ambassador to pakistan. He reportedly died in a u. S. Drone strike. Military has not confirm the report. Out an a u. S. Drone took Afghan Taliban leader. Embassy will make it up to advertisers who have seen olympic tv ratings fall short of expectations. Advertisers will be given free time during the games. Nbc will not say what size audience of promise, but it is down from the 2012 olympics. President ialons Campaign Says she and her husband made 10. 6 Million Dollars in 2015 and paid a federal tax rate of 34. 2 . They donated 9. 8 of their income to charity. Is trying to undercut the trustworthiness of donald trump. He says he will not release his returns until the irs completes audits. The clintons have shown returns for every year since 1977. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am mark crumpton. Thank you very Financial Markets closed the week in north america. Here is a quick recap. Points,closed down 37 more or less. Stocks were mixed. The s p down as well. The nasdaq extending yesterdays record to almost 5233. A standout performer was nordstroms, which reported betterthanexpected numbers, defying the trend from retailers. Got that weak retail sales report, but some retailers doing well. One Economic Data point, rig , it has been up seven weeks in a row. The red line is total rig counts. You can see it coming there in may. The white are chart is the weekly change. 2014, 2015, a relentless grind lower, but that has turned high. As we have had this come back this year, we have seen rig counts pick back up and a selloff. Is what its supposed to happen. The fracking industry is supposed to be able to respond much faster to the rise in oil price. Joe whatd you miss . The brexit vote and nomination increasedtrump has and interest in who is losing out in the economy. While much of the world got wealthier, the middle class in the developed world has stagnated. Thank you very much for joining us. As you state in the beginning of your book, you are 31 years old. Not many people write memoirs at 31, but you did. What made you write this book . I was consumed by this question i encountered at law school, why arent there more people like me here. Yield law school, surrounded by elites, not sure why the White Working Class was not more well represented. Thatlize there were things were relevant about my family and community that help to answer that. That is why i wrote the book. Joe when you say people like me , what do you mean by that . Tell us a bit about yourself. A town that has been hemorrhaging jobs and hope for as long as i can remember. I grew up in a relatively poor family and i was raised by my grandparents. My life story is very characteristic of what people call the White Working Class, increasing joblessness, decreasing hope, and an increasing social crisis from opioid addiction to rising mortality rates. Kind White Working Class , not having term had the chance to read more than a small amount of your book, it is really as much about the poor as anything. Is about the aspirational poor, people who want to work but arent. Those who are working, but can feel the pressure. This is not just those out of work, but those who see the writing on the wall. In my have a chart terminal, total u. S. Manufacturing employment. Thecan see it peaked in 1970s. It has been in this longterm decline. Donald trump making it a centerpiece of his campaign, more manufacturing jobs. How much of this decline is the result of policy, Economic Policy decisions, and how much do you think a change in theomic policy, ignoring rhetoric around manufacturing and donald trump, could contribute to a reversal of fortunes for the people you grew up with . My sense is the Economic Policy probably does not have a lot to do with this story. This is the way the modern economy is going. Increasing whitecollar jobs as opposed to bluecollar jobs. That is just the way the economic wind is blowing. The question is how do we better equip people for a whitecollar economy as opposed to going back to a bluecollar economy, which is probably not going to happen. One of the Big Questions is how these people will vote in november, and whether they will vote at all. I asked that question because i looked at some data that show the poor as a group tend not to vote. Apathy tends to be greater in nonpresident ial election years, but the data arent that different from 2012, 2008. From what you have seen based on your own experience in the research you have done, has donald trump fired