tv Bloomberg Markets Americas Bloomberg October 18, 2016 12:00pm-3:31pm EDT
the russian leader? he says if elected he may meet with the russian leader before and i pray to, what do you think about that approach to vladimir putin and how would that affect america's interest on the international stage? secondly, does it distress you that folks at the fbi and state department talked about the proper level of classification of e-mails that were on secretary clinton's server? would you a knowledge the appearance of impropriety and just a department -- should state department officials look into it? for the prime minister, with the governing referendum happening soon in your country, what would passage mean for your -- for you to lead the country and what would failure mean for your political future and italy's role in the european union? pres. obama: i will be more subdued in our discussions of
the republican nominee in this context that i might be on the campaign trail. let me just speak broadly about russia. russia,ame into office, under the previous administration, had invaded parts of georgia, had created a frozen conflict there. were was a new president and tried to initiate a more constructive path with respect to u.s.-russia relations. i think we showed russia plenty of respect. acknowledging enormous differences and different values but trying to find ways in which we could incorporate together. -- we could cooperate together. we initiated the new start treaty. we assisted russia with respect to the wto.
on some common, international challenges together. when the previous president was replaced by vladimir putin, i met with him and we discussed ways in which we could constructively work together. the challenge that we have had very mucha is that centered on russian aggression in some very particular areas around the world. in ukraine, where they have engaged in similar conduct to what they did in georgia. and even there, we have tried to broker and work with the europeans to broker a minsk agreement that would peacefully resolve those issues. in syria, one of my earliest
things with prudent was suggesting that if a sod stayed d stayed in assa power, given the brutality in which he treated his own people, you would see a civil war that would not be good for the syrians and the world anywhere. us to than to work with try to solve the problem, he doubled down on his support for assad and we know the situation that exists there. any characterization that improperlyhave challenged russian aggression or tried to encroach on their legitimate interests is just wrong.
continued flattery andr. payton -- mr. putin the degree a -- he appears to model his policies and approaches to politics on mr. putin is unprecedented in american politics. it is out of step with, not just what democrats think, but out of step with what of until the last few months, almost every republican thought, including some of the ones not endorsing mr. trump -- including the ones now a dorsey mr. trump -- endorsing mr. trump. some of the readers -- leaders were constantly haranguing us for talking to the russians, and who consistently took the most hawkish approaches to russia,
including mr. trump's election for vice president, now and/or smith of mr. trump -- endorsement of mr. trump with their previous views. the bottom line is we think that russia is a large, important that iswith a military second only to hours. and it has to be a part of the solution on the world stage rather than part of the problem. has their behavior undermined international norms and international rules in ways we have to call them out on. anybody who occupies this office should feel the same way because these are guys that we fought for and we protected. we cannot go around talking about human rights or freedom of democracy, or
freedom of religion, or nondiscrimination, or basic laws sovereignty and territorial integrity of countries, no matter how small, and an expo leverage is of somebody who violates those principles. virtues ofhe somebody who violates those principles. i am much more surprised and troubled by the fact that you have republican officials who historically have been adamantly anti-russian and attacked me for even engaging them diplomatically, now they support and, in some cases echoing his positions. it is quite a reversal and you will have to ask them to wait it.
with respect to the state department and the fbi reports, you have heard directly from both the fbi and the state notion or thet accounts that have been put out there are just not true. you can question them again that, based on -- but, based on what we have seen, heard, learned, some of the more are notnal implications based on actual events. or based on what actually happened. i think derived from overly broad characterizations of interactions between the state department and the fbi that happened a lot and happened
between agencies. i think that covers me. i know 2016 is not a very good year to organize a referendum. but i think the anti-in therendum is very simply -- italian referendum is very simple and because it is a fight against bureaucracy. we need a great investment against bureaucracy immediately. for a lot of reasons. 63 government and seven years come a few times we joke about it. it is unbelievable in a country to have a government change every year. but, it is normal, the political discussion is very strong.
my opinion is very easy. winin december, we will these referendums for italy, it will be more easy to continue the battles to change europe. because structural reforms are important for italy and for also for institutions in brussels, in europe. , in the consequences political debate, in my view, is if we win, italy will be stronger. in the debate in the eu. i work strongly to achieve the victory. sorry. american citizen, not italian.
ok. >> i will ask the question in italian. let's talk about the referendum. you hope to win, of course. we have found many investors in wall street who are worried about the fact that you might lose the referendum. these are investors that have faith in italy and that threaten, if there is a negative result, in terms of the reforms, to just leave. what can you tell the investors in order to reassure them, if there is a negative outcome, will you stay on, where you continue with the reforms -- will you continue with the reforms? and will you bring wine to the dinner with the president? this is an italian custom. >> curettage and accent is beautiful. accent isa tie in
beautiful -- your ical you in action is beautiful. accent is beautiful. the problem is brussels is very rigid about it and very rigid with a tie in efforts to therefo -- with italian efforts. what do you see after brexit, they do not seem to be moving on that front. how important it is to move forward in that direction. ? if the referendum does not go well for the prime minister, should he stay on and continue with his reforms? feeling, and i think that, rightly so, our american friends are a little bit more
interested in november 8 that in the italian boat uncaused notes -- vote on constitutional reform, and so are we. in terms of what you were asking, very briefly, this is a time in which many investors throughout the world are coming back to invest in italy. we are happy about this. we are happy about the investments on innovation in terms of technology, apple is investing in naples, amazon is going to open an artificial intelligence center in the durant. for the entire economic and financial world, they are starting to see italy as an area in which to create opportunities and business. therefore, open doors. i do not believe that there will the nomajor disasters if
wins at the referendum but in order to have no doubts, i want to win the referendum and i will do everything i can. messagefundamental, the goes through, this referendum does not have to do with the great world events, the great world issues, simply, do you want to simplify the institutional a system, giving italy greater stability and certain times in which to have greater stability? this is something to simplify things in our country and based on the question that was asked of the president on europe, we respect the european rules and we are totally inside the european rules. although, sometimes we do this halfheartedly and we would like to do things differently. but, so long -- we will respect them because italy has made his reputation, one of the key words in this mandate, if we were to
change them, but if they are there, we will respect them. what will happen within the next few months will be seen as a great finger -- we will discover this by living. i am almost certain that the yes will wins so you will have no grounds to ask the question. during the course of my presidency, i have had repeated conversations with angela merkel, francois hollande, around how we could most effectively recover from the crisis of 2007-2008. it is fair to say we have made more progress more quickly. out i have tried to point
was that the reason we were able to make progress is that we focus very early on in providing demand infusion of through our fiscal policies, rebuilding roads, bridges, investing in schools, teachers, clean energy, putting people back to work. tax cuts. putting money into the pockets of consumers and saving the auto industry. important was very was quickly trying to fix the ands and infusing capital making sure they were more stable and more transparent and would attract competent so the financial system will was -- financial system was
working. i am proud of our financial track record, we have grown ander and created more jobs , this past year, we have seen incomes rise and poverty fall more quickly than a lot of our counterparts in europe. that europe is a more complicated collection of states and more difficult to move. some are in the eurozone and some are not. everything that we have done can immediately translate to europe. there is some parts of what europe does we could learn from. in terms of the social safety net, for example. thatwhat i do know, is given the very slow growth that has taken place in europe or contraction over what is almost a decade, you have a generation
of european youth who are not attaching themselves to the labor market fast enough. if you do not reverse some of those trends, then it becomes a generational loss of income of wealth, economic dynamism. now that countries like italy and others have made real their finances and their deficits, and there is more market confidence in their position, now would be a good time, i believe, to refocus attention on growth. , becauseg investments one of the reasons we have been able to cut our deficit by two thirds is not simply because we cut spending by two thirds, we
disciplined spending but we also grew fast enough that more revenue came in and that is one of the best ways for you to arrive at a sound fiscal position. monetary policy alone is not sufficient. europeanghi and the central bank have done good work trying to maintain a positive trajectory in europe but ultimately there is only so much monetary policy can do if it is not combined with fiscal policy. that, the prime minister is right, italy has been true to his word in europe and met its obligations but my hope would be the debate broadens as europe moves forward around how to grow more quickly and put more people to work, see
incomes rise, create a greater sense of momentum and optimism. that thereo believe is a connection between the lessn and some of constructive populist impulses and have been rising up those trendlines about europe do concern me. if you look at the european experiment over the last 40 years, i said this in hanover, there's probably no group of people that have enjoyed more prosperity and more peace over the last several decades been a united europe -- then a united europe. -- than a united europe. their senses the global capital and deletes are not attentive to
the ordinary concerns of people, that would be a tragedy. is that thesense areal capital and elites not attentive to the ordinary conservative people, that would be a tragedy. he reformed the promised or is initiative, certainly on the economic side, are the right ones and in a global, internet driven world, governments have to move fast and quickly and transparently. rooting for success but i think you should hang around for a while no matter what. thank you, mr. president. i would like to ask you about the election, donald trump telling his supporters that the election is rigged and asking
them to monitor certain areas on election day. how concerned are you about the potential for violence and what about after election day, are you worried about the election may be distrusted? zi, theme minister ren offensive in mosul has begun, are you concerned about what happens after liberation? weigh-in.ent, you can one of the great things about american democracy is that we have a vigorous and sometimes bitter political contest. and when it is done, historically, regardless of the person who loses the election congratulations the winter, reaffirms our democracy
-- congratulates the winner, reaffirms our democracy. that is how democracy survives the cost we recognize that there is something more important -- because we recognize that there is something more important than any individual campaign and that is making sure that the integrity and trust in our institutions sustains itself. because democracy by definition works by consent. not by force. i have never seen, in my lifetime, or in modern political history, any presidential creditte trying to this dit the election and the election process before boats have taken place. it is unprecedented -- before
votes have taken place. it is unprecedented and based on the facts. every expert, regardless of political party, regardless of ideology, conservative or liberal, who has ever examined these issues in a serious way will tell you that instances of s are notnt voter fraud to be found. mind elections are run by state and local officials, which means that there are places like florida, for example, or you have a republican governor who is a republican appointees -- choose republican appointees will be monitoring a lot of these election sites, the thought that somehow mr. trump loses florida it is because of those people, you have to watch out for them. and is both irresponsible
by the way does not show the kind of leadership and toughness you would want out of a president. if you start whining before the if, whenever things are going badly for you, and you start blaming someone else, then you do not have what it takes to be in this job. there are a lot of times when things do not go our way or my way. that is ok. you fight through it. you work through it. you try to accomplish your goals. the larger point i want to emphasize is that there is no serious person out there who would suggest that somehow you could even rig america's
elections. in part because they are so decentralized and the number of votes involved. there is no evidence that has happened in the past or there are instances that will happen this time. and so, i would advise mr. trump to stop whining and try to make his case to get votes. if he got the most votes, it would be my expectation of hillary clinton to offer a gracious concession speech and pledged to work with him in order to make sure the american people benefit from an effective government. it would be my job to welcome mr. trump, regardless of what he said about me, or my differences with him on opinions and escort him to the capital in which there would be a peaceful transfer of power. that is what americans do.
that is why america is already great. one way of weakening america and making it less great is if you start betraying those basic american traditions that have helpedpartisan and have to hold together this democracy now for well over two centuries. we arespect to mosul, seeing the iraqi forces with the support of the coalition that includes the united states and italy, and other nations moving osul.rd and encircling m the intention is to drive isil out of what was its first major urban stronghold and what continues to be one of the key
organizational and logistical and leadership hubs for isil. i am confident we can succeed although it will be a tough fight and a difficult fight. it is iraqi's who are doing the fighting. performing effectively and bravely. they are taking on significant casualties. there will be ups and downs in the process that my expectation is that ultimately it will be successful. think, a key i milestone and what i committed l firstg when isi emerged which was to roll them -- and ultimately drive them out of population centers and destroy them and defeat them so they are not in a position to carry out terrorist attacks against our peoples or our friends and allies, or
against innocent people inside of iraq and syria. and we have seen steady progress on this front. you ask a very important question, which is, if we are successful, how do we deal with what could be a humanitarian when itbecause isil occupies these territories, it leaves them dry. ds them dry.ee it is not good at governments and basic functions like water and electricity run down and people are fleeing from their homes. there will be significant displacement. this has been part of the coalition planning process in conjunction with the united nations, in conjunction with major aid organizations. so, we have put together plans and infrastructure for dealing with a potential humanitarian
crisis that are as extensive as the military plans. that does not mean that we do not have to pay attention to it and executing will be difficult. it will be a tough environment to operate under. no doubt there will be instances where we see some heartbreaking situations it in fact large numbers of people flee. it is hard when you leave your home, it is hard when you leave your home and are ready you do not have a lot because you were living under an oppressive regime. it is hard to leave your home in a war zone. so, it is not something i expect will be easy. but, i think it perhaps has not been publicized enough, at least in the american press, the degree of planning and assets and resources that we are devoting to this very important problem.
because of we are not successful in helping ordinary people as they are fleeing from isil, then that makes us vulnerable to seeing them return and feeding on the resentments and the aftermath of mosul being liberated. >> i think about mozilla, the indications from the president are very clear from the italian side. we are particularly committed to am, a dangerous one, and italian company will work to we are the dam because theged with the rest of
coalition to answer to the iraqi people, the possibility to have a future. let me be very great to the italian army, particularly the carabiners who provide counsel to the local police. we are not worried about the future that it would the coalition to answer to the iraqi people, the possibility to have a future. let me be very great to the italian army, particularly the carabiners who provide counsel to the local police. we are not worried about the bring also -- mosul because sooner or later it will destroy daesh. in the war with the united states and other allies. last? >> thank you, thank you mr. president. and represents a jew political party for italy mainly because of the constant .low of migrants can italy work as a bridge which
we italy and africa? the united states approach the tying government? sometimes europe is left alone, -- italy to face the challenge. ini'm going to answer italian. obviously, our position is always the same one. europe has to be more convinced and look towards africa with more convention. from this dance, we cannot go every time to offer help to the united states without doing our part. states are busy in all the international theaters. in the ones closer to us, we need support of our best friend because the united states are this, our best friend. timeso have to start at a
and european strategy. we can always wait for this type of support. therefore, the issue of the maintainer in -- mediterranean and africa has been left aside for the last 10 years in the european union. we have to give it priority again. we have to work, as the commission had first seen it would do, but it is not doing it with the necessary speed. we will do whatever we can with the agreements with certain states, the five states that are our priority. we have to work for africa to be a priority, including a party from the point of view of resources, local development. we will talk about this during the g7 in sicily next year. in terms of investments, the political investment, which in the past few years has been
lacking. asking for help from the united states, which is something we gladly do. europe and italy have to do their part. its effortsncrease and international cooperation. we were the last in the classification, in the list of seven, not a good position. we will reach the fourth place in the ranking, in terms of gdp, which each of us proposes. we have an increase, in terms of the money in international cooperation, funds, and, in are working,a, we we want to stay to make sure there is a black -- block of all the brothers and sisters that leave their country. they risk dying. we are happy and very proud to help save lives. the ocean is one of the worst
places to do that. we do not want the mediterranean to become a cemetery. we have to have a long-term strategy. we spoke about this. and, we have to have short-term strategies as well. we are very proud of what we are doing but we know this cannot go on forever. we cannot think of being in charge by ourselves of all the problems of libya and africa. at thesday and friday european council, we will talk about this. obama: let me just make a few points. number one, it is a strategic interest for the united states to make sure that the migration crisis taking place in europe is solved. it is of strategic interest of the terrible loss of life we see, as people attempt to reach europe, but also
because of the distorting effects it can have on european politics. that the influx of migration is this orderly, chaotic, and overwhelms european countries. committed ineply resolving thisin issue effectively. now, obviously, there are a lot of contributors to it. we are very focused on strengthening the government of national accord, as i indicated. secretary john kerry and others are working with his on aterparts automotive -- multilateral basis to resolve tensions that exist between the different portions of libya. and, to be able to invest and build in their capacity to
control their borders and their waterways. because, if we do not have a partner on the other side of the aean that will continue to be problem. i've pointed her one. point number two, we are deeply appreciative of the generosity and humanitarian impulses of the time people and rescuing so many people through operation sophia. but we did in warsaw was to although that is probably -- primarily and eigh eu mission, that united states assist wherever appropriate. whatever they need, we will help, the same way we do with respect to helping to enforce
the agreement between turkey and the european union. on that body of water. the third point, as was pointed out, is more long term. that is trying to help these countries that are having difficulties where people feel either unstable, insecure, or just, hungry, and in search of opportunity. how do we help them to develop in such a way to where they feel they can succeed in raising their families without fleeing to more developed countries. that is a longer-term proposition. we have to begin to make investments now. i mentioned, we have obviously respect tossues with migration. net migration into this country has actually been flat, in some
cases, even decreased or we have seen reverse flows, particularly to mexico.t one place we have seen a spike is from small countries in central america where the economy is doing poorly, agriculture is doing poorly, in part due to changing weather patterns. feist is that biden, i give him the charge of working with those countries to come up with a development plan. congress, on a bipartisan basis supported sending more money to these countries for development. more effective policing, dealing fighting the narcotraffickers in a more effective way, investing in young people. that is not going to happen overnight. there will be a decade-long process potentially.
in the meantime, we insist that those countries corporate with us to send a message that it is a dangerous trip to reach the united states. if you get here, you are likely to discourageack, this dangerous passage but also to undermine the human traffickers who prey on people to make money. all of these strategies have to be employed. the one thing i would encourage ,s, and i have said this whenever i have visited europe, you cannot have a situation germany,ly, greece, are bearing the entire burden. if in fact you have the european union, your unified not just for the benefits but the costs. i do think it is important for europe, collectively, to be invested in solving this problem
, not just leave it to one country, in the same way that here, in the united states, actually, we are an nationstate, as opposed to a union of separate states, but, we would not abandon one state and say, you deal with the entire problem. if we have solidarity and benefit from that, then you have joint responsibility is. ok? >> [indiscernible] that is what i: just said, central america, they have increased. , wente heavily and 2014
down, and have gone back up this year in part because there is still desperation in central america, but are still not at in 2014.s they were at i appreciate you shouting out a question because i'm sure there are a lot of other colleagues of years who would like to do the same. thank you very much, everybody. appreciate it. david: president obama wrapping up a conference there with that kind prime minister, giving a strong talking to one of the journalist there. i want to start with what president obama and matteo renzi were speaking about there being the migrant crisis and europe. it had a lot to do with economic participation. i wonder what caught your year there when they talked about migration. matteocally, from the
renzi, he would be hard pushed to receive a warm endorsement from obama on this visit. he has stood by what he has been arguing, including on the migration question that italy is often being left alone as the frontline country. , it wasg to renzi thanks to italy pushing that eu partners. david: several questions about the december 4 referendum, one having to do with the way government is run in italy. he is saying, if he were to lose, it would be cataclysmic, in his words. the did you hear today from prime minister and president obama about the potential gravity of the no vote in the referendum? renzi dodged the question on whether he would resign. if he loses the referendum, it
is a promise he has made in the past. his strategy is to not talk about this. he says it just serves to unite all of the opposition against him. in the campaign, the opposition are making a referendum on .hether or not you want renzi i'll briefly, he wants to focus on the merits of the reform. that is what he did in the press conference, saying it would combat bureaucracy. obama gave him an endorsement saying that the u.s. strongly supports the referendum think it would modernize politics. david: an italian reporter asking what he would say to the investor community. what did he have to say? >> renzi basically stressed his argument that the investors are coming back. he mentioned apple, other even ifs, and says that
there is a no vote, there will be no major repercussion. david: all of this fits into a conversation about growth in europe. you had president obama saying that monetary policy alone is not sufficient. he talked about populist trendlines in europe. put this into context of what we far,seen in europe so obviously similar situations we have seen in the netherlands and spain. renzit of the problem for is he has to not explain a constant -- a complex constitutional reform, but he has to answer to populist pressures which the opposition is banking on. for many people, it is not about the merits of the reform, as they understand it, but it is about the economic situation, immigration, even about brussels. here we see renzi and obama side-by-side stressing the need for policy to boost economic
growth. it is perceived as german led austerity. david: thank you. joining as by landline from rome. turning to politics -- to politics, melania trump is standing by her man. joining us now for more is mike dorney joining us from washington, d.c. anderson cooper sat down i last night and she said it was boys being boys. what sort of effect do you think this will have? melani hear more from going forward? it is kind of striking her you would have expected to see something sooner. she has been largely absent from the campaign. she has done what she had to do. they had to show the wife
standing by the man. what is interesting is there was not much of a positive portrait of donald trump she is pointing out she is merely rebutting what is the current controversy. i'm not sure what we will see going ahead. there is the argument that she maybe does not need to be adding fuel to the fire on this. of course, since she has a foreign accent, that is something that maybe not a lot of trump supporters want to hear from in the coming weeks. david: she was certainly critical of the media last night, taking a line that donald trump has been taking on campaign trail lately saying the campaign is rigged. seegations we could widespread photo fraud. president obama turning attention on republican
officials. you see any indication that they are making inroads using that line of attack? mike: that was the political headline coming out of the press conference. the two words said, "stop whining," that is the way they want to or trade this is whining, this is not real. to people in washington, the idea that the election may not fearfulded is a problem. we already had an election in 2000 where they were fighting for over a month over it. ultimately, there was a complete concession. if there is no concession, it makes it harder to forge deals in washington, it makes it harder for each side to claim legitimacy. that is something that both republicans and democrats are worried about. david: coming up, the tides of investor flows may be changing
research at barclays. what is happening here? ta?e are we in the cycle >> we have seen falling real yields. now we are seeing some of the macro regimes shifting. just to put it into perspective, the great rotation that we saw in 2013 out of bonds and into equities has essentially been undone this year in 2016 with equity outflows of over 200 250ion and inflows of over billion. that is equivalent to what we saw in 2013. quite extreme behavior. ing we saw in rates points to equity influence. the key to maintaining it is the retelling investors. david: what is prompting this to
happen? >> in terms of the -- david: rotation. >> moment to him. now that the bottom moment to him is showing signs of fading, i think we should see investors should there -- shift their focus back into equities. : david: what sectors are you particularly attracted to now? >> we have seen falling real rates has led to outperformance proxies in some sectors. we are indicating a move out of the middle from staples into health care. out of energy into tech and financials. risk: you write about the spectrum. if high-yield becoming more attractive? typically it sees it goes
from cash to response -- bonds. some have seeped through into emerging markets. we are midway to two thirds way moving through the risk spectrum. thed: mentioned the role of u.k. referendum and all of this. safety perspective? we just got done watching the press conference. i think the sentiment factor on european equities is near low. from the flows perspective, all of the excitement we had in 2015, a tremendous amount of inflows has all been undone. i think we have seen the complete reversal.
watching course you're banking flows. what is the outlook? level of low is challenged,it ha to say the least. i think the perpetual the kind of rates that we have seen has led to an excessive buildup of risk premium. we had a favorable move back in mid july to shift some money into european financials. again, i think it is a long, risky road there. david: let me ask you the role of central bank spirit we had janet yellen's begin and stanley fischer speaking yesterday. how much is the role of the
fed priced in at this point? >> i think markets have come a -- post-brexit to pricing in the chance of a december hike. there has been a lot more talk about taper and taking what is happening in the markets and extrapolating. there are two important differences. you bring up chair yellen's speech and fischer. qe from other central banks is running at and near 2 trillion pace. and ife that to 2013 -- you fast-forward to today, yellen speech. ♪
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from bloomberg's world headquarters in new york covering stories from san francisco to toronto and london this hour. goldman sachs joins the power as banks have been beating expectations for income trading revenue. we have a chart on the latest quarterly results. netflix shares rose more than 20% after subscribers numbers exceeded estimates. traders see the likelihood of a rate hike over 62%. we are happily into the trading day. abigail with the latest. abigail: looking at a nice rally for the u.s. stock. all nicely higher. the nasdaq the most up. on paper, the best day in about a month. over the last five days, it has been a different story. lots of choppy trade.
s,ree down days and two up day lots of volatility leading to whether the strength is a move to new record highs or just a pause in the volatility. time will tell. as for energy over the last five days, it has been equally bumpy but to the downside. crude oil down over the last five days. s&p energy index down over the last five days or so. a supply cut deal out of opec is a little bit less likely. as for the 10 year yield on today's session, we see a good bit of volatility. right around 10:00 a.m., it started to take a dim to the downside. this could represent a small plane to havens. the yen dollar also a safe haven starting to decline. the homebuilders index at that time came out, and it was down from the prior month.
that could be bringing rates down a little bit. there was a cpi print that was a little bit disappointing when we factor out energy and fuel, suggesting maybe the fed will not be as quick to raise rates. we go to bloomberg and look at 4374. this is a one-year chart of the cpi in aqua. below it is the personal consumption expenditure index. this is the fed's preferred gauge of inflation. it is lagging. even though we have a little bit of disappointment this last month, both are trending up. cpi, this match the chart may suggest the fed has the ammunition needed to raise rates in december. david: thank you very much. let's check on the bloomberg first word news. erik johnson has more. erik: thank you.
donald trump's 53 of m putin is unprecedented in american politics -- flattery of vladimir putin is unprecedented in american politics, one says. the president took russia to task over actions in ukraine in syria. president obama: we think russia is a large importing country -- important country with a military that is second only to ours and has three on the solution to the world stage rather than part of the problem. but their behavior has undermined international norms and rules in ways that we have to call them out on. president obama said the u.s. has not been approached on russia's legitimate interest. and donald trump
take the stage tomorrow at the university of nevada, las vegas, for a third and final debate. news saysace on fox he plans to ask questions on debt, immigration, the u.s. economy, and this up in court. the donald trump campaign has invited the mother of the mother killed in benghazi, libya, to attend the debate. assange haslian been cut by ecuador. londonbeen holed up in since 2012 on grounds of diplomatic immunity. he is trying to avoid deposition to sweden for an alleges sexual offense. firefighters are banking on toler and calmer weather continue wildfire in southern california.
fires destroyed one home and forced the evacuation of hundreds of people. winds grounded water dropping helicopters. the cause of the fire is unknown. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. i am erik, it is bloomberg. david: the bond market is showing signs that is ready to pull the trigger on rates in december. there is a 61.8% chance for the boost before year's end. joining us now is kathy. good to speak to you once again. let me ask you about the speech on theay in new york heels of the speech janet yellen gave on friday. is there a continuum between the two? what do you think the purpose of the speech yesterday was? >> it is interesting. they seemed to contradict each other, but the overall message
is that i must raise rates, they want inflation to go higher, and although there may be a new wants between how long they can stretch out the tightening cycle or how slow to move out of the direction is up. i have surprised there was so much reaction to secretary ellen saying she would not mind the economy run a little hot because we have had interest rates near zero for eight years. that would tell you the fed once the economy to run a little hot. they have not been able to push it. david: we have seen this backup in longer on yields.what is the root cause of the back of we have seen? japan'st started with decision to aim at positive 10 year yield. expectations have been such leading up to that that the central banks of the world are really trying to suppress long-term yields. when they changed course and the european central bank did not take the next step that was
anticipated, you start to see long-term yields. that has contributed to the increase. david: are you interested in the long end at this point? kathy: well, we keep an eye on it, but we have over the past couple of months encouraged people to shorten duration for the time being because we think there is more outside in the long end of the curve. foreverot looking horizon about getting to where we started at the start of the year at 50 basis points or so will not hurt. something staffordshire talked about yesterday was the inflation target. he said in a target should be reevaluated or moved. when the fed is looking at inflation, what are the measures it prizes the most? kathy: that is a great question because they seem to bounce around. every bank has its own index in cleveland, atlanta, new york. there is the pce deflator which
they set is the favorite. they watch survey-based measures of inflation expectations and market-based. the bottom line is for most of those measures, inflation is moving up, well above where it was a year ago. expectations are below where a lot of the inflation readings actually are so the market may to be prepared for the fed move as rapidly as it could move. david: do you think that has harder to run at this point? kathy: i think it is. we have negative term premium, which is the risk premium for holding longer-term bonds and seems to be reflecting expectations of really aggressive central-bank action or for the deflationary pressures, so if neither of those developed, i think we could get longer-term rates to move up. david: let me ask you about the
other side of the coin here for the labor market. for thed you see slack labor market? kathy: i think they have to million part-time workers or one to 2 million part-time workers who would rather have full-time work and still have the labor force participation rates for the 25 to 55 euros settlement that is moving up but nowhere near where it was at the beginning of the recession, so that tells me a lot people on the sidelines could come back to the labor force. david: is it something that could be a roadblock or a hurdle for the fed? kathy: that is where you seem to get a sense of opinion. go, the the longer we longer we get inflation and have others like janet yellen saying hold on a minute. we think there is enough slack and the increase year-over-year does not indicate a super tight labor market so i think that is
where the discussion comes in. david: let me ask you about the world that many of us to our dictionaries that janet yellen gave on friday. the importance of that and how that factors into what they are considering right now. kathy: that is the big mystery, how do we measure that? how do we include that? i think there is a fear they move too quickly and could really slow down the economy. if they don't move quickly enough, there is fear that could contribute to the slowdown in growth. i don't know that anyone knows the answer to that, but there -e many great phd's that some - that think so. david: coming up, shares in netflix surging after the company reports strong subscriber growth. we will break down the numbers. this is bloomberg. ♪
david: you are watching bloomberg markets. it is time now for the bloomberg business flash. a look at some of the business stories in the news right now. samsung letting travelers exchange their note 7 smartphones at america's busiest airports as part of the effort to recall millions of devices that are starting to catch fire and exploded. regulators banned them on all u.s. flights. customers can exchange the phones or receive a full refund. sprint is receiving from luminary subscriber gains and remedies that surpassed analyst estimates. the wireless carrier added 344,000 monthly subscribers in the fiscal second-quarter.
revenue also beat estimates. walt disney decided not to pursue a bid for twitter partly that it may soil the family-friendly image. disney had hired to investment banks to design -- two investment banks to inspect. that is the bloomberg business flash. netflix shares are surging a better-than-expected subscriber growth numbers. the video streaming company reported it at a 3.6 million subscribers in the third quarter. stranger things and narcos are credited for helping gain and retain customers. cory johnson in san francisco, let me ask you first about netflix original market, the u.s. market. cory: let's skip right ahead of that. wise to look at the u.s. market and international market
separately. it is a worthwhile consideration. looking at what happened in the u.s., we sought to grow -- we s aw tepid growth. three months ago, netflix missed andof the internal numbers lowered the guys going forward. at the same time, they were affecting a big pricing increase across a number of customers. as more customers saw the prices go up, the concern was there would be a further slowdown in butgrowth of customer base, the subscriber base grew by a substantial number. we saw a pretty strong growth. showing strong subscriber growth. within the u.s., you sign pick up of 4.3% on a sequential basis, and i think that is the right way to look at this, not year-over-year. people thought this is it.
as soon as they raise prices, they are in trouble and he were losing money and burning free cash flow. the improvements well off of what it was two quarters ago is a good thing so that growth and the streaming subscription showing a slight increase, and i was seen as been in the u.s., but very small in the u.s.. how valuable every electric is subscriber growth when you evaluate how netflix is doing? it is spending billions of dollars on content every year. what does it tell us? having seen this happen in media for a long time, i remember doing the story about a magazine in the 1960's tried to combat television. they jacked up this a collision from 2 million to 10 million by giving the magazines away basically, by raising the
marketing cost. for me, that was important thing is not just the subscriber growth rate, but what do they pay to get those subscribers? how heavy is the foot on the gas ? we saw the marketing cost increase, so subscribers that a little bit, but so did the spending on marketing so i think that is an important thing that wall street does not seem to care about right now. it is important to look at how easily can they grow subscribers. have a pretty substantial 210 basis point increase in the marketing cost, and that is of the subscriber increase, so that is a reasonable marketing cost, but when they are losing so much money and spending so much money on content, it is a problem. david: give us a preview of what to expect after the bell today. i imagine we could see some wait wait on your.e
-- yahoo. cory: we'll verizon wants to pay a lower price because of the data breach. i think it is a really important quarter for intel. they are making a lot of changes internally at the company in terms of management and who is running which division of the company. at the same time, they are focused on the pc and data center. talk to stacy smith who was the chief financial officer and now the number two guy there. he will talk to us about what is happening right after the company reports earnings so i am looking forward to that. david: thank you very much. he will be speaking just after the earnings are released with stacy smith. measure to tune in at 4:30 p.m. in new york and 1:30 p.m. in san francisco.
♪ david: this is bloomberg markets. a new study shows u.s. employees percent more than you the european counterparts. let us ask the bloomberg writer who wrote the story. talk about the metrics they used to come up with the way they approached this idea of how much americans are working versus other countries.
>> the key was really looking at survey data on the micro level and seeing not just how many days you work per day when you are a worker, bahamas vacation you take, when you retire, when did you start your career? that is electric they came up with as a way of being able to compare country to country and look at things like productivity and how countries can boost on activity. david: there is a debate within all of this, output versus hours worked. weigh each of them and why each is important. ben: yes, so, european workers in some countries have a great reputation for coming to work, working eight hours and getting a lot of bang for the buck. there are other kinds of things that detract from productivity in places like europe. young people cannot get jobs. you are wasting a precious resource by not getting those folks in the workforce.
in the u.s., we have folks who are not taking vacation days but getting totally burned out and are not as productive at work. weid: there is agency to say are talking about two different cultures, u.s. versus europe at large or the italians or the swiss, but it is deeper than that. ben: clearly, there is a culture difference between europe and the u.s., but if you look at the 1970's, americans and europeans were working about the same amount of hours, so how do you ask that -- you explain that? something has changed in the u.s. and in europe that has gotten us to the point where we are working 25% more in the u.s. let's talk but a few of those, the role of labor unions in the u.s., perhaps that plays a smaller role in the u.s. and europe. ben: unions have gotten weaker in the u.s. but remain stronger
in europe. maybe because labor unions are stronger, they have more soidays, more vacation time that has become a comfortable way of life that you take 4 weeks off of work in the summer. that youere is tension feel like you may have to work in u.s. ben: we shifted to this motto you put all the money in this pot, but when you retire, you are never sure how much to check take out, and retirement has become a riskier thing here. europe, they have a strong system and are retiring on schedule. david: there is baked into the u.s. economy this aspirational thing that you can work hard and get ahead. you can get a lot of money and get the job you want. is that distinctly american when you look at the u.s. work ethic
versus other countries? ben: that's the interesting thing. research suggests it is true anyway. there is more inequality in the and some people get more at the top of the scale and get a wider range of income. if you put in hours, they will pay off, hopefully, and you get those raises and promotions, and in the u.s., they pay off a lot. in europe, they do not pay off a lot because you will not go that much higher. taxes are so much higher in europe. whatever extra money you start making, the taxman will take a lot of that. ford: thank you very much that work on u.s. workers versus european workers and we have some news on tesla right now. we are seeing delays only model 3 tesla. tesla has been banking on the less expensive version of its car. many thousand dollars vouchers to get those cars have been sold
word news. erik johnson has more. erik johnson:. angela merkel and meet tomorrow. here is patrick donahue. patrick: this is putin's first visit to berlin since fighting broke out in ukraine two years ago. he will join ukrainian president and the french president to focus on talks over ukraine. the kremlin says putin will be open to talking about syria as well. a michigan family has filed a class-action lawsuit against the state and the flint school district. they want more help for students whose academic performance has deteriorated since the drinking water was contaminated with lead. academicuse diminished achievement and behavioral
disorders. for the first time ever, donald outspendon tap to hillary clinton on tv ads this week. he is expected to spend 14 million dollars on tv ads, versus $10 million. still fightinge towards the race to the white house, schoolchildren have voted. scholastic says hillary clinton took 52% of the 2016 student vote. donald trump got 35%. scholastic says the student vote has mirrored the result of every election since 1940 with the exception of 1948 and 1960. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. david: thank you.
over stanleyo chew fischer discussion of inflation targets yesterday. he did not comment directly on when he thought the fed should raise rates but he did think the central bank was close to meeting its goals of creating full employment. on bloomberg surveillance ward said herd expects the fed to raise rates before the end of the year, but it may not necessarily be a good thing. a they are between a rock and hard place now. they do, for legitimate reasons, feel that it is necessary to move towards normalizing rates and yet the act of doing that is likely to slow economic growth and it is hard for them to see were the progress will be. how do they normalize rates? how do they let the balance sheet and organized? nobody knows how this will end. francine: it will end badly for pension funds.
howard: i heard comments of 6% assumptions on returns. those may be high. as far as stocks are concerned, nominal dvd plus stock return over time. if nominal gdp is to present, you are at 5%. an observation that carl riccadonna made yesterday, our fed officials beginning to train as for the howard ward economy? is that what stanley fischer was doing yesterday? think that is part of what had to happen. lowering expectations. so i think as far as the stock market is concerned, the key thing is the trajectory of earnings. we have had a year of no earnings growth. and the expectations for next iar, which are 10% increase, think those numbers will have to come down. totalosts combined with
labor costs, declining revenue growth, it will squeeze margins. i don't see how we get a lot of growth. ward onhat was howard "bloomberg surveillance" later today. goldman sachs shares or higher today after they announced a higher income in revenue in the third quarter. they earned more than a dollar estimates. analyst joining us with more is laura keller who covers the banking industry. and glenn schorr. let me start with you, glenn and get your reaction to what we heard this morning. explain the buy rating? well, i think goldman along with the other think banks that have reported put out pretty good numbers. next income trading got a lot better. and underwriting was pretty good. and the companies have done a great job at managing expenses and returning capital.
so you know, i do agree with the last interview you just did that we are in a low growth, low rate world and that earnings will help to drive the market. my companies are no different. they will benefit from that. david: putting this into context about how interest -- how important the interest is? laura: the have a lot of money that they take from equities trading, as well. it is something where they really need that kind of revenue and you really can't discount anything where they have a bad quarter for long trading and a bad quarter overall. this quarter, we saw an amazing rise in the fixed income trading. 49% which is huge. way more than we had from analyst expectations. than competitors. onhad jpmorgan who beat well friday. and we see goldman sachs coming out there and swinging.
to ask you about how long we have to run when we look at the fixed income. how long do you think this trend will continue? let's put it in perspective. laura is correct. $2 billion in the quarter is one quarter of the revenue this quarter, which is a lot but it has been higher in the past. as a of fact, put that in context. at the very peak in 2009, they did one quarter at $7 billion and they did $2 billion this quarter. there has been secular pressures and have not come back shrunk the size of the pie. but there are times in their where it can grow and i feel like what you saw a glimpse of this quarter was a little bit more client activity. people positioning around their views on rates. their views on credit and fx.
you had a better quarter on mortgage and rates and credit. and again, this is just one quarter. but a bit better of the tone. and that could go a long way for goldman sachs. i know it is not built into our models that they will have these kinds of rises every year. laura: and you had asked goldman, harvey schwartz, the cfo, the first question, you asked him about fixed income sustainability. and i'm wondering if you felt like what he answered was what you need it? he said the headwinds are not as strong. so maybe the tailwind is in there either? i'm just wondering if you felt like that was an answer that you felt comfortable with? glenn: in all fairness, it is an impossible question to answer because they could talk about the environment but who knows how clients are going to behave over any short amount of time. that theeality is
outlook for overall economic growth earnings and rates is going to have a big influence on a couple of those businesses. even on credit. so i thought his answer was as good as it could be. meaning that i asked about the first quarter of 2015 we had a big spike inactivity on the heels of the swiss repacking their currency and everyone going bonkers for a few weeks. this quarter seemed morpeth article with red jewel rising expectations for rates. a general feel that the economy is fine and therefore, credit would be ok. so i think my interpretation of the answer is that we are not falling off a cliff even though the fourth quarter is seasonally slow. because of the holidays and the election. as a general comment, there is a bit of better activity in fixed income. david: let me at your sense of
where you think this bank is headed. we had them unveiling a loan program. are you satisfied with the direction the bank is headed in? , and theyir model were the best at it for a long time, post crisis, it came under seized from various forms of regulation, of helping the system and the companies get on better footing. so like i said, one product of that was that they don't make as much in fixed income or other businesses. so i think they have been very slow and methodical to not rip up the playbook and just change their stripes. they stick with the coordinating of making markets and how companies finance themselves. and in the process, it's not like -- they took down balance sheets tremendously.
he took down risk-weighted assets. and they took down expenses on, and noncom. so they have adjusted. markets was of a year and a half of methodical plotting of where we can make more money in the client segment that we are not currently touching. make no mistake, this is a not consumer banking franchise. they have one product so far that they think is sufficient where they can make money and new clients a favor. it serves goldman sachs well. it certifies their revenue stream. andd: that was glenn schorr laura keller. thank you very much. coming up, the european union delayed its agreement on a proposed trade agreement with canada. this is bloomberg. ♪
david: let's head over to abigail doolittle for a check on the markets. abigail: one of the big stories we have the idea that seen yields rising as investors expect the fed to raise rates this year, perhaps more than once, into next year. but the flipside of the story is what it actually means for the value of hans. to yield trait is inverse price and our team saw an interesting chart today.
showing this for the 30 year. the long bond. and we see that is down nearly 4% for the month of october so far on pace for the worst month in more than a year. so when we take a look at the side that we are more used to looking at, this is the 30 year yield for the month of october, this is actually the biggest the 30 year bond since february of 2015. supporting the idea that investors think a could raise rates this year. this could also be supported by the consumer price index over the last three years. we see it is rising back to levels it was a few years ago. so despite the fact that there was a small disappointment there, will be factor out energy and food, it basically supports the idea that prices and living costs are rising. and lastly, when the going to the bloomberg, all of this is supported. world interest rate
probability. and we see that it is back close to levels, high levels over the last year. basically 63.5% probability that the fed will raise rates in december. and this is based off of said fund futures. david: that was abigail doolittle. now, let's look at the bloomberg business flash. several angry volkswagen owners told a federal judge today that a proposed $10 billion settlement does not adequately compensate them for the automakers in missions fraud. they objected the settlement at a hearing in san francisco. the judge will decide if the deal is fair weather to consumers. black rock third-quarter profit rose as they cut costs and attracted money into the exchange traded fund. the increase to $875 million from -- earlier.
blackrock has weathered turmoil in the industry. investors flocked to cheaper products. and the cost of living in the u.s. rose at the fastest paced ,n five months on energy prices which is a sign that inflation is getting closer to the fed goal. the consumer price index rose .2% from the previous month. that match the median estimate of economists. and that is the bloomberg business flash. european union governments are delaying a vote on a trade agreement with canada as they seek more time to overcome a political split with belgium. let's bring in amanda lang. get is up to speed. so-callede comprehensive economic trade agreement, it is a big trade deal that took five years to negotiate. this is what you would call the 11th hour. what was supposed to happen
today was that every member was supposed to ratify it and there would be an official signing ceremony to make this thing real. there have been many negotiations and it is a tiny little part of belgium. is 1% of the eu region. the vast majority of belgium is willing to ratify this thing but this french-speaking region is concerned about parts of the deal so they are holding up approval. and with that, it is holding up the whole deal. and at this moment, the finance minister, they are kicking it up to the leader level to say, we have to figure out what to do about this. david: reading about the trade deal, the european trade commissioner said talks are in and they continue. are there signs here that these negotiations could fall apart? everyone involved is
saying they are cautiously optimistic. and actually, a lot of what we're hearing on this side is that they do still expect it to get done, maybe even later this week. prime ministers are still expecting to sign this on the 27th. the issues that are on the table ase are issues that are seen those that might be around in future trade deals. the eu says, we came together as a block to use this negotiating power and form trade deals around the world and it makes us look really bad when one tiny part of the 28 members can hold this thing up that it is the way it works. and there is a real political overlay here as well, after break that there is a sense that this is a testing moment for the member states of the eu. having said that, the issue that this tiny little part of belgium is raising, it is not immaterial. they're concerned about lower labor standards and environmental standards. obviously, those are things that everybody else is willing to
ratify. there is also concern about lowering tariffs on canadian agricultural products. issue here isal not so much of this trade deal but anyone that will follow it, including the deal with the americans. it is a bigger deal and a more important one for the eurozone. and they are worried that once they lower their own standards on some of these issues, they are opening the door for that to look an awful lot like this one. david: you talked about the political overlay. i wonder how this is playing out in canada? trade has become a hot button issue. what is the domestic backdrop? amanda: an astute question. we remain more pro-trade here in general than what we hear from the u.s., at least at the leadership level. we are dependent on trade. so i think the general feeling watched the
transpacific partnership to happen as well. so we are pro-trade. but i think the reason your question is so smart is because in europe, the same kind of anti-trade sentiment is alive and well. it comes as everyone looks at political turmoil globally and they turn inwards. so i don't think that is the rhetoric, i don't think it is absent in europe. so it stirs it up a little bit at a time when we want to get this done. from canada's point of view, we have everything to gain. most people here are assuming and hoping this will happen. david: that was amanda lang joining us from toronto. coming up, it intel reports and an update on cloud sales and the possibility of an iphone design. -- shortlysmith after the break, break down the numbers. the bernie madoff of landlord's. this is bloomberg.
david: new york real estate developer steve froman has spent decades exploiting rent control laws to bring wealthier tenants into his buildings and now the attorney general wants to make an example of him. how he began his career. stacy: he basically made a calculation. the calculation was that he would invest in the buildings, cap knowing they would skyrocket in value. filled withngs were lower income or middle income people who didn't pay much for their apartments.
and what stephen chrome and is alleged to have done is systematically worked to make living conditions miserable over 140 buildings in order to get them out. once you get them out, you replace them with higher-paying tenants. talk to us about some of the tactics. peopleited where these live, talk to us about that? simon: let me put it this way. he is also called a slumlord. but that isn't right. in the long run, he is making the apartments more valuable. but the tactics are reminiscent of slumlords. the attorneyhat general has intros of text messages and affidavit saying that they would intentionally or negligently let apartments fall into squalor. so high elevated lead levels.
lead dust everywhere. you are talking about ceiling falling through because of water damage. of destructive construction. garbage or water. outages for months at a time. so on one hand, maybe he will argue that he was a really sloppy landlord. but on the other hand, it seems systematically that you eventually will want to leave that apartment. and essentially what he would do is that if there was someone who would be willing to leave, they would take the buyout. once you take the buyout and a place becomes vacant, there is a structure in place to take it away from the lower middle classification and bring it to market rate. you can read simon story in the latest issue of "bloomberg businessweek."
we are live at the bloomberg world headquarters. over the next hour, we will cover stories out of san francisco, washington, sweden. here is what we are watching. u.s. markets are shaking off stocks. stocks are higher as investors bet that they will move on rates by the end of the year. and big oil leaders are meeting in london for the money and oil conference. could be a rebalancing in the oil market sooner than forecast. we hear from the statoil ceo. and only 20 days from the presidential election. we look at how both candidates are impacting down ballot races. abigail doolittle is here now with the latest. all are nicely higher today.
the bestq on pace for day since the middle of september. and what makes this interesting is that it follows a global rally in stocks. stocksthem lead u.s. higher. so a risk on flair for today. as for the s&p 500, it this is the intraday chart. there was a dip down midmorning with session highs. move backre trying to towards the session highs. when we do have is a broad-based rally. all sectors are higher today. the best-performing sector is health care. not surprisingly, the biggest boosts for the s&p 500 today include united health, illumina and anthem. united health, this stock is having the best day in more than three years, they boosted the 2016 earnings to eight dollars per share. they also said the 2017 outlook is doable. today,a is higher
rebounding a bit from last week's nearly 50% decline. let's turn to the commodity complex. metals are having a nice day. goldman sachs is having the best day. silver is that a two week high. and all this could reflect weakness in the dollar. we see the dollar index lower. on pace for the first today decline in october. but there is some reason to think the strength in gold could be short-lived. we going to the bloomberg and we take a look, this is a four-year chart of gold. and it traces along the 200 day moving average. and recently, gold slips below that average, telling us how bullish investors had been around gold. to slip below. 2012.appened back in and we can see it proceeded a huge drop down.
so perhaps declines are ahead. thank you so much. that was abigail doolittle reporting. bloombergk in on the first word news with corny collins. courtney collins: president obama responding forcefully to claims made by donald trump that the november presidential election is raped. speaking today at eight joint conference with the italian prime minister, mr. obama said the gop nominee would be better off by making his case to the electorate and not publicly complaining about the integrity of the electoral system. advisent obama: i would donald trump to stop whining and make the case to get votes. if he got the most votes than it would be my job to welcome mr. trump, regardless of what he has said about me or my differences or my opinions and escort him over to the capital in which there would be a peaceful transfer of power. yesterday, trump asserted via
twitter that there is large-scale voter fraud happening in the weeks leading up to the election. trumpy clinton and donald take the stage wednesday night at the university of nevada in las vegas. for the third and final debate. wallacerator is chris and he plans to ask questions on debt, immigration, the economy and the supreme court. donald's campaign has invited the mother of the soldier killed in benghazi to the debate. jointly since that has pleaded classifiedleaking information. james cartwright is accused of lying about giving information concerning a cyber attack on iran's nuclear facility. the government is recommending a prison sentence of no more than six months. in belgium, authorities have indicted for people on terrorist activity.
as many as 15 people were detained earlier. the federal prosecutor's office said no weapons or explosives were found during today's searches. have been established with the terror attacks in the belgian capital in march 22. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am courtney collins. one of the big stories in the financial industry has indexhe rise of low fee funds. then guard started the trend 40 years ago and now manages more than 3.8 trillion dollars in global assets. earlier today, erik schatzker sat down with no mcnabb and asked why vanguard has not gone public. bill: we are public. -- we are private. and it is a competitive and it should not be laying it all out there. we have really great retention
of executives. people feel like they are paid fairly. i think if you look again at our expenses over time, one would be hard-pressed to say we haven't in reducing the costs of investing for people across the board. so for us, keeping that part of the equation private between us and the individuals has been a really good thing in terms of hiring and attracting talent. erik schatzker: do you see a point when you have to release that to please critics? not in this conversation. but the world of their does change and you have to respond accordingly. erik: we know the vanguard effect. tocing other asset managers lower the fees they charge. what about the department of later fiduciary standard? can you ballpark the amount of money you think it is going to save investors? in the billions, overtime.
i think there are several trillion dollars that are covered by these rules. and if you think about what they are paying today and what they may be paying 3-10 years from now, you have to think it is billions of dollars in fees. couldophically, no one argue. when the first set of proposals came out, they needed some work but the department of labor got it more right than wrong from our perspective. for retrocession, the paid brokers for clients -- those practices are going to do continue to decline over time. iether they totally go away,
don't know. but what investors want is transparency. it isn't always that the absolute low fee wins. be value created for the investor and they have to be able to assess that value. transparency is really important. those kinds of arrangements are opaque. erik: one of the things the fiduciary standard might do in to standardsriving like vanguard, it could be wrote will platforms. -- charges $30 a year and $10,000 of investment. how does the human compete with that? look. i think a traditional advisor will still have a place. erik: doing what? who: there are some people love to sit across the table and talk through what they are doing and what their needs are and what their overall financial plans are and what they will look like.
however, the interesting thing with the robo advisor phenomenon , it has created some new ideas about what technology can do for you. and i think traditional advisors will have to embrace this technology to it agreed to figure out how to be more efficient. and we are seeing tremendous responses from investors. we introduce the program 18 months ago. and we had 10 billion dollars of legacy and advisory arrangements. so we started from a little bit of a base. that business is approaching $50 billion in 18 months. erik: where will it be five years from now? bill: five times that. the demand for this kind of service is great. and it really gets the point that you were trying to make. which is keeping the cost down and using technology to create a really comprehensive plan for people. it is a good thing for investors.
erik: it is so easy to oversimplify this debate. what is undeniable is that investors unbalance keep choosing passive vehicles over active ones. do you see anything reversing that trend? i think there is a secular trend. and i think it is a secular trend for two or three reasons. one, the evolution of the 401(k) business is much more money going into target date funds. and that is not going to change. i think the department of labor push that along further. erik: is very natural point at which it plateaus? we can look at our own a record-keeping classroom and have something approaching 45% of investors and using them appropriately. i think the number could be 70%.
erik: of the total stock market? bill: no, of the 401(k) business. erik: i'm thinking about passes in general. bill: the second phenomenon is the move from advisers to more of a fee for service. so as opposed to transactions that he mentioned earlier, people are now charging fee for service. so what they're really doing is becoming asset allocators. and what we know from the academic world is that you have to get your mix right and it will drive your return. so it risers are looking to get the right asset classes and they are trying to do it at a low cost. and again, if you look at the amount of money that is advised and how much is still in active, you have to think this is more than a cyclical thing. dallas bill mcnabb talking with erik schatzker. scarlet: coming up, we talk to
scarlet: this is bloomberg markets. u.s. earnings season is in full swing and there is one clear trend. fixed income trading is surging. gratifies lloyd blankfein strategy as some other investors pulled back. let's take a look. goldman joins jp morgan, citigroup and bank of america blowing past fixed income trading. they reported gains of almost 7% increase in
earnings. and this is because they rely on trading more than any other big bank. it made up about 45% of goldman's revenue the last 2-3 years. sales and trading is the most important segment when compared to other business lines. it management is a redline. so here's the breakdown of the trading division. fix income is the white line and you can see the bounceback over the past two quarters. in the second quarter and up 49% last quarter. this is good news for goldman after revenue fell by half last year compared with 2009. this rebound is timely after u.s. banks saw the profitability you wrote. the return on equity is the gray in the it was about 8% third quarter, almost half of the average prior to the financial crisis. the orange line rose to more than 11% in the third quarter. now as with every bank,
cost-cutting has been a huge driver of goldman's profit. declining substantially from the second quarter with higher compensation and benefit cost meant it rose 10% year on year. and done, netid revenue grew year-over-year for the first time in more than a year. jumping 19%. on a post earnings conference call, harvey schwartz says the bank is well positioned if interest rates move higher. something investors and banks have been anticipating for months. geopolitical events that have shaken markets around the world are also having an impact on the new york city housing market. earlier today, the bloomberg surveillance team talk to barbara corcoran. she said the brexit vote and the falling pound have had a negative influence on the demand for homes in new york. what has happened as a result of that is that we have lost all of our buyers from england.
totally. we don't see any buyers at all. so it was a real black eye for us in the new york city market. fortunately for us, we have so many viable groups coming in to buy but losing that audience was a real surprise and it happened overnight. >> and i imagine this is because the pound is weaker which is why it is so much more expensive. which is why i don't come to new york but tom keene comes to find me in the u.k.. talk about the chinese buyers. a different kettle of fish. they're coming in droves and spending their money on any kind of real estate. not just big cities like new york. are probably more wine estates being sold in california to the chinese than anyone else in america. they are spending money as though they are printing it. and so we love the chinese. we love them. tom: very quickly. new york city looks like dubai
10 years ago. everywhere i look there are cranes in the air. does new york city risk and overbuilding of apartment units? new york city always risks the overbuilding and it happens every so many years. what happens is every development job takes 2-4 years to build. they had to get the financing and it is committed early and there is no stopping once it is committed to. tremendousurse build inventory and every once in a while it shakes out. the million dollar is figuring out when it shakes out. will it shake out soon? i don't think so. the demand is so large. that there is never a warning and you never know. be able people should to predict but i have never been able to predict accurately. barbarathat was corcoran talking with the bloomberg surveillance team. scarlet: it is time for the bloomberg business flash. samsung is letting travelers their samsung galaxy 7
notes at booths in airports. the devices are prone to catching fire and exploding. regulators have banned the model on all u.s. flights last week. customers can exchange the phones or get a full refund. ryanair is cutting the profit guidance. they say full-year earnings are likely to increase by 7% in said of 12%. the reason is the drop of the pound having an impact on airfares. and that is your business flash update. ahead, senators and representatives are making millions of dollars by serving on corporate boards. we take a closer look at the practice and who has been benefiting the most. this is bloomberg. ♪
are meeting in the u.k. for the london money and oil conference. the topic of conversation is when to start drilling again. down 50% in the last five years. discusses the company production plans and the rebalancing of the oil market. we are working very hard to take down costs. we are preparing our portfolio for the next generation portfolio with the upturn that we are expecting to come following a time of rebalancing. that is our main focus. costs and addressing the next generation portfolio. lex does that mean you are not putting more breaks to work? in -- we take a long-term view on the oil price. and we make our decisions and the long-term perspective, we projects to work
until they are as good as they can be. ae current portfolio has breaking price of 40 u.s. dollars per barrel and we are ready to move forward on the projects when they are ready. the u.s. onshore is a wait and see approach. we look like to see a stronger commodity environment. >> there seems to be a trend, many other ceos are doing the same thing. what are you waiting for? is this a range or is it less volatility? we are waiting for the upturn in the commodity market. the fundamentals of the oil market is turning towards a rebalancing. we think that is going to happen in 2017. and be on that point, we expect an uptick in the oil price, reflecting the past that investment in commercial oil production has been doing significantly over the last
couple of years. that tove -- we expect happen and we are preparing ourselves for the upturn. >> what is the upturn look like? know, the basic nature is that there is going to be volatility. during the rebalancing time. we should expect significant volatility around the current levels and may be increasing during the rebalancing time. and then we expect an upturn and it is very hard to say where the price level is going to end. costs have come down significantly. that is going to impact the cost level going forward. but they are tighter markets in general. fewer discoveries are being made and it will impact the price market. >> i know you are hesitant to give an absolute level. but when you model a plan, you have to use a base case for oil, so what is your model right now? eldar: it is higher than the
current level. basically, we follow the forward markets over the next 3-4 years. and then we have projections that it is heading upward from that level. but it is a significantly higher level than we have today. >> would you be hedging? >> know, we are not hedging oil production. we are open. oil and gas is the core commodity. and we are open and exposed to whatever the market says for the product. so no hedging. we are a big player and we have a strong financial capacity to wait for the right moment to launch products. wait for the unconventional businesses in the u.s.. >> will and opec deal get done? what is your probability of a freeze or cut in november? well, i think it is more likely than not, actually, that
opec will reach some kind of agreement. in november. i think the drivers are there to achieve some kind of ways and it is strong and they will do so. that was eldar saetre speaking earlier. scarlet: still ahead, the commodities close. raking above 1260 announce. and a quick programming note. michael dell will be joining erik schatzker for an exclusive interview from the world conference in austin, texas. that competition begins at 1:00 p.m. your time. the clock p.m. in london. this is bloomberg. ♪
this is up as the dollar declined. at robust alooking coffee. there is a tight supply situation as a pot of -- as a positive catalyst for the price. and wti crude is stuck at $50 a barrel. theers are pondering likelihood of opec following through on production cuts agreed on last month. i want to revisit old. the you see here is divergence between etf and gold prices as well as what futures are speculating. the yellow line is the price of gold. this does tend to lag behind the price of gold. the red line is the long contract. they have gone way up, as you can see. a long exuberance.
mentioned, the cti report today did not beat analyst estimates which means the fed has less urgency to raise rates in december, which would then be supportive of gold prices. on the other hand, the driver for gold might be the u.s. election. some investors say that because of uncertainty surrounding the outcome, they would prefer to hide out in the safe haven of gold or use it as a hedge. let's check the headlines on the first word news. courtney collins has more. >> hillary clinton has a six-point lead over donald trump in the latest national poll. himformer secretary trumps in the newest surveymonkey weekly tracking poll. larry johnson is supported by 8% of likely voters. gilles simon gets 4%. trumpead-to-head matchup,
wins. -- clinton wins. according to an e-mail allegedly from campaign chair, released by wikileaks. bernie sanders and elizabeth warren were considered. iraq, the offensive aimed at mayking the city of mosul lead to a humanitarian crisis. the u.n. says it could lead up to 700,000 residents of the city to flee. it are plans to build camps that could house most of the refugees but iraqi officials say it may be safer to stay put. and last month was the hottest september ever recorded since modern record-keeping began. marks the 11tht consecutive month of record high monthly temperatures. month of october 2015 has
set a new temperature record. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. oliver: president obama today had a joint news conference with italy's prime minister. during that, he was asked about the latest on the presidential race. have a look. president obama: i would advise trump to stop whining. some of the more sensational implications or appearances, as you stated, are based on actual offense. the president added that is not true that the fbi made a deal about the clinton e-mails. for more on today's comments, i want to get to ben brody. then, welcome.
we look at this conference here. thatis obviously establish president obama is in support of clinton, clearly. at the same time, when we look at his comments on the e-mail situation, it is interesting that he is wanting to squash that speculation. what do we know about what he is saying and how it relates to what we know from the wikileaks coming out? >> well, the president has made very clear that he believes that hillary clinton is the key to securing his legacy. she is a close colleague and staff member of his during his first administration and he believes that putting her forward will be an important part of securing his legacy and moving forward. so he has gone aggressively to push her out there. so he is confronting her to meet -- her e-mails, a major vulnerability. it is worth noting here that he is stating a fact. there was no deal between the
state department and the fbi. ,t may be that one was sought but it never happened. the e-mails that they were talking about, not being classified was classified and it was kept from full public release to this day. scarlet: it must be kind of a surrogate, that her president obama or michelle obama, and of having to play a lot of defense talking about the e-mail scandal as opposed to focusing on pushing why hillary clinton is the candidate to vote for in november. >> absolutely. and this has been a problem through the campaign where the democrats feel they have to be on defense. again on again, it is the e-mails. this is something that may be the clinton campaign didn't get out in front of, fast enough in terms of having her explain what happened and apologizing. so it is certainly something that has gone on. but as you heard there, the president referred to donald as
a whiner. is quiten attack that effective because it casts him as someone who is little and these belittling and tax bring out personal responses. when he is being personal, he is not hitting hillary clinton. and he isn't betraying himself as presidential. he is at pressuring himself as a leader or as calm or collected. when you look at the more information from the wikileaks, one was a list of potential first cut vp candidates that they were looking at. obviously, the choice has been made but does it give us insight into the mindset or the main priority that the administration could have? >> absolutely. is trying topaign grow itself with the vice presidential pick. they may come out and say no, it is only about fitness on day one or with the top of the ticket. but the truth of the matter is,
they are trying to expand their horizons. john podesta refers to these candidates that you are seeing intour screen as falling food groups. he has gone for the food metaphor here. about latinong politicians, african american politicians. men, women, traditional politicians, military leaders and business owners. they look at all of those and they are trying to figure out -- we believe, they don't going to the pros and cons but we can see that they were trying to keep a very open mind about how they might be able to expand their coalition i choosing a vice presidential nominee. perhaps we should watch what they do and not what they say. because when it comes to how they are spending their money, they are diverting money to the red states. states that previously, democrats would not have had a shot of winning. >> absolutely. it is an clear exactly right now how much they are trying to play
mind games with the republicans. maybe draw some support or money from the republicans away from typical battleground states. but the polling does show that the races are getting closer in some traditionally red states, especially arizona. talked clinton campaign a lot yesterday about going there and sending surrogates and potentially sending the candidate herself to do a fence to bring money and to help down ballot candidates. are a politicsu reporter nowadays you also become a wikileaks reporter. that was ben brody. tomorrow, it is the final presidential debate. we will host special coverage on wednesday that starts at 8:00 p.m. scarlet: let's move to life after politics. it can be a lucrative road. we have a look at the board compensation of former lawmakers. we are talking about a lot of money here but let's set the
terms. what a lot of these people have done is legal. it is not illegal to go serve on the board of directors as a company, right? >> right. they are prohibited from lobbying. but going on a corporate board is not considered lobbying. so everything they're doing is perfectly aboveboard and companies are seeking these representatives to be on the board. about thet's talk idea of what is legal and where that line becomes black and white. of course, this has been a few times mentioned by donald trump through his campaign. he paints himself as the washington outsider. what exactly are people talking about, whether or not there on his camp or they just see the revolving door as a problem, what are the solutions being proposed that might clarify some of this hazy area? clear with is pretty what they are allowed to do and
what they are not allowed to do but the revolving door is about optics and appearances. it is funny, because in the past it had to do with democrats criticizing republicans coziness we areg business and seeing this most prominently with evan buyer and his republican opponent saying, look at the cozied up to banks. thenow you have trump using washington insider thing as a weapon against the democrats, to some degree. but it has always been a sense that those who have are able to leverage that and use it against those who don't. and it plays particularly well in this campaign. scarlet: a sketch of the numbers. you had a great graphic in the story that appeared on bloomberg.com that shows the amount of money that these lawmakers that when they made, when you look at their salary as a congressman and a senator and how it explodes when to account for their compensation from being on a board. who is in the lead here? >> depends on how you look at it.
hard.ime, it is the cap he has any great career with his ties of labor over a long amount of time. he makes no bones about it. he thinks he is actually doing a service. but when you look at it over one year, you had aaron cantor who had a one-year payout from a board he joined. the bottom line is, if you are a congressman or woman, you get $174,000 a year. and if they are on a board, they are making double that. $174 -- even $174,000 is a lot of money. so to be able to double that with being on a board is a pretty good way to make up. issue frontput this and center with this great article. what will be the conversation about this? will we hear more about this in the election? >> you will hear about it after the election because there are
50 members of congress who are potentially joining this group of unemployed members of congress. and we talked to some recruiters and they sit down with them because they know companies want these people on the board and they say hey, what do you want to do? and pretty much at the top of the list is to be on a board. so this is a likely outcome with this kind of service. scarlet: jeff green, thank you so much. his story is available on bloomberg.com. lots of interactive graphics with names of former senators and congressmen. oliver: all the names are there are there. salaries let's take a quick look at the u.s. markets where we are trading pretty much in the green across the board. the dow up about 50 points. the s&p up three quarters of a percent. as echoriskier areas, over. a solid day with health care and materials leading the charge. we will be back with more.
scarlet:0 scarlet: this is a bloomberg markets. the bloomberg business flash. we look at some of the biggest stories in the news right now. materials.ting but the rivals are not doing the same. the automaker says it will idle four of the assembly plants to align production with demand. after six straight years of growth, new vehicle growth is slowing. and signs returned to the energy market. cambron energy is weighing an ipo for early next year. that is according to people who have considerable knowledge of the matter.
they had considered going earlier before equity markets delayed the plans. toh is the front-runner acquire a stake in -- that is according to two people familiar with the matter. the family is in talks with several equity funds and is opening to selling to a majority stake. that is your business flash update. the marketss go to desk where abigail doolittle has the sector spider report. let's talk health care. it is the top performing sector for the s&p 500 today. the spider sector. it is nicely higher. outperforming the broader markets on health care strength. and leading the way is the unitedhealth group. the stock is up on pace for the best day in more than three years. this is after united health day
to boost guidance for the full year to eight dollars per share. a also said their company will with the 2017 outlook. all of this as they say they put obamacare worries behind them. the strength is really bringing up other health care needs as well. this includes cigna and anthem. we also have illumina trading higher. we have lots of green here. and that is in sympathy with united health. illumina, that stock was down. if you present last week and higher now for the fourth day in a row. a bit of a rebound. when we go into the bloomberg and take a look, united health, we might be talking about the fact that obamacare worries are behind but clinton may be looming ahead in iowa tech. pollite we had the clinton standings and the blue is the index. when clinton pulls go higher, biotech goes lower. as investors worried that she may weigh on drug crisis.
so this chart mesa just that if clinton continues to do well, if she wins in november, it could be a drag on biotech. oliver: thank you. coming up, consumer prices in september did rise. it is a sign that inflation is getting closer to the goal but when market participants look, they conclude that the fed may not be in a rush to raise rates. joe weisenthal joins us next. this is bloomberg. ♪
with jan stuart. over banning the gasoline engines for cars and what kind of impact it could have. it is a sign of things to come. all the carsmakes too heavy, it can make the battery weigh 500 pounds with the same range then you are almost there. then you are one big goal away from actually having a lower weight car. so it can be done and it should be done. you kind of want that to be the case. >> and at the same time, the cost of her noble energy has been going down. >> there is another chart that is mind blowing. powered, versus expectations in various years. so the white line is right now. even beating 2015.
pettine, i love the charts with the suede lines. this is awful. i think this is called an asymptote. because it is that good. this is what should happen. >> is it going to move the needle for big players? ask west texas utility, whose price is over wind, not gas. ewing get that, especially once it is installed. let me ask about the price of getting this stuff out of the ground. we pay attention to the market price of a barrel. of i think the market price getting it out of the ground is more important. because if you can get it for less than $40 then you will bring it out without any kind of curve on production. where do you see these prices?
jan: a good question. we built a dynamic model and getting out of the ground is not that big of a deal. we can do it that way. $70, we get too much. the blue. as things stand now. so the end of this week when it will all change again -- but the point is, you can find an insane amount of oil and get it to the surface and into the market at $70. that would be the new $100. things are improving until such time when they don't anymore and you have more expenses. it is why the curve wants to flatten out. it doesn't go the other way. that was jan stuart. scarlet: joe weisenthal joins us now. we focus on the latest report because the theme this week
feels like inflation. everyone is looking for evidence of inflation. the cti report shows a quickening inflation but it was below estimates. joe: i have a question that i'm wondering about that. government bond selloff and we will talk about that later. and is it because people are worried about inflation or our government bonds selling off so they are looking for an excuse? because a lot of the trends have been there for a while. your is a chart that i look at regularly in my bloomberg, it shows different ways to slice up the cpi report. energy, cleveland said, core cpi. most of this did a little bit lower this month. the one exception is the red line. thosest of this, most of taped down this month. you can see the trend is clearly up for all of them. so when you talk about the inflation story, which has , it isa lot of attention
a story that has arguably been going on for about a year. changed is that oil prices have risen and lifted expectations. joe: they have flat lined. they have been in the mid 40's or low 50 range for a while. i definitely, it is no longer weighing on headline inflation. so to the extent that the collapse in oil with bleeding through other categories, weighing down on headline inflation, for now, that deflationary impulse is over. oliver: it is important to remember that these are comparable figures. and whether or not we talk about inflation year over year or month over month, when you have -- seline is objective.g scarlet: up ahead we will talk about the bond market selloff.
4:00streaming, starting at p.m. on twitter, you don't want to miss that. oliver: and we have new reporting on yahoo! and verizon. hadly a month said yahoo! users hacked. acquire yahoo!to saying it has only received limited information on the hack. the lack of disclosure could jeopardize the deal. we will have more on that later. this is bloomberg. ♪
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hospital and doctor coverage with prescription drug coverage, and extra benefits all in one complete plan for a low monthly premium, or in some areas no plan premium at all. other benefits can include: $0 co-pays for an annual physical and most immunizations, routine vision and hearing coverage, and you'll pay the plan's lowest prescription price, whether it's your co-pay or the pharmacy price. or pay zero dollars for a 90-day supply of tier 1 and tier 2 drugs, with home delivery. don't wait, call unitedhealthcare or go online to enroll in aarp medicarecomplete. >> 3:00 p.m. in new york, and :00 p.m. in london. i'm oliver renick. scarlet: i'm scarlet fu.
welcome to "bloomberg markets." we are likely from bloomberg world headquarters in new york for the next hour. we are covering stories from you from san francisco, boston, and washington. we continue to focus on the bond market. 30-year treasuries headed for the worst month in more than a year. we get a fresh outlook from kathleen gaffney in just a moment. we will look ahead to morgan stanley tomorrow. and verizon seems to be growing antsy over the lack of clarity concerning a recent yahoo! data breach could could it jeopardize a deal for yahoo! web assets? abigail doolittle is here with the latest. abigail: we have a nice rally on our hands. the three major averages all higher. nasdaq, tech-heavy nasdaq,
leading the way. strength in technology. nasdaq on pace for its best day in a month. as for the spark behind the rally, not exactly clear. we go across asset classes and we have oil trading higher at this time but it has been fluctuating on the day. the bloomberg commodity index is higher but off of its highs. it could act as a tailwind. there have been fluctuations in there. in the final hour of trading, bit of a tailwind them good another possible spark, weakness in the 10-year yield. investors may interpret this as a potential sign the fed will not be raising rates this year. or is going to be slower to raise rates. however, on the month we're looking at a different story get 10-year yield trading nicely october.r the month of best months is the month of june 2015. is on pace for its worst
month since january. we see bit about convergence there suggesting that today's risk is not fully into the month. that could of course be on jitters of the fed is on track to raise rates. one reason that investors don't like the idea that the fed could be raising rates is the fact that it makes future earnings perhaps worth less. when we lik to look at the long-term charting bloomberg, 30 have in your chart, and why we have the s&p 500 -- we have the earnings trailing for the s&p 500. ofve seen that the earnings started to dip down even as the s&p 500 goes higher. we have seen a strong correlation. this may suggest that if earnings do not start to turn back higher, the s&p 500 could in fact meet the earnings going
lower and that perhaps there is some risk off my head. perhaps all of this on fears that the fed could be raising rates a little bit sooner and faster than when investors would like to see. oliver: never good when a trendline looks like what it does before those red bars. let's check on headlines with corny collins. -- courtney collins. obamaey: president responding forcefully to claims made by donald trump that the presidential election is rigged. speaking at a joint news conference with italian prime minister matteo renzi in the rose garden, mr. obama said the republican him when he would be better off simply making his case to the electorate and not publicly complaining about the integrity of the electoral system. president obama: i would advise mr. trump to stop whining and make his case to get votes could if he got the most votes, it would be my job to welcome mr. trump regardless of what he said about me or my differences with him on my opinions and escort
him over to the capital and wish it would be a trance peaceful -- peaceful transfer of power. courtney: yesterday trump asserted via twitter that there is large-scale fraud happening leading up to the election on november 8. hillary clinton is leading donald trump in the swing state of nevada. 47-40 in the monmouth university survey. trump was ahead in the same poll last month. clinton's rises due to greater support by minority and young voters. leonardo dicaprio says he is awaiting direction from the u.s. justice department regarding ill-gotten funds that may have supported his environmental foundation or the 2013 film "the wolf of wall street." the oscar-winning actor says he will return any donations connected to the malaysian fund pending the investigation
u.s. says $3.5 billion has been bylen from the fund people close to malaysia's prime minister. more than 350 works of art from the collection of late rocker david but we will be up for -- david bowie will be up for bid. bowie died in january at the age of 69. pearlattle-based rockers jam and the late rapper tupac s hakur are among the first time nominees for induction next year into the rock 'n roll hall of fame. jam and shakur wil part in their first year of eligibility. results will be announced in december. global news 24 hours a day in more than 120 countries. i am courtney collins. this is bloomberg. scarlet: thanks so much, courtney. a goldman sachs analysis is
putting the risks associated with 2 bonds in perspective. a 1% increase in interest rates a trillion dollar lost to the u.s. barclays aggregate index, representing a larger loss for bondholders than at any other point in history. joining us to discuss this risk is kathleen gaffney, vice president and the portfolio manager for multisector bond strategies. thanks for joining us. and inflation rising approaching the 2% target, do you see positioning risks or systemic risk in the bond market? hleen: i would say it is more positioning risk, and a difficult when dutch difficult one to position against because of rates are rising, they are rising from a very low base. it means there is lots of downside and very little upside. systemic risk would give potential for upside.
great look at it to go higher and inflation -- there has not been any signs of it --rting oliver: we are talking about coming off that low base of yields and we have seen weakness in the past month, but overall, how do we know where the floor is? how do we take the floor that existed? do we keep pushing it down lower ? even after the selloff, we are at 1.7. how do we assess whether or not below is a bad place to be? kathleen: you are right, we could move lower, and there is .hat chance a lot of uncertainty over the markets. however, when you stack up the
, itside versus the upside is skewed more towards the downside. if you don't know how to time it , you just want to get out of the way of that much downside. it may take some time but i would rather be safe than sorry. scarlet: when we talked about bonds relative to equities there is the chart that is incredible. great location and how money has been streaming into bond funds and coming out of equity funds. there is afforded $55 billion difference -- there is a 455 going dollar difference. are we at the point where we see the money come out of the bond equities?into kathleen: i think there is a good chance that happens in the medium-term. money has been flowing into bond funds for safety and ironically, for income, when you look at global yields.
it has been drawing money into the u.s. however, if inflation is coming back, and it does seem that the fed is getting a little more inpatient or willing to tolerate an overshoot inflation for when janet yellen was saying on friday, some good inflation and some ok growth is actually a positive environment for equities. forould be very challenging traditional bond funds. and that we are talking about a between stocks and bonds. it does seem that the conventional wisdom, the way we have come to think about the asset classes and the past 30 years, there is a national equilibrium that exists.
this is basically the stock and bond correlation. in thek at the s&p 500 u.s. 10-year yield. really since the late 1990's you have had an inverse relationship between the 2, which over the past month has been breaking down. what is so interesting is if you take it back from the 1970's all the way through the 1990's, pre-volcker, it is the opposite. that being said, how do you know where we sit on that? is there a new realm we should i was of the tenant moves in their? kathleen: it is an important inflation point and you have the potential to get the best return. with the yields so low and the challenge around the world for how his growth going to get going, i think it gets going with gradual tightening by the central bank and allowing some
inflation to help stoke the markets, and that means with low yields, returns from bonds will be poor, and it makes sense to start thinking about where you are going to get the best returns. highly it will not be in sovereign debt in the developing world. scarlet: let's talk about inflation because you say that you don't think that markets are reflecting the risk of inflation rising sufficiently. is no one position for rising inflation? the fed doesn't necessarily have to move because it doesn't top economist estimates. kathleen: it didn't happen but it was above expectations, and i really do think there is a lot of complacency about the ability to get inflation going. it is just not on investors'
radar screens at all. the numbers are starting to come in above expectations. that is really what i think they are aiming for, to shake loose the anchored expectations that we are lower for longer. yes, lower for longer, gradual rate rises, but it is expectations that will matter most in terms of return yields, the position in 10-year treasuries is that an extreme , which tells longs you that everyone has been reaching for yields and going further out the curve. , it that position unwinds is going to create a lot of volatility for the fixed income markets. scarlet: kathleen gaffney, thank you so much for joining us. oliver: coming up, shares of yahoo! are recovering a bit after dropping sharply to just above $41.80 today.
scarlet: this is "bloomberg markets." oliver: i am oliver renick. time for the biggest business stories in the news right now. remarks will pay $50 million to resolve claims it colluded with other animation studios cannot hire one another's workers. the group of workers claim the roots of the anti-putting deals 80s whento the mid-19 george lucas and officers of steve jobs' newly formed pixar
agreed not to raid employees. samsung is letting travelers exchange note 7 smartphones as part of an effort to recall millions of note 7 phones because the devices are prone to catch fire and exploded regulators banned the model on all u.s. flights last week. customers can exchange the phones or get a full refund. tobnb is encouraging hosts install solar panels. those renting a property's can back if they00 install a system that is valid through the first three months of 2017. scarlet: how to a bloomberg scoop. over the past i would it seems verizon may get past our it seems a verizon may be growing impatient with yahoo! -- over the past hour it seems that verizon may be growing impatient with yahoo!
the data breaches causing misgivings internally with verizon about the deal. are we talking about misgivings in terms of negotiating price for verizon backing out completely? >> at this point it is all about negotiations. they have about 20 teams working on integrating the 2 companies. and everything i've seen so far looks like they're looking to lower the price. ,liver: what is curious here not to throw accusations around, but if you are a company, you want to get the best price possible purchasing another company. is the hack materially affecting properties verizon wants to buy and making them less valuable or is this an opportunity to get a better deal? alistair: the main property is yahoo! mail, where the hack focused. you have got a look at whether they lost a lot of users.
e-mail is a really sticky product. i have a friend who has been complaining about yahoo! hack for weeks and they still have not changed their e-mail provider. maybe we might get some updates from yahoo! later today when they report results and if there hasn't been a big loss of users on the male side, that probably bodes well for the deal. scarlet: in general, when you look at tech companies that might have experienced data hacking, how do they recover from that? what are the best practices to show that they have a good handle on the situation and can move forward and fix it as opposed to just waiting for the investigation to sort itself out? one of the main things the big tech companies, especially google, is good at, they come up with new ways to secure accounts and control accounts. it is something that a lot of companies do. yahoo! actually does it right now as well.
it took a long time to do that type of thing. that is considered pretty basic. yahoo! doesn't have a good reputation in this field. it can also do something where it makes it easy for users to ,wap services if they want to which sounds counterintuitive, but it actually makes people feel better that they are not trying to lock people into accounts. scarlet: what is stopping yahoo! from just coming back with a lower price for verizon so that they can get this over with as opposed to waiting it out and seeing if the investigation does bring out more instances of data breaches? alastair: i think the deal is due to close in early 2017 anyway so there was quite a lot of time to go. if you are marissa mayer or one of the board members, your obligation is to get the best deal possible. yahoo! is not going to back down on the price. if yahoo! can prove there has been actual material losses of
users or damage to the business, then maybe yahoo! can negotiate a pretty big discount. of course, there hasn't been any real data on the actual impact yet, but we may get some a little later today. scarlet: right from when the company reports earnings after the close. thank you so much for your perspective. oliver: still ahead, "options insight."today's trade is allergan. our next guest says there could be a potential upside after the election. this is bloomberg. ♪
abigail: thanks for joining me today, kevin did it is the heart of earnings season at 90 you think this could continue. what are the macros out there? same we go back to the quarter triggering cycle earnings saved in the market. it was volatile when you went to 2014. people were worried about ebola and europe. last year you by china and the possible rate type. here we are now and it was quite in our distance of them people are focused on what can drive the market because we got bad guidance as well as pre-guidance from honeywell and the guns coming out of the companies. they are focused on cost cutting measures. they don't think topline growth is going to do well going into the future. this bullthat to get market going. abigail: great perspective, thank you. we have bonds selling off. what are your thoughts?
do you say away from bonds in this environment? >> hard to go into the bond market when the finance minister of norway recommending there will find increase the allocation -- there will find increase the allocation-- their fund increase the allocation instructed that is where people are in the risk reward profile. runave had such a long bull in the debt market and when the fed is starting to talk about raising interest rates. aboutl: right now talking raising interest rates, do you think it will in fact happen in december? 62% probability of the time. -- walkwatch themselves to themselves into a corner and they have to do it. you have three governors behind that move. what would really hurt the market is if they have for chili dollars on the balance sheet. i don't think is 25-basis point move would do anything to the market.
abigail: you like allergan, socket is down 25% this year. why do you like it? >> so much uncertainty in the market. especially on the health care side, the election coming up. no one knows who is going to win but you guess come under fire. -- it has come under fire. this is a great stock replacement strategy. go longer call. to january,y -- out so you can go out to january and it costs $12.80. allergan, $230 a call. the most you can lose is $12.80. $40.5 billion to do tons of great things. tons of great acquisitions, looking to do stock buybacks, great ceo that has the blessing of carl icahn, which is where you find these days. he likes to stir the pot. leverage the upside and mitigate
downside risk should earnings or the election really impact the health care sector even more. abigail: welcome that is really great stuff there, kevin. out of curiosity, any other trades that stand out from a macro standpoint for our viewers? >> you can stick with the health care names because they have been beaten down and looking and earnings right now, johnson & johnson reported today. last week we talked about the risk reversal pick it bottomed out -- abigail: got to leave it there. great stuff. oliver: thank you, abigail and kevin. miss." is "what'd you breaking third-quarter results from yahoo! and intel after the close. this is bloomberg. ♪
speaking during a joint news conference with italian prime minister matteo renzi in the rose garden, president obama expressed dismay at trump's recent rhetoric over the russian leader. president obama: we think russia is a large, important country a military that is second only to ours, and has to be a part of the solution on the world stage rather than part of the problem. but their behavior has undermined international norms and international rules in ways we have to call them out on. mr. obama said the u.s. has not encroach on russia's legitimate interests. nasa six-point lead over donald trump in the latest national poll. the former secretary of state tops trump 46-40 in the nbc