and go away. a very cool south korea. what can we learn from the people of korea? this is "bloomberg surveillance." it is friday, august 8. i am tom keene. joining me, scarlet fu. us thisgreeley joins morning. adam johnson is on assignment. to talk about.t global stocks falling, bonds rising. that sent german yields to a record low. over to the u.k., home prices rose to a record. sales reaching a seven-year high. in china, the trade surplus jumping to a record thanks to export growth. in the u.s., it is a fairly light today. unit labor costs at 8:30 a.m. will bectivity

important. this will show less productivity and how do we get the growth that we need? >> it is friday. not a whole lot in our earnings. john kerry is in kabul. he will have already met with afghanistan's two presidential candidates. his plate is pretty full right now. >> has that job ever been more difficult? has anyone ever had a worse couple of months? >> that is a great question. has it ever been more complex than what we are seeing? check. a complex data it is historic and correlated. are locked up. equities down. negative eight. the euro is one thing not moving. crude oil is elevated over the

last 24 hours. near 98. the mix is at 16.66 without question. the yen is one of the great things. 101.78 on the japanese yen. there is the german bond yield. a 104 -- a 1.04. up six advancing dollars. >> the german two year went into negative territory. 0.003%. are paying people to take their money in germany. brent crude was 104. up nicely over the last few hours. bond yield, stunning at 3.19%. 's headache, putin

the weaker ruble. data check 4, 5, six screens today, but it is friday. we will not do six screens of data. let's do front page right now as we look at the newspapers. >> let's start with the first one, the u.s. is being pulled back into what is going on in iraq. the president authorizing limited airstrikes against the new muslim militants who control a big chunk of the country. he made -- president obama made the announcement last night. he said it would be to protect u.s. personnel and religious minorities stranded on a mound. >> the second most important word he used was genocide. it triggers all sorts of legal obligations. we have signed a convention on genocide. when we have used that word, it

means we are recognizing our obligation. that is huge. i suspect the president has. he has imaging that we do not of what is going on. the horrifying text messages that are running out of batteries from cell phones. between 40 and 60,000. a lot of people. it is an incomplete picture. dropping food and water to those affected. to our second story, the world health organization declares ebola and international public health emergency. countries outside nine nine hundredhere more than people had died. it is moving faster than we can control. it will get worse before it gets

better. >> the company to watch is the small pharmaceutical start up. they have a serum may have been developing. cure?it a >> it is not a cure, but it has shown to improve things. it has been encouraged by a couple of small government agencies. pharma companies are not willing to go into this. government monday has been moving into this. -- government money has been moving into this. the glide path of where this could go with a gets ugly, it is a longer time frame than many of us perceive. the hysteria of so much of the newspaper does not speak to the ofhematics of the expansion the bacteria or virus, where it takes longer. they're trying to get out front of this. >> it is surprising it has not spread farther than it has.

i am worried that we will hear about it in china. once again to china, it is a different story. >> we talked about the economic potential of africa. the tragedy here is that we are missing -- this is not a problem of the disease. it is a problem of inadequate health care and inadequate resources to fight the disease. >> regulators have ordered deutsche bank to clean up its act. a were told to overhaul technology and compliance procedures. is riskrs say it management deficiencies. >> it is good to see someone taking on deutsche bank. >> this is a memorandum of understanding. this is according to the wall street journal. 2015 deadlinee for deutsche bank to fix the most urgent problems.

>> when you talk to your children, your supposed to make it explicit area you are supposed to know what the consequences are. >> those are front-page stories. >> a busy friday with correlations in the market. futures, negative seven. our film running lane is in washington. does the president have the with hisf congress announcement yesterday? >> republicans are wishing he would do more. we heard from the hawk wing of the property. lindsey graham saying there needs to be a comprehensive strategy that addresses syria and potentially what is going on turkey right now. they are supportive of what he

is doing. i think brandon hit a key point. the word genocide is a trigger word. it has an impact on the policy side and political side of things. democrats recognize what the president is dealing with. >> there has been a conversation about who has the most sway in the white house. this makes me wonder if the national security advisor -- does this mean policy is being driven by her? >> it is tough to say. the idea of intervening when something like this is occurring, when tens of thousands of people are in danger of being massacred, it is along the lines of what sam power has been pushing for for the last few decades. in d.c. right now, but she was involved yesterday throughout the discussions with the national security council. what the president realized and what i have heard from national

security council officials is it was a combination of things. humanitarian crisis. there is a massacre that could occur. the u.s. felt they needed to step in. another factor, there are u.s. asset. that is why the targeted strikes were okayed. moving so quickly and they could endanger u.s. forces right now. the president did not have an option. >> he described his national security policy as don't do dumb stuff. how does this fit into that? >> that is the sanitized version. what has been amazing, you secretaryhow full kerry's plate is. you remember, the president gave a speech at west point that was supposed to lay out his foreign-policy. it was supposed to be the big speech for him on a second term side. everything that has happened

over the last three months has forced him to throw out a way. difficult because they cannot keep a long, broad term policy. that is the long game. what will happen 12 years from now. these are crises that can be put off. they have to be addressed now. >> policy goes out the door when you have people on a mountaintop. president sothe long? what was the catalyst to push them to do this? a briefing call last night. the thing i was taken back by was they were stunned by how quickly this latest offensive by isil has moved. siege,s happened in the it has happened so quickly and over the last 48 hours, i think they are caught off guard and

they felt like this was a tipping point. before this, i feel like they had control. >> iraq is our twitter question of the day. john mccain already has an opinion. we would like to hear from you. should the u.s. boots follow airstrikes in iraq? sweet us. tweet us. different market this morning. lisa is qualified to look at the and correlations. the market can go down, but everything gets locked up together. what do you do as a professional investor? >> they have to look at the time frame. these are the times to be opportunistic. a lot of folks are looking at what is going on in high yield

and whether or not -- there are opportunities emerging. that was one of the markets that gave us an early signal. >> how bad is the bloodbath in high yield bonds? >> it started to get nasty. yields were up to about 6%. fullve moved about one percentage point over the last three or four weeks. about starting to get to $10 million cumulative outflows over the last three or four weeks. >> where is that money going? the am not clear where money is going, but probably onto the sidelines. >> relief for the new york yankees. leadingrms of indicator, what is the high yield indicator for? >> high yield tends to be a riskier asset classes. when folks start abandoning

asset classes like that, it very often is a harbinger of risk off. very often there is a correlation with stocks and other risk oriented assets. we are starting to see emerging markets breakdown. >> when do you catch the dark? someone has to pull the trigger, pick up a phone, how do you get to that decision point? to a combination of sentiment and valuation. areave been talking about we going to get a correction in the market? even here, with some of the selling that we have seen, we

have only breached four or 5% off of the high. >> thank you. >> iraqi is more deadly and terrifying. markets are terrified as well. we are going to see how barack obama can continue to not do stupid stuff. this is "bloomberg surveillance." ♪

>> good morning. look for the cell 1:00 p.m. this afternoon. the best on technology from the greater san francisco area.

this is "bloomberg surveillance." i am tom keene. to our company news this friday morning. star with malaysia. malaysia airlines is going private. malaysia airlines is trying to stem losses and repair its image following the loss of two of its planes. the founder of lululemon and being a fight to buy out the yoga where retailer. he has agreed to sell half of his stake. -- for a buyout for a least a year. the company behind the fica credit store may make it easier for credit -- americans to get loans.

certain unpaid medical bills will be given less weight. that is this morning cost company news -- this morning's company news. >> what is driving that? compassion? >> a push by banks to lend more. the credit score guys. >> the banks can decide what loans they want to make. this is saying the internal control saying they have to a to a-- they have to adhere certain credit score. >> futures have improved. dow futures -44. works at morgan stanley. she knows crosscorrelation. it is easy to see with the turkish lira jumping up this morning. we were talking about this before, but i guess it does come back to the foundations of the market, when you see something like this, what do you buy?

do you buy blue chips, etf? >> this is a time to take a step back, not necessarily jump right in, i think you have to take the time to be doing work on individual securities. bottom-up. >> doing work on individual securities. that is profound and amazing. book folks that nobody reads. within that, you have to do the work from the bottom up. what do you mean by work? figures about trying to out where the baby has been thrown out with the bathwater. when you get into the selloffs, you have stuff that is cheap and stuff that got cheaper. you have stuff that is expensive and is still a little bit less expensive. it is about discriminating. taking some time. >> we are not there at the broad selloff yet. we are seeing money plowing into bonds. not just u.s. treasuries.

the two year yield, it went negative earlier this morning. >> .003 right now. the 10 year yield they are giving away a 1.04. >> the that and ecb are only part of the story. >> that is right. one thing that does not get talked about enough is the demand side of the story. ,e have a global savings glut so we have foreign reserves in china, in japan, and that money has got to get it to work. >> does russia change the demand side? did they move the curve to the left, where you get europe in recession and the yields drive down nevermore? >> that is at play here. the question is, to what extent. it is not clear that the sanctions are at a point where there is real economic levers where someone can champ cutting my gdp forecast.

i do not think we are there yet. at the point of diplomatic political theater is my personal read of it. the question is -- i think a market is starting to say, yeah, but, who is going to blank? >> one story we have been following is the flight of institutional investors moving into catastrophe bonds. they are not in any way correlated with the rest of the market. is that something that you advocate? is that something you are concerned about because they're going into risk they do not understand? >> institutional -- that is what distinguishes institutional investors from individual investors. and as additional -- institutional investors can make those choices. it is hard from folks where we sit to want to be giving that advice to individual investors. secretary of defense hagel

saying 60 of 72 aid on those made it. know a lot more than they're letting on. >> we are 9/10 of the way through burning season. we will discuss that. trattner --d, jason trenner will be joining us. tax, couple of names for inversion. ♪

>> good morning, everyone.

an incredibly busy morning in the markets. let's get to our twitter question of the morning. iraq.the geopolitics of should u.s. moves follow an airstrike in iraq? we need to hear your opinions on this. >> futures have crawled back from their losses. when we came in, they were down, we have come back up. the 10 year yield has come off its lows. >> that is an amazing young. >> we are going to talk about the curse of too much cash at companies. ♪

.> they wait on capitol hill the president waves. all of america waits for news.

secretary hagel is in new delhi this morning, i believe, making clear there is new information on the number of airdrops that were sick vessel to the -- newered on top of a information on the number of airdrops that were successful to the beleaguered on top of a mountain in iraq. thousands of religious minorities are stranded on a mountain in northern iraq. the militants control a large chunk of the country. in gaza, the truce has ended and hamas does not want to extend it. rockets were fired from gaza into southern israel. palestinian militants say they will not end the fighting unless gaza and its blockade.

player,d's number one roy mcelroy, is one shot off the lead. those are your top headlines. >> golf, a good distraction. he has served to six secretaries of state as we look at our top stories. john kerry -- by a truce in gaza. this morning, the is lost -- the islamic state moving faster than the economic policy can rack. -- cannot react. -- can react. >> what is the perspective of the moment as you thought about what united ages doing? what is the needed perspective this morning? to -- a region that is broken and dysfunctional. we cannot leave because we have

allies and enemies, but we cannot transform it either. comprehensive, happy hollywood endings here. you cannot leave, you cannot transform. you have to find a middle ground. to me, that is transaction. identify what you can do from what you cannot. think, the president has tried to find a balance between too much risk readiness and too much risk aversion and i think, on this one, with respect to trying to check isis and to deliver a humanitarian win, he succeeded, but again, you have to keep your expectation real on this. alone.re prime minister camera saying -- prime minister camera and saying great job, u.s.

can this policy work if the u.s. goes in and a unilateral way? >> look at libya. the classic case of a coordinated multilateral intervention. took eightikes months to get rid of ted dossey. khadaffi.rid of take a look at liver -- libya today. is not the absence of european support. the problem is local ownership. larry summers said nobody ever washed a rental car. you don't wash a rental car because you only care about what you own. we are not going to be able to [indiscernible] want to bring them with the

president said last night. we have the capabilities to help avert a massacre, i believe the united states of america cannot turn a blind eye. we can act, carefully and responsibly, to prevent a potential act of genocide. that is what we are doing on that mountain. i have authorized targeted airstrikes, if necessary, in a fight to break the siege and predict -- and protect the civilians trapped there. scope ofnges the whole this. >> it makes me wonder -- for six years we have been trying to figure out what has one policy is. this is the problem that we have been ignoring -- it is hard for any president to have a policy. for thebeen looking wrong thing. it seems like the best we can do is have responses to things we had not anticipated in a sane and rational way. >> anaren, are you seeing that?

, are you seeing that? >> i worked for republicans and democrats. this is not just a barack obama problem. about one thing. we have been failing in matters of war and peacemaking over the course of the last 16 years. you add in the almost eight years of an obama presidency and you are now talking bill clinton, george w. bush, barack obama. the last effective foreign policy we had in this country was george h.w. bush and jim baker. dealingity is, we are with a different kind of world. others are rising and the problems, the nature of the problems, nationbuilding,

historic conflicts, all of these things do not offer have to, hollywood endings. if you ask most americans what is the most significant act in obama's foreign policy, killing osama bin laden. >> thank you. we want to bring in our twitter question of the day. this is a good one. u.s. moves follow airstrikes and iraq? >> i am terrified. it feels like -- those are the most terrifying and realistic words i have heard about what is going on. not going to give my opinion on that. i'm going to give my opinion on a data check. it shows tensions within the markets. negative six. strengthen in the last one team that's.

two point 36, that is really all you need to know. >> has had come -- it has come off of its low. let's do the math. lisa holds parchment from brown university and applied mathematics. corporate america is stunned with a good earnings performance. you nailed this the last time you were with us. again, everybody mention money. >> this is one of the least told stories at the minute. we came into the quarter with folks looking for earnings growth of something like 5%. we have 90% of the companies reporting. we're going to exit this quarter with earnings growth of about 11%. >> was the distinction down the income statement? is it legit revenue growth? growth confirms

thendp numbers are higher maybe what some of the data has shown. was in the market, as we saw the season. >> where are we in the business cycle? can it be longer this time around because of what the fed is likely to do in contrast to central banks around the world? >> i think we are in a longer business cycle. it has been a slow recovery and we are in the six or seventh inning stretch is kind of the way i would describe it. we are just at the inflection point where it looks like labor is going to start taking the

lead. we are going to make the handoff to the consumer. the consumer has been what is missing here in this recovery. it has been corporate-led recovery. >> are companies going to start spending cash? >> they have been spending cash, question is, have we like to be way they are spending cash? they are spending cash on him and day. a.is -- on m and we would like to see them spend cash on investments and capital spending and capital equipment to their productivity. >> that sets us up for our next segment. how corporate america has a first world dependent problem. too much cash. we will show you next on "bloomberg surveillance." ♪

>> good morning, everyone. with me, scarlet fu and brendan greeley. >> we begin with the latest from iraq or a president obama has authorized limited airstrikes against islamic militants.

the u.s. is dropping food and those stranded near syria. the world health organization declaring ebola a world health emergency. the worst outbreak on record is an extraordinary event. leastrus has killed at 930 two people in west africa since it was first reported in march. of the best-known soccer players in the u.s. is calling it wave. landon donovan says he is retiring at the end of the season. he is 32. he is a career leading scorer. he was cut from the u.s. team before the most recent world cup. that is today's headline. landon donovan, when he went down, got up, he changed the world cup this year. --ricans like him

>> he did not plan the world cup. donovan as of landon he was the best american soccer player from a time when america did not feel about soccer. -- did not care about soccer. >> liverpool is making great inroads in america. >> i only care about dave and that come -- david beckham. >> landon donovan past two deandre yedlin. you're going to have to learn his name. >> when does football season began? >> michael vick, the new york jets. our single best chart is on a personal problem that is

familiar to anyone watching u.s. companies. too much cash. even with all of the buybacks and dividends, companies are still loaded up. nonfinancial u.s. companies hold about a billion dollars in u.s. bank account. companies that hoard cash -- the ones that spend it. >> the ones with high cash to revenue ratios up 113%. the lowest gain 100 72%. that is a difference of 59 percentage points. for investors, it does not pay when companies hold cash. this is from pavilion. >> let me introduce a point in to that. from 2009.study what it said is that companies that start up in a recession with lower cash flow, less investment, are more likely to

endure. it lists a couple of companies that started up during a recession and figured out how to spend money well. cash.re is a value to with us right now, lisa. question.nduring you mentioned it early. you want to see investment. >> we would like to see investment. this is about discipline. have that cash and are being thoughtful about what is their cost of capital at any given time, how do i grow it, how do i give it back to shareholders, as opposed to sitting on it is really the question. >> it sounds like it is only a debate for tom. sayingyou saying cfo just say no to share buybacks? >> not yet. if you look at the dynamics, the

cost of equity is higher than the cost of debt. most of them have recapitalized those balance sheet and they are saying, if i do the work on this, it is still making sense for me to buy back my shares, which is one of the signals that this is not a market that is so overvalued. keep talking. futures were negative nine and now we are at negative four. up, gangnam style turn the world on to korea. ♪

>> this is "bloomberg surveillance." i am carlos food. adam johnson is on assignment. let's get company news from the files of bloomberg west. a microchip that functions like your brain. it simulates the functions of synapses and more during calculations. chinese smartphone maker xiaomi sees a big future in india. they shipped 50 million devices in its home market last quarter, more than samsung and apple. shall make -- xiaomi hopes to boost its profile to 100 million by next year. the maker of online games like farmville cut its four-year outlook.

it is making a push into mobile. the reason zynga is around as it is a worse chart than citigroup. gangnam is not about style. korean music is a novelty here. it is an export, but a conscious funded project from the government. tell me understand, for those of us who saw the video here last year or two years ago, just how big korean culture is elsewhere in the world. a trend we are missing in the u.s.. >> you mentioned thereon. there is a so proper they're called my love from another star. it is about an alien who falls in love with an actress. that has 80% viewers share in iran.

korean soaps are popular despite the fact that they have their own tele-novellas. the korean government finances the translations of these programs. brought vhs tapes to hong kong to start this 20 years ago. >> betamax. was aelieve or not, there time when no one was interested in k-dramas. >> this is government? >> government-funded. >> billions of dollars. >> it is what we do with jazz in the 1960's and 70's. do get -- sent duke ellington all over the world. a national number one priority for korea. all of the best minds in korea

would have been running other aspects of the economy and are now put on the pop-culture project. probably the most stressful government job in korea you could have right now. >> japan used to be the source of all things cool. there is historical conflict between japan and korea, but was that always the goal for korea to displace japan? >> there is an ancient rivalry between the two nations. they wanted to one of japan on something. japan on something. the drive was there. >> here's a quote from the book. the drive of korea. this is on korean education. privatelization of tutoring has proved a disaster. parents throw money fanatically

at --. half of k-12 education, so their kids will take you places of brendan greeley's kids in college. >> that is one of the more of the book.spects it is your experience as an american-born korean, going to korea and returning to school there. what was that like? >> in korean school, they use sticks and we had to carry our own desks for an hour. ere were too many students in the class to hit everyone, so you had to inflict your own punishment. you would have to do push-ups or holger ahead -- or hold your

desk over your head for an hour. >> the asian economic crisis left a cultural impact. i have heard about how there is a connection between that crisis and this wave of plastic surgery throughout korea. are so desperate to look as good as possible that plastic surgery is now the solution. >> that is something i am not endorsing. it is a problem. one in three women supposedly have some kind of procedure. there is a perfect golden mean for every single feature. there is a protractor you can take to your nose as should be 95 degrees. surgeon drew me a diagram. that is why i know this. >> thank you so much.

>> improving markets in the last hour. the turkish lira has jumped two days in a row. >> the president has authorized limited airstrikes against islamic extremists. tweet us. ♪

>> markets seize up. united states considers airstrikes against the islamic state. when do you get back into the market? the ecb and fat are at a fork in the central bank road. call it the draghi-yellen affect. we are live from our world headquarters in new york. i am tom keene. with me, scarlet fu. brendan greeley is in. adam johnson is on assignment. our guest host, jason trennert. to catch up on overnight. global stocks falling. bonds rising. german yields go to a record low. turkey's lira is leading the market low. to ahome prices rose record as sales reached a

seven-year high. and china, the trade surplus, thanks to unexpected export growth, a pickup there. in terms of data in the united states, a fairly light today. wholesale inventories is at 10:00 a.m. no significant earnings to update you on, except o'er hill shire brand. brands.t for hillshire -- .> the urgency is not the same futures negative four. they were much worse earlier. the 10 year yields the volumes. 2.3 6%. for those of you on radio. 2.36 percent.

that is stunning. hydrocarbons elevated. brent crude, up as well. let's get to company news. >> the companies behind the fica credit score may make it easier for americans to get loans. using records of failure to pay a bill if it has been settled with a credit company. malaysian airlines is going private after the airline disasters this year. they are trying to stem losses and repair its image following the loss of its two planes. ear founder of yoga w alulemon is done fighting off

-- to buy the company. >> the islamic state turns left. they advance on the kurds. the border between the two is about the distance -- it is short of new york city to cincinnati. pentagon is aware that u.s. intrusion into this form of warfare will come with great risk. the is the risk for president and america? >> the biggest risk is that you end up having isis targeting american assets on the ground and beyond. the obama administration is criticized for acting to weekly and too late. something, he desperately wants to avoid. he has tried to limit the nature

of that intervention in his speech yesterday. i think his redline on no ground troops will be maintained. alone.re and theof england australian leadership saying this is great, but how alone is the united states? >> nobody wants to touch this. the french have said they will support the kurds on the round in the technical side. in the region, if you ask whose side we're on here, we are fighting shoulder to shoulder, as it were, with the russians and iranians. those are the only countries who have offered significant support. the united states is not particularly supportive of maliki.aliki -- of mr.

the recognition of what was happening on the ground with and the humanitarian catastrophe really had to trump all other considerations for obama. he is late on this. he is enormously reluctant. it was the right decision. the story of american foreign-policy has been event. are we watching me and of big american strategies? >> i do not think that is true. reacted to theas presidency that came before him. he had no foreign-policy experience he when he became president. in thatnishing

environment to try to be a foreign-policy president in a domestic environment where no one supports it. he is unusual in that regard. his second foreign-policy team is weak. it is not coherent. much worse across the board than the first team. i do not think that will persist. the environment in which the united states will work, we will develop strategy. the world environment the u.s. is working in is going to be more challenging. >> markets assumed oil supplies were secured, even with isil moving in. there has been some change, is that part of the calculus behind the scenes? >> i think that is right. there is a little bit of a change. there was a presumption.

isis proving vastly more capable than president obama a few months ago. i still think the actual impact will be quite limited here. there is definitely a tail risk that we did not see before. >> this is moments ago. in central blast kiev by the european square. give us an update. not so much on sanctions and how solid issia, the institution? >> they are under pressure.

it is only going to get worse. it looks like the attack injured a few people. the fact is, the president is inane -- in and impossible position. impossible position. the likelihood that the russians pushed back correctly is growing. i would hate to be in his position. having said that, right as we are speaking, food and has had an emergency meeting with his own parliament to talk about humanitarian catastrophe unfolding. food and sending the message the if -- putin sending message that russia is prepared to intervene. >> many books. we are pleased to bring you jason trennert.

cash.go to you are not going to cash. >> i do not think so. one of the things we have talked about is what is the alternative? are high onmotions these things. it makes people nervous. by the same token, you have to be invested in something. i am not sure that the risk-free asset, u.s. bonds, are really all that risk-free. i think they are common stocks that are much more risk-free than uncle sam. where are we, scarlet? 2.36. ramifications to the equity markets? prices are a function of future cash flows. by the same token, you have a lot of companies -- you are finding that the large cap,

stable companies, some are lower than uncle sam. . know the emotions are high the market is going to continue to sell off. i the same token, i am not sure this is the reason to go all cash. improvement?nd would certainly. index futures are at their lows when we walked in and they have been steadily climbing. maybe we will be unchanged by 9:00 a.m. we will answer the twitter question. should u.s. boots a follow airstrikes? tweet us. ♪

>> good morning, everyone. a beautiful friday morning. is with me.ley adam johnson is on assignment. jason trennert. >> let's get to the morning must-read. keep getting it wrong because they use old economic growth models.

a visitingo professor at princeton, americans remain scarred by the crisis. the sense of excitement about the future is missing, despite all of the gadgetry. it is no substitute for the enthusiasm and anticipation needed to propel investment. it is the emotion that the numbers fail to capture. people in america do not feel like this is a bull market. they do not feel like the economy is -- >> i could not agree more with that. i travel 75 to 80 days the year. it is ironic in a way. people describe this as a rally. the market bottomed five years ago. people do not quite believe it. you can see it in the actions of corporations.

there is much more of a tendency to do financial engineering. people are scarred. i think there are other things going on from a regulatory point of view that worry companies. for the average person on the ground, it has been a difficult time. a you sound a little bit like -- like something needs to happen to get consumer spending going. know, monetarydo policy is greatly at odds with regulatory policy. of can throw money out of theters, but is half regulations of dodd-frank are completed after four years and banks do not know what to do, it is not going to be effective. fiscal policy can take the form of lower taxes.

i do not think fiscal policy is doing that. the deficit is coming down. you have to give the president some credit on that. room toght be more stimulate. >> thank you. -- arere communing competing again. we discussed the butte -- the boost to the economy. ♪

clicks green on the screen. thank you for joining us. i am tom keene. markets were amazingly fragile three hours ago. they do better now. two.es up dow futures up seven. let's get to our top headlines. the u.s. has been pulled back from the conflict in iraq.

president obama authorized airstrikes against islamic militants. the so-called militant now a large chunk -- in control of a large chunk of the country. hamas does not want to extend the truce. rockets were fired today. militants have said they will not and the fighting unless israel ends its gaza blockade. landon donovan of the los angeles galaxy says he is at the end of the season. he was cut from the u.s. team before the recent world cup. >> have you recovered from the thrashing you received in the world cup?

>> it was nok outcome. you want to get to the final. >> you have a great uniforms. what is the difference between -- and landon donovan? there is a big difference between the u.s. league and european link. you want to talk about thrashing, the real thrashing that took place was by the netherlands. >> adam johnson, if you are

watching, don't sell, come home. >> he got a nice pass. there was a beautiful goal. >> should bill gross by a football team? >> i will leave that question up to him. die version is how mario draghi described the policy after borrowing costs were at record lows. expects monetary policy to stay on different paths for a long time. divergent monetary policy is something we have known about, but yields fall. let's take the new neutral idea. the bond market seems to be coming around the version of some type of a tightening cycle, but it will be shallow. it cannot be really fast, either.

it is partly risk driving yields down. it is also the idl that it will be something around 2%. >> the ecb did not do anything yesterday. --l the ratcheting up be the to take on full-scale, full-blown, quantitative easing? the testsll see how work out and that is what draghi -- we indicated that. they could drive him to quicker action. they want to see the results of those operations first. >> we asked about the ecb. do you see draghi pulling away from the german influence and

making different decisions for europe? >> there is a consensus driven central bank. you have differences of opinion. people are in favor of less easing, more easing. from the different ecb, per se. >> how will sanctions affect the real economy? it is to be seen still. we have to see how it plays out. it is subsequent to the question we asked. that it was in recession. you are seeing a big problems in the periphery despite the fact interest rates come down.

how much longer can draghi hold -- i guess he can do it indefinitely. at what point are they're not political -- are there political pressures within the countries themselves? it is a global phenomenon. if you think about europe, what they would like to see is the -- disappear. that is the key thing here. they're probably going to take more action. if you listen to draghi yesterday, he likes to see the government take the right action. it has been remarkable how

strong it has been. >> let's come back on this. let's get to our twitter question on the -- question of the day. should u.s. boots follow airstrikes? tweet us. ♪

>> this is "bloomberg surveillance." let's get you some company news headlines. murdoch's publishing

company reported quarterly earnings that missed analyst asked him it's. cbs no longer wants to buy cnn. fox made a bid for time warner. murdoch said he would sell cnn if the deal went through. 's japanese parent company having growth issues of its own. profit missed estimates. they're getting squeezed by discount calling plans. u.s. forking to the growth as a result. go over to tom for this matters now. strategicranter is a strateg trennert is a

on the is an optimist banks. they will prosper. they will support business and investment in america. this is a bit out of consensus. >> be drama surrounding the banks since the financial crisis , it is not the easiest thing to get behind. as we were talking about before, banks have to do something. there is a normal -- an enormous amount of excess reserves. you saw that this week with the fed's senior loan officer survey. they're going to eat their lending standards. >> you were working, running research notes.

bank consolidation goes back to jacksonian democracy. a great question. part of this, we are talking about before, the regulatory environment that you are in. dodd-frank was past four years ago. 398 rules have to be written to comply. six -- 206 have been completed. to the extent to which, as we keep making progress on dog flying, banks will feel somewhat more confident. on dodd-frank, banks will feel somewhat more confident. >> totally focused on jpmorgan, bank of america, wells fargo. there are many other banks out there. which banks attract strategists most?

uglies,e the big jpmorgan, bank of america. at this point, mainly because they has done a very good job of reforming themselves, i think they're poised to do well as the economy starts to broaden. the economymportant itself is less focused on finance engineering and long-term growth. the simple answer is probably not. they have to have that. that is part of the risk of that shareholders, that is -- they have to be compensated for the risks they are taking. they do not want to own tech companies or a company that is going to be focused on capital appreciation. they want the income. that is an important part of the process.

>> is citigroup right to look international? >> they have gone down that path for a long period of time. reevaluation of the love affair with being in frontier markets and being in emerging markets. at this point, given some of the news this morning, it may not be look at home. the greatest emerging market might be the midwest or the industrial part of the united states. there are a lot of things you can do in the united states without a lot of the attendance geopolitical unrest. now, let's go back to scarlet fu. >> we were looking at futures earlier. they were down by 8/10 of a percent. they have come back a long way. futures are higher. by almost four points. >> it is becoming clear that we

are not going to become enmeshed in iraq. unequivocalt was about what his plans were and how involved he wants to get. >> this is surveillance." -- this is "bloomberg surveillance." are streaming on your tablet, smartphone, and at bloomberg.com. our guest host for trennert the hour is jason trennert -- our guest for the hour is jason trennert. >> president obama authorizing limited airstrikes against iraq. they are dropping food and water to aid iraqis stranded in the northern territory near syria. the who declared ebola a public health emergency.

record isoutbreak on an extraordinary event. it is calling for a coordinated, international response. tiger woods, nine strokes back after the first day the pga championship. three players, including lee westwood, shot 65. shot off thes one lead. those are your top headlines. huge declines in golf sales in the u.s.. it is important to point out golf does not have a tiger problem. golf has a millennials problem. people are leaving golf for fitness. >> i agree. look at the sailing world. you have a lot of experience. we remember the days.

it has changed. people do not have the weekends to do golf or go yachting. millenials choose not to go golfing. 40 is a beautiful bow. -- boat. ed as a youth?o bow, but itet a would have to sit at the dock. >> let's switch gears to our top headlines. president obama authorizing limited airstrikes against sunni militants. brian, by calling this, casting

it as a humanitarian mission, what kind of flexibility does the president have or does it hamstring him in terms of what he does next? >> he wants to hamstring himself. he could not have been clearer that i would not allow the united states to be dragged into another war in iraq. beneath this media frenzy about his announcement, the reality is, this does not represent a strategic shift in u.s. policy on iraq and syria. he is trying to constrain himself and limit whatever the to a modests does action here. >> he authorized airstrikes on forces if they continue their advances. that is not much of an if. >> it depends on how strong the kurdish are. happens overhat this weekend.

the strikes have not happened and the other thing is, iraqis getting some support from russia and iran. there was a strike that killed 60 people. something is happening and it is not the u.s. >> what is the state of calm in baghdad? >> they are nervous. are also negotiating over the next prime minister. today is the deadline for iraq's president to offer a nomination for the next prime minister. politics continue. baghdad is being hit by suicide attacks, but they are relatively safe compared to the situation in mozilla. -- in mosul. brian of the things that was saying that was interesting, this is just a limited humanitarian mission.

people figuring out who we need to protect. >> he did authorize airstrikes if they continue to advance. we will see how that plays out. we will be right back. ♪

>> good morning, everyone. i am tom keene. an amazing morning. the markets turning around. futures up four. what a reversal. better news in the markets. >> what a risk aversion? betty liu.now, we are going to focus on the markets. >> we are throwing focus on the markets. if you are too rattled to put your money and stock markets, a lot of americans put their money in their homes. home prices continued to rise. the ceo of one of the largest homebuilders in the u.s., he will be joining us at 8:00. i want to press him on one issue that is bugging the housing market. how to get first-time homebuyers back into the market. if you are going to get them

back, are they going to be high-quality? >> we look forward to that. "in the loop" beginning at 8:00 with betty liu. >> we're going to take a look at photos today. this is the flag-draped coffin carrying the remains of harold greene. it is important to look at that to remember that it happens. this ritual that we go through, to remember that things happen. joint chiefs of staff saluting for the major general from upstate new york. sincehas been 40 years richard nixon announced his resignation. that picture, stepping into air force one, that is what people will remember. >> i saw the whole thing on tv.

and say to him, i am sorry it is over, and for him to move -- it was like a one or two day period. people understand he was a flawed person. some of the foreign policy things he did -- >> he almost had a deal with edward kennedy on health care. that was 40 years ago. this is a dance party that, tends. it is a bow that circles manhattan. there are no drinks and people dance. >> no drinks? >> it is a morning dance party before work. >> this is american ingenuity. this is innovation in a recession. >> i think tom and i would be out if there are no drinks.

>> it is a pre-work thing -- i try not to hit the sauce before 8:00. >> who decided to put this on? >> this week in business week, a --k at the silicon valley not a terrible place. >> we will be right back. ♪

>> this is "bloomberg surveillance." i am scarlet fu. with me, tom keene and brendan greeley. adam johnson is on assignment. our guest host is jason trennert . it's get you company news. ibm says it has made a microchip that functions like your brain. it simulates functions of neurons and more to make cap you look -- calculations. the chip marks the latest efforts to design brain-like chipmakingaditional produces fewer breakthroughs. xiaomi sees a big future in

india. indian demand for its phone will equal china. xiaomi hopes to boost its global smart phone sales fivefold, to 100 million next year. after of zynga tumbled they posted quarterly results at the low end of the forecast. >> that indicates what we need to know about zynga. >> they are postponing several new titles as it makes a push into mobile. that is the company news. with us.trennert he was the first one i thought of when i heard the news that smart is back on wall street. there was a reaffirmation of smart content on wall street this week.

evercore bought isi. completea reaffirmation that intellect matters. >> i think it does. i worked there for 15 years. is the babe ruth of the investment research business. nancy -- nancy lazar is going off on our own. why is isi so unique? >> it was one of the great places to be trained. it is one of the reasons we have been in business, because of all of the lessons we learned. it should focus on making research accessible. doing good quality research, but allowing it to be written in such a way that people can read it.

>> this is important. you hear me talk about chart paragraph. feel of thesehe reports is not mechanical. jasonel like ed hyman or trennert wrote the chart. that is the difference. >> it is important to print it out and feel it. amongis a tendency research analysts to get wrapped up in their own intelligence. they write things that are very ivory tower-ish. you have to balance your willingness to write a lot of things with being useful. >> it is not just portfolio managers. >> one of the practical pieces of information that you just

publish was a list of companies that might be good candidates for tax inversions. walgreens decided not to go that route. 20 of other companies you found that might be tempted to. things.s based on two how much of your revenues come from outside the united states. the other is what your effective tax rate was. we combine the two factors into a situation where we said ok, these are the companies most likely to do it. the other thing that is interesting, it may be too much of a stretch, but i believe these things that are happening are in reaction to a sense that american power is somewhat limited. there used to be a stigma attached to inversions. walgreens decided not to do it, the argument about economic patriotism is really not very compelling for a lot of people.

people are not blaming companies. >> when walgreen says it was not going to do its inversion, there was an assumption it was caving to political pressure. that -- it indicated laid them a little naked there. they did not have a strategy. they had a tax strategy. when that disappeared, their valuations dropped. >> no one is going to say this is a great way to run a railroad. it is not a substitute for actually having a good strategy for growing revenues and earnings. it can help. the activist movement is growing. there is more -- part of the reason companies are doing this, there are more investors pushing companies to do that. >> here are some names.

-- pharmaceuticals. , 40 6% effective tax rate. >> where is microsoft? why not the big ways? >> i am not sure. perhaps they do not have to do it. there are other things they can do to grow earnings. there is probably more restructuring they can do at home. some of the other companies, in some ways it may be that they are running out of rabbits to pull out of the hat in terms of growing earnings. you are getting pretty down the track in terms of things to grow. >> let's get to our agendas. tom, get us started. >> iraq. so much going on.

the market reaction. i can say i have never seen a correlated market reverse as we have seen over the last three hours. dow futures way negative. dow futures up nine. 2.3 9% shows the tension as we go into the weekend. with theed everyone u.s. going to launch airstrikes, should boots follow suit? should they follow airstrikes in iraq? >> i am not sure it is necessary. >> absolutely not. intervention and conflicts we do not understand. >> amen to that. i remember reading accounts from the clinton white house during the rwandan genocide.

they were frantically looking up -- are the >> we have to get the last answer and. yes. adopts the united states mandatory military service policy. >> i am watching turkey. in two days, there is going to be a ballot. from the outside in, it is easy to not take erdogan seriously. he scored a hat trick in a soccer match in opening a stadium where the goalie stood to one side and let the ball go in. he is loved. he is very popular. it is worth paying attention to. i am keeping my eye on the

banks. deutsche bank is under pressure with the new york fed and other regulators, telling it to clean up its act. there are some issues with its record-keeping. bank of america, we still have not gone the announcement from brian moynihan about a settlement over it securities. >> what do you want to get smarter on over the weekend? >> that is a great question. one, smarter on europe. i am starting to worry more about deflation. that is changing the mixers. how thaterned about might impact u.s. monetary policy, to the extent that there has been a move to normalize interest rates. if europe is going through a , that might have an

impact on the pace at which we normalize interest rates. >> thank you. stay with us. jason moved the markets green. " is up next with betty liu. ♪

>> good morning. it is friday, august 8, and we are live from bloomberg world headquarters. "in the loop." -- you are "in the loop."

and i am betty liu. one of the issues in housing -- getting first-time buyers into hovnanian hasara more. the ceo of the humane society joins us later in their campaign -- on the campaign and the battleground state. president obama has given the go-ahead for air strikes against islamic militants in northern ofq threatening thousands religious minorities stranded on a mountain. open higher.u.s. the dow jones industrial is at the lowest level since april. in hawaii, one disaster averted, but another could be on the way.