>> from bloomberg world headquarters, i matt miller. line," thettom intersection of economics with a mainstream perspective. dennis lockhart talks about the future of the federal reserve. we will have a sitdown with north carolina governor patrick for a. says he isjames returning to cleveland to play for the cavaliers. ♪ to our viewers here in the united states, and those of you joining us from around the world, welcome. we have full coverage of the

stocks and stories making headlines today. peter cook with three big names, buffett, gates, and adelson foring to four -- pushing immigration reform. michael, what do you have for us? bring --have -- that said bank president. third of the day. welcome to the program. i will put you on the spot right away. fedpresident of the chicago told us first thing this morning that inflation is too low, and we shouldn't think about raising it -- interest rates. says inflationd is too high and we should raise interest rates. quickly. you get the george w. bush role, you get to -- >> i'm the one that gets say the porridge is just right? >> i think it is early to make such a call.

i welcome the firming of rates that we have seen in the last very few months. the last few readings. numbers make a trend, and it's the trend that we want, the sustainability of inflation around 2% -- it remains to be seen. i'm not sure. i want to watch the numbers for a while. determine whether this is going to hold. certainly, if we look back over the last year to three years, we would say inflation is too low. i'm still in the camp of wanting to see the test of time to prove that we in fact are going to see rates near or at our target of 2%. >> how long do you want to wait and watch? currents said that the rate, you will overshoot. you will at 2.4 percent or to provide percent by the middle of next year. >> i will tolerate some

overshoot. over the next couple of years, threshold,easonable beyond which one should be concerned. wraps policy needs to take some action. perhaps policy needs to take some action. i think the numbers we have seen recently may have some transient factors in them. for example, energy or gasoline you read the forecast that gasoline prices, going toest they are soften after labor day. awould like to give it at least a few more months to watch the inflation numbers. >> you are already at the forecast for unemployment for the year. if inflation stays elevated, would it be unreasonable to see an interest rate move in the early part of 2015?

>> if inflation stays where it is, it will be near target. to me, is not necessarily a call for monetary action to deal with inflation. we will be closer to the zone in which we might make a decision. -- i am still in the camp will be saying this in remarks a little later -- over expecting the conditions to come together in the second half of 2015 to make an appropriate at that time for liftoff. we have heard a lot about financial stability from the fed recently. one of the arguments for moving sooner rather than later is you eliminate some of the reach four yielded that you see in the markets. wrong with an earlier but small move? >> is a trade-off. if we move too early, history shows it to be premature, there is a chance that we would snuff

out some of the momentum in the economy. late,move very conceivably, we would have an overshooting would be persistent. that wouldn't be desirable. i think of it as a cost benefit trade-off. i think the benefits of holding for a current policy while longer, as i said, up to say midyear next year, even after that -- it outweighs the potential cost. i'm still in the belief that we need to continue this level of stimulus in order to get closer to the objectives of the federal reserve, and to really have the messiah before we move. >> the employment objective -- what is your target? what should be the normal rate of unemployment? >> if you focus only on the official unemployment rate, the you three rate -- the u3 rate.

something in the range of 5.25%. that would be reasonable. of the people at getting that we take a broader look. slackked at indicators of in employment markets that may not be captured in the official unemployment rate. part-time, foron economic reasons, to use the technical term. interestingly enough, in what was a very encouraging employment situation report that came out just a few days ago, actually, the part-time number went up. part-time is not moving in a way that is consistent with the official unemployment rating. >> when you get to the point where you are many -- ready to make a move, you have to figure out how. are you going to use the interest rate on excess reserves, and put a floor under

rate with that reverse repo operation? what do you do about the balance sheet? do try to get it done faster or g -- or let it run off? >> we can exercise monetary control over short-term interest rates at the beginning of what should be a tightening cycle that will take some time the. i don't think there needs to be a rush to bring down the size of the balance sheet. interest on excess reserves with , floor set by reverse repos and continuing to communicate unity -- using the fed fund rate. if that package of tools actually can assert control over short-term interest rates, then i think we have some time to shrink the balance sheet. >> one last question. janet yellen goes before congress next week for the humphrey hawkins testimony. during which she speaks for the

fed as a whole. what we hear -- what will we hear? >> many of her views are out there. i suspect we will hear a repeat of some we have already heard. i expect her to be an advocate of sustaining or maintaining the current level of monetary stimulus for a while longer. certainly and 2015. probably biased the second half of 2015. i suspect she will repeat that monetary policy is not necessarily the first line of defense against bubbles, or against financial instability risk. those would be the themes i would expect janet to reiterate next week in congress. >> dennis lockhart, thanks for being with us. matt miller, that's it from

here. we will send it back to you in new york. >> thank you, michael. north carolina's governor. we will continue our coverage of the national governors association meeting in nashville, when "bottom line," continues. ♪

>> the national governors association four-day summer meeting is underway in nashville. on the agenda -- creating jobs and the role of education and economic development. megan hughes is there. she is joined by the carolina governor at work for a. nashville, here in joined by the governor. i want to start by asking you about governor chris christie, who is fund raising for rod looking governors. he just announced a record second quarter in terms of fundraising. how would you evaluate the job he is done, especially in light

of the new jersey bridge controversy? >> there's not a better salesman and chris christie. he controls a room. he just draws the attention. he is a great communicator. he helped me get elected. he is working hard across the nation. a salesman, of don't underestimate him. >> bigger picture, looking at this november and governors races across the country. do you see a continuation of what we have seen with the republicans really sweeping the state houses? >> i think we do. there will be close races. you may in pennsylvania. he will be very tight in both of those states. ohio and wisconsin are doing well. south carolina is doing well. i anticipate us continuing to gain seats. the sun, we are also defending seats which which is in a different position. chris, and scott walker, and

others. we have a great republican governors team. every state where there is a republic and governor, almost every state that i know of, we have had a major drop in unemployment, including north carolina. >> let's shift in north carolina. that's a state that saw a republican sweep for the first time since reconstruction. we have seen is sharp shift to the right in terms of legislation. abortion, gun control, voting rights which is been in the headlines. it's exaggerated to say it has been a sharp shift to the right. requiring voter id is not a big sharp shift. where we made our big shift is in business friendly environments, recruiting new businesses and reducing unemployment. the weighthifted north carolina has been perceived. it has made national headlines. >> headlines are coordinated. not as drastic as you think. we didn't really change our abortion laws like the new york times says.

it's basically the same abortion laws we have had, which is made them safer. shift innk that perception has impacted how north carolina is perceived as a new southern economy? >> that perception was not correct. second, we are having businesses come from all over the world to north carolina. when i became governor, year and a half ago, our unemployment was the fifth highest in the country. we are not even in the top 30 regarding unemployment anymore. we have gone from my before percent to 6.4% -- one of the largest drops in unemployment rate. it's because of our business friendly tax reform and business from the regulations. heavily inrding very states that have higher taxes. it is having an impact. >> looking at unemployment numbers, it's interesting to point out that north carolina has one of the fewest number of weeks where people are allowed to collect unemployment

benefits. >> we had the ninth highest unemployment benefits in the country when i became evident. we owed the federal government $2.4 billion in debt. we had no way to pay off. we were paying much higher benefits than our neighbors in south carolina, tennessee, and virginia. we lowered the benefits to what our neighbors had been paying for years. we did not expect -- extend the federal unemployment compensation. as a result, what we started to see was workers take jobs that were being offered. that is exactly what employees were telling us that people were taking the jobs that were offered, because they were waiting for the extension of unemployment. >> what about the argument that people are underemployed? or that they are dropping out of labor participation altogether? career had to take a job that was available. i have done that several times. -- to getople to do

in the workplace improve themselves. they can move up within the company they join, or show their skills to other companies. it's better than being out on the streets. it's also showing employers that there is an available labor force in north carolina in which is very important to employers looking at our great state. >> governor, thank you so much. >> thank you so much. coming up next, we will get you in on the markets update. lebron james says he is going home to cleveland ohio. what are the ripple effects for the nba? that story and more when "bottom line," continues. ♪

>> after four years with the miami heat, lebron james is returning to cleveland-the cavaliers. again.

the head of bloomberg sports, and joins me now on the fallout. fallout has such a negative connotation. this seems like an angelic being to do. the prodigal son returns. he was despised, not only in ohio, for the decision. thennt to the heat, and behaved very well for four years. he won a couple of championships. now, no one remembers the anger. everyone just loves that he is coming back. >> it's a great feel-good moment. a great time for the league. i'm sure for people in miami, it's a sad time it. but he delivered to championships down there. they had a phenomenal run. cleveland,go back to to those fans were desperate for a championship and his home community, it's a great thing. it will be great for business two. >> did miami make mistakes?

the they have done things differently to keep lebron with the heat? >> only lebron really knows for sure what the dynamics were. most people believe that he had a very strong desire to go back to where he grew up, to the fans who supported them through all the years. i'm sure to where he felt, at least to some degree, bad that he had left them. >> not all the years. he was born in akron right near cleveland. he grew up there. i'm sure most of his family still lives there. he kept his residence there for a while after he went to miami. the way he's not cleveland in his hour-long -- the way he s nubbed cleveland took a long time to be forgotten. >> he has done such tremendous things in his time in miami. he did tremendous things during his time in cleveland. hourone our moments -- one moment was a mistake.

people make mistakes. that was unfortunate. but he is now doing something that will bring real joy to people. i think it brings joy to basketball fans everywhere that he is going home, to try and bring a championship to the city that has never had one. he has had a great stretch in miami, the heat fans have had to championships -- two championships. >> this is a guy that hasn't made many mistakes. are time when athletes doing things involving breaking gun laws, and assaults on and getting arrested -- some for murder. this is a guy who is intelligent, well behaved, and he thinks about what he does with that decision show being the only exception. >> he has earned and deserves the respect of fans and people everywhere. it's not just what we're talking about now, off the court the way he has conducted himself, but on

the court, he is incredible. he averaged 27 points a game. he had the highest goal percentage this year. the cavaliers had the lowest. imagine what he is going to be able to bring to that franchise. the coreilities on defensive, offensively, in fact, the heat were in the top line defensively three out of the four years he was there. the cavaliers have been in the bottom five defensively during these years. he is going to contribute. you have a tremendous supporting cast of young players. it is going to be exciting to see. --s really not going to be you have to have strong teams around the league. oklahoma city is not going to say cleveland is just going to win it. >> it reminds me that he made $32 million last year with endorsements -- $72 million last year with endorsements. himhis the right thing for to do, as well as the smart

thing to do from a business perspective? miami -- the impact may be in the other direction. but like he said, he had a phenomenal run the last four years. give me one example of a miami franchise for lebron went there. it was valued at three and $54 million, last year, $704 million. not all attributable to lebron, but he had an effect. >> the cavs will be worth more. >> merchandise, concessions, ticket sales. the whole enterprise value goes up or -- overnight. change is good. all of the discussion has kept the nba front and center. i think it's a great time for the league. this is actually just the start of the decisions. carmella was going to make a decision. we will see what happens. a lot of big stars moving around. overstating or

sensationalizing the importance of this? is there a more importantly than america? >> i think -- >> can you think of one? >> his impact on the game of basketball has been phenomenal. the greatest impact of any individual since michael jordan. we just came through a great final. it's a very good time for the lead and sports in the u.s.. >> thank you so much for joining us. 26 past the hour, that means bloomberg is on the markets. here's julie hyman. >> overall, we are not seeing a lot of movements. ,he s&p 500 is down this week the most since april. all three markets are in the green. in terms of individual stocks, take a look at wells fargo. it kicked off bank earnings the season with bottom lines number that matched, but that wasn't good enough to please investors.

second quarter earnings failed to continue well. we will have more on the markets in 30 minutes. more bottom line next. ..

>> welcome back to "bottom line." i am matt miller in for mark crumpton. three of the richest men in the world have joined forces to light a fire under lawmakers in washington. warren buffett and bill gates slammingn op-ed, congress for immigration gridlock. peter cook has more on their message and the likely response from congress. these three don't share political views on a lot of things but they do agree on immigration reform.

bill gates has been given to both sides. ive on this act issue. they're pretty blunt on their assessment. the thing congress dropped the ball bunnies to do something for the good of the economy, good of the country. of american citizens are paying to take care of the legislative needs of the country and we are getting short changed. they say it is time for the house to draft and pass a bill that reflects both our countries self interest humanity pain of -- and humanity. pretty straightforward message. the reality is despite the power players involved they are likely to get the same reaction of other top business players. republicans see midterm elections within sight. they see the chance of taken the control -- of taking control of

the senate. will be read by a lot of people in washington it will not have a big impact. the wildcard is shadow -- is sheldon and the -- his sheldon adelson. that would be a big deal. >> why hasn't the business community have marks -- have more success in this debate? there will be more men is that more businessmen pushing for immigration reform. more businessmen pushing for immigration reform. >> really the business -- community business lobbying interests don't swing the same way they used to. both parties are playing to their more populous basis these days. -- business does not resume

does not resonate the same it used to. they're also not talking about the same immigration issues other folks are talking about. they are talking about wealthy and educated immigrants. that is not the same core issue on the border right now for democrats. >> thank you very much. topic that -- a that is tonight at 9 p.m. washington time here on bloomberg television. end of his time in office president george w. bush was the last politician republicans wanted to campaign with. same with mitt romney after his 2012 loss to president obama. both are now at the center of republicanessful fund-raising efforts. has changed and what

is the secret here you go >> -- secret here? >> it seems to be nostalgia. willingness to go on past party stalwarts has been interesting and very lucrative. let's look at what they have done. the republican national committee has pointed to george w. bush, a guy who did not even attend the 2008 republican national convention. they also put up a limited 2004 era campaign book. and you move over to mitt romney, where the republican is sellingmmittee "mitch was right -- "mitt was ri ght."

the republican national committee was putting out socks nimum donation of $35. a 2.3 million dollars in fundraising based solely on those socks. nostalgia and socks. that is the key. >> how do those tactics differ from how democrats are raising money? democrats are soft men as well -- are sock men as well. >> president obama's campaign team 18 the peak operators when it came to digital fundraising. a way to learn to do it, and you can talk to both parties teens and talk about this, is doom and gloom. in the committee that is basically running the house elections for the democratic side has become the best at this. and havesubject line

included things like, "all home is lost -- all hope is lost." it said -- obviously this isn't the message the campaign aides are giving. few things are more successful than the doom and gloom message. >> phil mattingly with the report in washington. coming up, we will tell you by argentine president cristina fernandez said no to the invitation to watch the world cup finale against germany. details when we return.

>> welcome back. this is "bottom line" on bloomberg television.

it is time for today cost latin america report. argentina's finance secretary arrived in new york city to meet with the mediator. this is part of the efforts to resolve its dispute with holdout creditors. i am joined now with the details. , thergentinian economy finance minister is not part of the delegation. what do we make of that and what can we expect from this meeting? >> who came are more of the techno kratz -- the technocrats. >> the finance minister and the economy minister are two separate ministers. >> finance secretary came and the legal secretary came and their attorneys were in attendance as well. is downa reporter that there right now, waiting to see them come out. they are still in their.

there.l in they are thinking they are probably going to try to find a way to convince the judge in new york to allow them the ruling that allows them to pay defaulters of debt. and to delay the effect of that ruling so they can possibly not default on july 30. >> do they want to prepay -- to restructured debt? , on july 30, the clock runs out. that was blocked by the judge in new york. they need to prove they are making good progress on negotiations with the holdout in order to get the holdout to agree to a delay.

>> the holdout being elliott. are there more holdouts than just elliott? >> it is a big group. elliott is one of the leaders of the group. this specific lawsuit follows elliott and some other hedge funds. and that includes 13 retail investors. there is a larger group. york wasnk of new holding hundreds of millions of for thein payment restructured creditors. hasn't it gone back? , it is. they issued a motion for clarification to the judge, basically asking what to do now. they want them to return the money to argentina and the bank of new york is saying please

don't make us do that because we are really open to lawsuits. and they have gotten a tremendous amount of heat from everybody with anything to gain in this lawsuit. very much stuck in the middle. we don't want to be forced to return this money to argentina met, two conditions are until argentina gives them the numbers they need for the wire transfer and that the judge says you will not be held liable for doing this. wonder why you pay your custodial banks such high fees. the bonds, meanwhile -- argentinian bonds are in repair. a serious rally. >> unfortunately when these things go behind closed doors and into private quarters, a lot of rumors and situations -- and

speculation start to drive a localprettied up newspaper reported they are going to offer the holdout the bonds and pay in full. in a kind of details report like that gave a lot of power to the markets. the market is posting its best rally in late 19 months. in 19 months. it could go either way for argentina. the commissioners not going to watch. >> she has laryngitis. to go visit her grandchildren down south and argentina. she has a meeting with putin ahead of the brick summit. it isn't surprising she isn't going to go on sunday. >> she still could watch her from her sick bed or she and vladimir could go to a club and watch it together. >> it will be a huge game.

argentina lost to germany in 2010 and a similar blitzkrieg situation that brazil was subject to. brazil is a huge rival of argentina. >> they are probably going to get crushed. it is not disheartening that you say that. you for joining us with the latin america report for friday. up next, your guide to the biggest newsmakers of the week on "bottom line." stay with us. ♪

program like this -- i think

from their perspective the biggest concern is that there is a suggestion that there is a pattern here. has been an ongoing story. we are now in the midst of a five-year period. it has dropped below 40%. of the fact economics are looking worse, there are strong regulations for coal. each passingth month the labor market indicators are getting better. for janet yellen it is not quite good enough. we still haven't seen an acceleration in wage growth. that has something that has been the focus of our clients and the focus of janet yellen. >> maybe the fed doesn't have a clear idea of how they are going to unwind all these unprecedented policies that have been in place for years. the fed growing their balance

sheet over $4 trillion. that remains a barrier the fed is going to have to deal with -- when ites to comes time to unwind. is very clear at this point they do not have a specific strategy in place. exiting by not buying bonds as much as it used to. is not worried much about it. pimco would expect volatility to stay low. when it moves it won't move by much. bottom line you the on what is happening next week. what themes can we look forward to next week?

be a big week of earnings and high profile data. wells fargo opened earnings this morning. citigroup will report second-quarter profits on monday, which could be when we also receive news on the banks expected $7 million settlement to solve mortgage-backed bonds. a the bank will probably report a decline in that it come -- in net income and fixed income trading. all of that is likely to take a backseat with the help of ceo jamie dimon at the top of investors mind. he disclosed his battle with throat cancer last week. morgan stanley on thursday. others to watch next week, google, yahoo!, intel, ibm, yum! brands, and general electric. hear senate testimony on

the house economy. the services committee will get their turn with yellen on thursday. we have yet another general motors hearing on thursday. o'neal,tifying, rodney the ceo of the company that made the faulty ignition squishes -- ignition switches. on the economic front the federal reserve will sum up u.s. a reportconditions in known as the beige book. a u.s. report sales likely accelerated in the month of june. that as a look at what is happening next week. back to you. of >> -- >> i may actually write down to that hearing. check of us, and other the market movers on the other side of this break. we return in just a moment. ♪

>> headlines on bloomberg radio and streaming on your tablet. that doesn't for this edition of bottom line. have a great weekend. monday.l be back on on the markets is next. is coming up on 56 past the hour, that means bloomberg

television is on the markets. let's take a look at where stocks are trading on this last day of the summer week. increase here.n the s&p down about 1% for the week. that makes it the worst week for the index since april. nevertheless a bit of a positive tone as we shake off the concerns of portugal. it has had a big snap back this year. let's talk about how to invest silvers. month silvers went up about 12%. that is double what we have seen for gold prices. what has been going on here? >> there are a lot of little catalysts. at thego back and look

past three years, silver is down 41%. is 25% less than gold and 100% less than the market. we talked about how everything being overpriced. one of the etf that is pretty -- it is almost twice as cheap. points.arges 30 basis is underpriced to get more assets. it is working. when you look at that expense ratio difference it does add up. in long-term it can make the difference of a percent in the return. one is called the

white metals basket truck. >> this is 35% platinum and 50% palladium. the lady him is up 25%. to get different way your silver exposure in a diversified manner. >> it has performed better than some of the silver only vehicles for the years. >> it has that little extra of palladium and it's. it.alladium in there is not only silver miners but there is a pure fund silver miner junior. this is a small cat silver miner. it is the second best performing etf overall. 50% year to date. it is a hot tamale because it is also the most volatile. this is a high data version of

silver. certainly it is surging up. it is having a breakout year. >> we have time for one more very quickly. >> this goes along soc. long soc. this is the highest yield etf of all of them. -- silver spikes you won't feel it. >> thank you so much as always. silver etf's today. street smart is next.

>> they are still heading for their biggest to climb since the month of april. we'll earnings get the rallies back in motion. i am carol masters in for trish reagan. street smart starts right now. welcome to the most important hour of the session. closinges left on the bell. lots ahead up the nation's largest mortgage lender is out of second-quarter earnings,