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tv   Bloomberg Markets Americas  Bloomberg  November 3, 2016 10:00am-11:01am EDT

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vonnie: we are going to take you from california to paris and cover stories out of china, wall street and the u.k.. first, we have some breaking economic data. what we have is the ifn nonmanufacturing composite index, the services index coming in below estimates and falling from a month earlier. coming in worse than had been estimated. rising,factory orders up 3/10 of 1% and we have durable goods orders falling more than estimated, down 3/10 of 1%. in terms mixed picture of economic data coming out in the past few moments, but that services industries is the most
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concerning. nonmanufacturing part of the u.s. economy is the largest part , by far, so that expansion it less than projected -- is less than projected. it might be a source of concern for economists. averages are holding steady. we have not seen much reaction to these numbers. the dow and the s&p remain slightly higher. the nasdaq is weighed down by facebook. rise, itp 500 does will break that seven session losing streak that continued into yesterday. let's take a look at the bond markets. atlooks like we have yields the highs of the session in the wake of those numbers, so not huge reactions here, up two basis point on the 10-year note as we are seeing a little bit of selling in treasuries. i want to get to some of the
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movers. still hearing from a lot of big companies, and these have the biggest computers to the s&p 500 gains. it looks like disney is rising with a couple of other media companies that came out with their numbers. charter communications which now owns time warner cable coming out with quarter sales that met expectations. 21st century fox first-quarter profit beating estimates, advertising boosting its cable division. , thationed facebook company coming out with sales that be estimates, the cfo saying that momentum is not going to continue. facebook shares down more than 5%. aig disappointing as well, those numbers coming in below estimates, seeing a weakness in international convert -- commercial coverage. to it half hours left of the thursday session, eight days
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of decline, that was the losing streak for the stoxx 600. , rising onour stocks the left-hand column, those are your currencies, sovereign bonds and commodities. what a day for the u.k. ,e had the high court ruling the prime minister cannot truck -- trigger article 50, the brexit process until parliament votes. it will go to the supreme court. was notrnment will -- happy with that, but theresa may says she is looking to trigger article 50 by the end of march. the brexit saga continues. on top of that, we had the boe quarter inflation broadcast. they are no longer expected to cut rates. rates could be cut or raised, depending on inflation. inflation will rise above the 2%
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goal. they raised the 2016-2017 gdp forecast. it was a more hawkish bank of england, today. i have showed year the yield since brexit. that was the boe, august meeting. it implemented a whole host of that -- measures, post-brexit. the decline in sterling and the increasing expectations for inflation. sterling because of the high court ruling rising for a fifth day, best day in two months. exit, boechart, august meeting, roughly 132. to 1.24nching up today and quickly, we had some data in the u.k. tovices rising in october
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54.5, the highest since january. the main path of the economy seems to be in good shape. vonnie: in the u.s., shares of aig are declining, the company moved -- posted a third-quarter profit that fell short. jobs.g assets and cutting erik schatzker has more from the new york stock exchange. erik: i am here with the ceo of aig. your shareholders are not happy, the stock is down almost 5%. we are strategic -- we are pleased on a strategic quarter, wasthe quarter in my mind characterized by five major transactions where we divested in non-core activities. one investment in a growth opportunity, but the earnings disappointment was centered
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around some legacy activities, which we discontinued doing, prior to 2010, where we had to take a write-down on what we called nonstandard structured settlements. if i look at the core earnings potential of our business, this quarter was very much on track to hitting long-term goals. erik: as much as you want them to, it is a challenge for some investors to look past the legacy numbers. the structured settlement costs was more than $600 million, one of the biggest reasons you pointed out why you missed analyst estimates. have you scrubbed the balance sheet, or is it possible that we will see more of those unpleasant surprises? ,> when we announced our update the marketclear between legacy and operating,
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and the legacy portfolio contains activities that largely discontinued and that is a big question mark. what can we dispose of the legacy for and i think analyst's can rightly make their own adjustments based on how they see that legacy portfolio. i make no promises as to what we will be able to dispose, but we intend to dispose of it as quickly and as effectively as possible. haveperating portfolio, i great confidence in, and we are taking steps to be very selective in focusing on the clients that value what we do most in the operating portfolio. view as taking control of our destiny and improving earnings going forward, well dealing with the issues of the past in a systematic way. erik: a last question on the legacy asset. does the reaction we have seen ,n the stock price motivate you
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incentivize you to dispose of those legacy assets that much faster and perhaps at a slight discount? >> we have already been very it,sed on disposing of expeditiously. price, we have always held out for the right price. weighing out the pros and cons, and if you look at the price we quarter,in the third between the sales proceeds, the reassurance that we retain and the tax attributes, it is north of 4 billion net proceeds. i could not give it away when i arrived at the company and somebody offered me $25 million for it. by being patient and realizing the best value, i think we will do the best thing for shareholders. erik: one of the businesses in your main operating segment of the company that you targeted
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for improvement, commercial property and casualty had a disappointing quarter. >> when you peel away the layers of the onion, it was concentrated in one area, which is the program's business where you have third party specialists managing general agents. out of the 200 programs, there are about a dozen that caused the problem, and we actually terminated our relationship with them as part of our broader focus on the most attractive part. the prior development that we had, it was concentrated in a part of the business which we are sically leaving behind. erik: what do you see e shareholders who want less volatility in your stock? >> the more we can accelerate the disposal of the legacy, the more that we focus on customer business, where we are adding value to the customers through
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expertise as much as our balance sheet, the more we can stabilize earnings and take control of it. other areas which we have taken huge steps on, on the investment side, we announced that we would reduce our hedge fund allocation and we are very much on track to cut that in half, and that will also reduce earnings volatility. erik: how much are you shifting your investment portfolio? gradual start to see a and to quantitative easing, that will be beneficial to us. from lowerfered interest rates and will benefit as they rise, we don't want that to be the core of our investment strategy. we are focused on having assets that are well matched and exploiting that liquidity that we have. erik: besides cutting your hedge fund allocation in half, are you doing anything else? >> we are doing more direct
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lending, using our ability to take less liquid assets where we have done our own underwriting as opposed to buying securitized assets. we are exerting greater control over our destiny by doing greater homework. have -- share with me some sense of your last conversation. that we have made a decision to involve them in oftings with as many management as possible, to understand the detailed operations of the company. there is a great deal of alignment on the strategic direction we are taking and the pace at which we are executing it. erik: have you talked to them about today's earnings? >> not yet. erik: metlife is perhaps the not too distant future going to get a decision from the appeals court in the second circuit of
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d.c. on its challenge. if they win, will you attempt to have yours reversed? to point out that our designation has in no way inhibited our strategic actions, to date. the exact rules of what they will be subject to are still far from complete. erik: clearly you would rather not have it. >> it depends on the nature of those rules. if they are well designed and administered, we see the fed as a helpful partner with the other regulators we deal with, to coordinate the effort. we want to reassure stakeholders that we are committed to a rocksolid balance sheet to back our long-term promises. however, should regulatory pressure become detached from sensible economic decision-making -- we always retain the option. of public policy objective
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dodd-frank was to have an exit round. we have done more to the risk this -- to de-risk this company. we believe on the merits, we would be a candidate for the off ramp, should that be the right direction. erik: we thank you so very much. we are here at the new york stock exchange. vonnie: thank you for bringing us that interview. mark: let's move it on. governor mark carney saying the path of inflation in the wake of the brexit vote needs to be watched mostly, and officials will tighten or ease policy as needed. >> we have decided that the stance of policy at present is appropriate, and that we have a neutral bias around policy,
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going forward. outside thego central bank, in london. less bearish or should i say more hawkish bank of england than the last super thursday in august. >> absolutely. what a difference three months makes. the market interpreted it as more hawkish because we saw the pound rising and guilt yield rise. ais was billed as being unexciting meeting, but in certain ways, it was very exciting. we got the expected rate remaining at the same 0.25%, the upgrade to an nation and growth forecast for the short-term, if not for the medium term, but what was more surprising was the fact that as mark carney said, the bank has limited tolerance
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for above target dpi. where it was before, the central bank was more dovish with more scope to cut rates, we did not get that and in fact, the market seems to be interpreting this more that we will get a hike in rates before we get a cuts -- before we get a cut. he said this is not a dovish or hawkish bias, you referred to it in the intro, and he talked about this being a neutral bias. interestinght was were the comments that came on inflation, specifically and what was beating that. mark carney had other comments feeding into that in terms of the issues of being structural and also having to do with the future of the uk's openness and trading negotiations because of brexit. vonnie: some of what the bank of england will pass will just be to wait, given the court case
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this morning, there is so much uncertainty about where the economy is going to go, both in terms of whether it exists or not, and how -- -- how growth will come in. wish there was a count of the amount of times mark carney said the word uncertain in this conference. he talked about the uncertain terms of the economy and this was billed as him saying over to you, chancellor. he said a lot of the issues to deal with the u.k. economy and what could weigh on it going forward are structural. in terms of the uncertainty, it was about brexit and of course we have had that high court ruling. mark carney was asked about that and he said he is not qualified to talk about it, what it shows is how much uncertainty there is in this whole process.
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vonnie: outside the bank of england, thank you. mark: coming up, we get the latest on that high court ruling that brings another twist to this brexit saga. ♪
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vonnie: this is bloomberg markets. mark: we are live from london in new york. this is bloomberg television, another twist in the brexit saga, the high court ruling the uk must hold a vote in parliament before starting the countdown to brexit. we spoke to one of the lawyers on the winning side of the case. >> the deciding factor was that the european communities act revised the rights that people have and it was passed by
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only seatedand we with parliamentary rights to the eu and the government wants to take those away. mark: we are outside the high court in london with all the details. how did the judges come to this conclusion? on a 300 year old law that dates back to the glorious revolution in the 1600s. the law is that you cannot take rights away or laws in this country without asking permission from parliament. mark: we are looking ahead to the supreme court. what happens now? we heard that the supreme court has a four day period to
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hear this case. a judgment would normally take about 12 weeks but because the case is so important, we can expect a decision by mid-january. vonnie: this effectively gives a voice in the debate, if it is a debate. it does give a voice back to an opposition, right? say what isd to going to happen next. parliament, go to the picture has changed in the last few weeks. the economy is doing better than we expected. lawmakers could get in the way of the will of the people, and it would take some big change in the economy to make that viable. vonnie: what is the labour party saying about all of this? korman justeremy may out and said theresa needs to put her plan in front
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of lawmakers because if they want to trigger article 50 that begins this count down by the end of march 2017, then they need to get a bill into the parliament as soon as possible. mark: does this dilute theresa may's plan for a so-called hard brexit? does it mean she will have to be more transparent? >> i suppose it will depend on what the supreme court says. the supreme court could for all we know -- overturn this decision. if they uphold this decision, the theresa may will have to go to court in front of lawmakers that are overwhelmingly in favor of staying. you have to believe that a hard brexit looks less likely. mark: great to see you. reporting and interesting decisions, there. still ahead, the latest development coming of the will
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-- coming at wells fargo. ♪
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mark: live from london in new york, i am mark orton. vonnie: and i am vonnie quinn, this is bloomberg markets. time for a look at some of the biggest business news. the sec is investigating wells fargo's sales practices. the bank disclosed the probe in a filing, today. wells fargo employees opened as many as 2 million unauthorized accounts for customers. that has resulted in $185 million in fines and the departure of the ceo. of goldman sachs says it is being investigated over the trading of interest rate swaps. the firm says it is cooperating in the probe. citigroup disclosed it is facing a similar investigation. swiss watchmaker will open an
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office in silicon valley. the move also meant the company's smart watch alliance with google and intel. the office will be located on intel's campus. the company has hired an intel executive to run its smart watch program. that is your bloomberg business flash. aill ahead, france sets up new one-stop shop. yes, we will talk to the chairman of saffron who was appointed to lead that effort. ♪
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from bloomberg
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world headquarters in new york, i am vonnie quinn. mark: i am mark barton, this is bloomberg markets. let's check in on the first word news. alisa parenti has more. sa: here's fighting between iraqi forces and the islamic state is underway in which -- villages in northern iraq. syrian border, fighters have gain control of a highway linking mosul to another city. the u.n. warns the new paris treaty on climate change will not be enough. unless more pledges to curb emissions are made, the climate is headed for catastrophic change. a report for next temperatures will rise by six degrees fahrenheit and that could lead to rising sea levels, superstorm's and deadly droughts. a nationwide poll shows hillary clinton -- donald trump has cut
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the clintons lead by two thirds. 42% in aeads 45% to race that includes third-party candidates. economists -- the economist is backing hillary clinton for president. the editor says the choice is not hard and of the campaign has thatded multiple evidence proves that it would not be a good president. global news 24 hours a day, powered by more than 2600 journalists. news.: breaking down byf burlington about 2%, falling on a new strip -- sale call at spurs point. spruce point. axler will be here within
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the next hour. mark: look at the credit suisse report. shares were sent slumping, the most in three months. revenue from equities trading fell 33%. executive says the outlook will remain challenging. a said cost-cutting efforts will continue, and cost-sharing with rivals is on the table. >> it is an idea that is not new. we are not the first to talk about it. it is difficult to execute which is why there are not many examples, but we are looking at that area of many things we do to drive costs down. flipside, -- also posting earnings, beating estimates with a jump in stocks and bonds trading which sent
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shares in paris up the most in seven months. the ceo told us his bank has fared well by limiting market risk. >> look at the way we managed brexit and the surprise which came out of the vote. limit as much as possible, the market risk, but we know if there is a surprise, the market can react negatively in the short-term and in the longer term, the markets have stabilized, the same policy for the coming elections, whether it is in the west or europe, we try to limit the market risk. mark: let's get to another important brexit development, france announcing one-stop shopping to welcome businesses from britain that want to set up a new european headquarters after to the u.k. leaves. joining us now, the chairman of saffron who has been named
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ambassador. thank you for joining us. if i can start you on the u.k. high court ruling, which you have no doubt heard. it is the big event, today, the high court saying that the article 50 cannot be triggered until parliament has a debate on it, so parliament has a say. do you think it could derail the brexit process? britishnot an expert on constitutional government. what i can see is it will add further uncertainty to the process, and businesses do not like uncertainty. mark: are you hoping it does derail brexit or do you want brexit to happen so that you can attempt to attract all of those businesses? communitynch business was very clear ahead of the thatendum, our wish was
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britain should have remained in the european union, because we contributiontain's in brussels was invaluable. we are sorry to have lost that. having said that, we are where we are, and as a result, a number of businesses who set up on the basis of the uk's membership of the eu are facing uncertainty, and that uncertainty, they will look at their options and we want to lay offerst advantages paris to a wider -- wide range of businesses over the next few months as they make deal -- make plans to deal with the uncertainty. vonnie: you are leading the effort on the part of the french government to leeward is this is. saffr also the ceo of an. why is it better to do business in france where there are
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corporate tax rates that are extreme -- extremely high and a 35 hour work week? board, chairman of the not chief executive. having said that, you hit on two fairly old cliches. the 75% tax rate was abolished several years ago to the extent that it was ever actually implemented. companies paid it, not individuals. as for the 35 hour week, the average work week of the french employee is 37.2 hours. it is longer than germany, which ways there are certainly to work around the constraints of a 35 hour work week and a productivity of the french people is remarkable and that is why we are a extraordinarily successful company. tonie: would you not want move the business to britain if britain was to bring its
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corporate tax rate down to something like 12%? saafran is not- s in the business of tax shopping. -- given its aerospace and defense activities, therefore the question of another domicile to france would never arise. mark: as you dispute the high tax reputation, you dispute rightfully, the 35 hour working week. can a project of a tax on financial transactions be disputed? is that going to be a strong deterrent from financial companies to move across the channel? >> we are not just aiming at financial businesses. our effort is very widespread.
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the french prime minister was extremely clear that he intends parliaments stick to the government's priorities in terms of making france more attractive, and that includes resisting the tax on financial transactions which legally, cannot be implemented in 2017 and if it were, at some point, the french government's position has always been that would -- that it would do so as a concerted european move and those conditions do not seem to be met. the government has made clear its determination to resist that parliamentary move. issue of -- many people say it is unlikely france will be able to introduce any ahead of the election, next year. is that the fact? >> we are not talking about sweetness because i think everyone would be on the lookout
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for anything which could be construed as state aid. what we are doing is, we are laying out france's and paris's intrinsic advantage as a world size economy, an ecosystem. france is home to a number of large corporations and home to large foreign investment communities. that has created an ecosystem which large companies expect, should they make a move. that ecosystem is about having consultants, available staff, multilingual staff and i would add another decisive advantage paris and france offer is a very high quality banking, stock market and insurance regulator who displayed that credibility during the financial crisis. this is not about sweetness, it is about quantifying and
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explaining what advantages france offers as companies over the next several months will be carefully,sidering very momentous decisions affecting their staff. mark: thank you, for joining us. today, breaking news. vonnie: shares of burlington recovering a little bit after falling on a new sales call at spruce point. bloomberg. ♪
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vonnie: you are watching bloomberg. mark: this is your global
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business report. in a setback for prime minister theresa may, a panel of london judges decided the u.k. must hold a vote in parliament before starting the two-year countdown to brexit. vonnie: -- other luxury goods makers in reporting a recovery of demand in china. the a just -- 14% rose in the last year. the: we take a look at facts -- factors janet yellen and the fed are considering as they wait to pull the trigger on the next interest hike. vonnie: three judges ruled the u.k. must hold a vote in parliament before starting the countdown to leaving the european union. prime minister theresa may wants to start the process unilaterally by the end of march by invoking article 50. the government will appeal and the supreme court will hear the case, next month. italy's economic development
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minister told us what this means for european countries. >> they need to have a clear line within the u.k. government, and then propose it to the eu. knowing that we are not going to -- especially the relation between the freedom of market and the freedom of -- has to remain at the core of each relation that europe has. mark: air france is taking steps to hold the side of its market share. the company will create a new unit to send off airlines from the persian gulf. air france said it will also simplify shorter flight operations. -- has joined other luxury goods makers in reporting the chinese market is improving. the french company points to improving sales in leather
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goods. sales in the asian specific reason -- ages pacific region -- asian pacific region grew 14%. is time for our bloomberg quick take what we provide context and background on issues of interest. almost a year of the federal reserve began pulling back on the greatest monetary policy stimulus in its history, question is when will it act again? the fed'sr 2015, committee voted in favor of what many called lift off, an increase in the interest rate targets the bank had published to near zero after the -- after the 2008 financial crisis. this was supposed to be the start of a process called normalization. officials envision rates creeping upwards in a way that puts the economy near full employment with inflation averaging around 2%. december, the fomc's meeting
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advised four quarter-point hikes in 2016. the fed has not yet hikes, this year. the federal reserve monetary policy by adjusting the interest rates that big banks pay each other for overnight loans. changes in that rate ripple through the economy, affecting employment, output and prices of goods and services. they use this overnight borrowing that is available to money market funds and other large non-bank investors. the fed borrow securities overnight to does -- discourage lending at below the target range. -- which was swollen by bonds purchased through quantitive easing programs. policymakers must weigh a relatively improved postcrisis u.s. economy against recent data. the fomc said in his november statement that it only needed
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some further evidence that inflation and employment were on track towards their goals in order to hike. you can read more about the fed all of our quick takes on the bloomberg. had to for more stories -- head to for more stories. mark: we look at the historic career of the top earning u.s. the red in history, getting ready to take on the breeders' cup -- thoroughbred in history, getting ready to take on the breeders' cup. ♪
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mark: live from london and new york, i am mark orton along with vonnie quinn. vonnie: breeders' cup classic is one of the premier thoroughbred races of the year. it is the richest race in north america and a defining event of the international racing season. california chrome is a five-year-old favorite. as california -- as
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california chrome parades around the pasture, he does not care that he is the top earning thoroughbred in history. he only knows one thing, how to run. >> california chrome shines bright in the kentucky derby. in 2014, chrome won the kentucky derby and -- with strong victories, but failed to win the triple crown. his career on the track continued. he had retired after his three-year career, he would been in meetings00 would've brought in about $3 million a year. compare that to american pharoah ,ho had a blue blooded pedigree
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fetching an initial stud fee of $200,000 working out to about $30 million a year. rather than retire, california chrome continue to race. >> chrome turns to gold. >> this year as a five-year-old, he won the dubai cup and what true other races, taking in over $7 million. if he wins the breeders' cup, that number will surge to $10 million. he could come -- verna combined $13 million -- he could earn a combined $13 million. a horse without an amazing pedigree who has only gotten better with age. winning over $13 million already in his career. insiders say his success will bring his stud fee to $40,000, double what would -- what he would have fetched two years ago. >> he is marching inexorably toward the breeders' cup.
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california chrome is again in the autumn. vonnie: joining us now for more , isde, no background music bloomberg news managing editor for the americas. stories in latin america and bond yields, but every now and then, you give us something a little more different. what does this look like? is -- has a very pedestrian pedigree where he is surrounded by blue bloods. a prince from saudi arabia has a horse that is wonderfully bread. this is very common for chrome. his father was like old yeller
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and his mother was votto, but he is just a running fool. vonnie: the odds will change before saturday. number 12, by the way. what are the odds on these horses? >> they see chrome at about a you betive, even money, a dollar for a shot at winning a dollar. these other horses have a much more significant shot. california chrome is running better than any other horse in the world. mark barton would say he is running on dirt, not turf, but he is still running better. two legs it --y lengths in the triple crown in 2013. >> go back to secretariat in 1973, and that is where the model began. spectacular at three, a stamp their ability, to produce and the big superstars.
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that is the norm. this is pretty uncommon where they will hold the horse until he is five. it happens with a horse like this. when your father is old yeller and your mother is fido, the breeding community assumes you are a one-off, that you will not be able to pass those jeans off. mark: which is why the stud fee is $40,000. i thought there would be more. , thesetwo biggest rivals horses have accomplished significantly less on the track. stud,y were to go out to they would immediately command higher stud fees then chrome would -- than chrome would. frosted is the son of the world's -- america's number one ranked sire and the other horse, as well. vonnie: a complete reflection of what is happening in the actual economy.
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what happens after the breeder'' cup? >> at this point, he is going out to stud, in kentucky, which is where the best of the best get sent. if he does well, and his offspring starts running, he will stay in kentucky. in this osborne does not do well, he will get routed out of kentucky and sent to new york or california. vonnie: we will have to follow his fortune. like frosted to maybe upset at a big price. vonnie: thank you. you can read more about luxury at bloomberg, your destination for the finest things in life. mark: it is all about pedigree. englandp, the bank of holds rates at a record low while the fed sets the case for a rate hike is a highlight from carney's news conference. >> i am not qualified to comment on the court judgment or the prospects, but it is an example
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of the uncertainty that will characterize this process. as i said to the previous question, the negotiations themselves have not even begun. there will be uncertainty and volatility around those negotiations as they proceed. i would just view this as one of the examples of that uncertainty. mark: still to come, chief investment officer at j.p. morgan weighs in on all the latest central bank decisions. we are one hour 30 minutes away from the end of the thursday session. ♪
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from new york, i am vonnie quinn. mark: welcome to "bloomberg
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markets." ♪ vonnie: we take you from london to hong kong and cover stories at a paris, new york, and egypt over the next hour. bank of england governor mark carney says they can move either way on costs depending on how inflation develops. the federal reserve also leads rates changed. the pounder climbs the most sent august as they ruled the government must hold the vote in parliament before starting the two-year countdown to brexit post-up theresa may still saying she plans to pull the trigger in march. vonnie: the securities and exchange commission is launched an investigation into wells fargo. the same day, we have


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