>> from bloomberg world headquarters in new york, i am mark crumpton. this is "bottom line." today the united states and european union warned russia of further sanctions. detroit hits 275 elgin dollars bankruptcyexit from and we will look at whether an end is in sight for california's drought. to our viewers in the united states and those of you joining from around the world, welcome. will coverage of the stocks and

stories making headlines today. olivia sterns crunches the numbers. of the criticsry and millionaires. we begin at the white house with peter cook and late developments on ukraine and britain where -- raising the terror level. >> good afternoon. the terror level from severe to substantial, the second-highest level and the u.k. terror threat system. we are not doing the same here according to jeh johnson his says there is no credible threat but clearly u.s. officials have talked to u.k. counterparts about what is happening there. the british prime minister talking about the decision today and talking about the general generational struggle. the particular worry, the 500 or its war so that have gone to theory a and a rock. worried they could come back to

the united income. talked about this is the biggest terror threat phrasing -- facing the u.k. ever. >> we are facing a terrorist organization not being hosted in a country but seeking to establish and violently expand its own terrorist threat. extending credit to the turkish border, we could be facing a terrorist threats on the shores of the mediterranean. >> here at the white house spokesman, jim ernest saying they have been in constant communication with the accused -- u.k. about the decision there. of course to the region as well. -- credibleat of threat seen specifically posed isil.fel --

>> we're hearing both countries may be prepared to ration of the economic pressure. words there getting u.k. will push european leaders to pick up -- take a pretty dramatic step to exclude russia from the swift thinking network, basically the financial backbone, financial messaging system that involves war 10,000 i haveal institution spoken to international thinking officials who said it would be a but big move, not fatal fatal to the russian economy at a very tough time. we asked the white house press secretary whether the united states was supportive of such a

move and he did not answer the question directly but did reiterate the united states is prepared to impose more economic pain or actions of the u.k. and -- ukraine. russia interfere in ukraine and ways the international community is completely unwilling to tolerate. as a result of that, it puts russia at risk of facing additional economic costs that can be imposed i the united states in concert with our allies. keeping, the idea of them outside this with network has come up. the president heading to europe himself for a nato summit. a trip to estonia and wales where you can be sure the talk of how to rein in vladimir putin and change his policies will be a hot topic of conversation. fromter cook joining us the white house. thank you. controly under isil

continues to expand and violence continues in northern iraq. still boom time for local, knees making money because of local american security officials. u.s. businesses .hat started in the first place the influence of the islamic state grows, the extraordinary growth has begun to slow, and in the boomtown, business leaders are facing a new reality. >> talking about the isis situation, it was a big surprise for us. we never think we will have these very close like what we have right now. may operateompany out of a small building but over

the past decade has become a big business. the patriarch started the firm in the 1970's before handing over to his sons. the siblings covering their growing corporate empire like a board of directors, all of them specializing in separate sectors. >> we sit down and mostly it is approved. >> brother number two has been head of the company since 1992. the americanr amid military arrived in iraq and kick started corporate cash flow . the 101st airborne division contracted the group to build, clean, service and in some cases secure u.s. army bases in the iraqi city of mosul. make a hugeble to

business with general petraeus in charge. >> huge business meant tens of millions of dollars in contracts across northern iraq over six years. at one point profit topped $1.5 million per month. group displays thousand and one of a handful of companies to dominate the larger infrastructure projects. cash in ournough hand. suddenly kurds were running businesses all over iraq. is one of two private electricity suppliers in the whole of the region. the local government sometimes truckers to death struggles to pay the bills. when they open the new oil refinery earlier this month,

there were no government inspectors in sight. and no government approvals on site. recent capturete of iraq's largest oil company pumped up prices and the groups potential profit. lucky. very lucky. the market is very good right now. spent $5 million over two years for the relatively small refinery south sul and expects to make the money back in around six months. 6000 barrels of crude oil per day, producing lower octane gasoline, diesel and daily profits of around $30,000. -- the eldest wanted to show was his project, a construction site he says will one day be the largest mall in iraq. my -- 1.5 million

square feet. likes the group's new headquarters will be incurred expands tallest building. -- wherewould you would your family be without the u.s. military? >> i cannot imagine it. totally different. something you see here is support. >> a decade ago the u.s. military overthrew health businesses to take off. now air strikes from that same military against the islamic state that ensure companies here can survive and company owners can continue to thrive. text 20 million ? ?- >> 20 million gekko > only fellely it has

just a few kurdish pockets. me here inley joins studio. this one business, what does it tell us about the economy in northern iraq, the kurdish areas and across the entire country gekko >> history plays a role. you have the no-fly zone. they suddenly have the freedom to develop business practices. it gave a massive head start off the 2003 invasion. it shows want to give these people opportunity, they will take it. cash coming from the u.s. military is key for them to grow like they have. >> interesting. all about timing, isn't it? inc. you so much. coming up, detroit's they crept planningnkruptcy plan to exit before the judge next week. a preview and the challenges detroit will likely face when we continue in just a moment. ♪

>> the city of detroit filed for bankruptcy back in 2013, the largest municipal filing in history. detroit is scheduled to defend its bankruptcy exit plan before a federal judge next week. joining me from chicago restrained ripley, senior director of u.s. public finance local government grew by standard & poor's. welcome back. good to see you again. look forating agencies when a minister palit he is attempting to -- when a municipality is attempting to exit from bankruptcy? >> after the bankruptcy would be completed what we would be looking for is how viable the long-term plans are.

when it embarks on a process, it is long and costly. what hurdles does detroit face long-term? >> we do not see bankruptcy as a reset button that you can go back to operating an operating well. you need long-term strategies for expenditures and revenue sources. withll take a lot to deal the built-up infrastructure needs and other economic development issues. resolutions to those kinds of things are what we would be looking for long term. >> is there a template for something of this magnitude, 18 billion dollars? >> not that i am aware of. it really is the biggest in history. we have seen other cities.

one thing i can say is the process is faster than it is most of the time, which might be good. functioning rather than a more debilitating timeframe to be in bankruptcy. detroitrday we learned wanted a commitment for 270 5 million in financing to fund the exit from bankruptcy. what might this say about the outlook for detroit? will that help the city gain market access ? >> it is one of the key factors we are concerned about after emerging from bankruptcy. you may not have bond interest. there was an exit financing announced this week. withve also seen them water and sewer. one thing they have in common with the lighting issue is there

is a different security pledge on it. host of it they are having issues with in the settlement were gao pledges, the exit financing will be in income tax ledge. lighting was a pledge of utility tax. morning theyis agree to wipe out billions in debt. the so-called grand bargaining print -- promises 800 million over 20 years, one that would support city retiree pension favors. two legal delays impact our rating agencies view as -- you a city's ability to get back on the road sooner rather than later? >> definitely. we expected it's a more drawnout process for getting back to normal. and you are in a bankruptcy a lot of times you will see city resources being deployed to support the needs of the bankruptcy as opposed to

supporting the needs of the city of detroit or anywhere else. that is one of the concerns we would have is the latest causing it to be a more drawnout process. as i said, what we have seen with the detroit process is it has gone by pretty quickly. it may not be as debilitating provided things can be resolved or quickly going forward. >> when you say pretty quickly, that against the backdrop of the size and scope of what they're are up against? >> i know there has been an aggressive settlements that have been reached with major settlements. work to puta lot of into. everything is in a hyperdrive mode. should be to the benefit of the city. it is the longer-term view that we take. we are looking at repayment of

debt over 20-30 years. our horizon is that long. you well know, there is a stigma that bankruptcy community -- the bankruptcy ruling holds. how hard will it be for detroit to erase nagging doubts about keeping the fiscal house in order and not fall back to the same bad habits and bad policies that got to the city to this point in the first place? >> that is a really good point. that is a concern you have going forward is even if they have financial house in order, what is the reputational risk or moral hazard of filing for bankruptcy? the best of circumstances. that is something they will have to deal with. the bond issues we have seen, which can be a major way to fund cash flow or capital needs, if no one is interested in buying the general obligation debt for long amounts of time, that in

the issue as well. it also means the types of financing you would do. impact. have an >> jane brickley, senior director of the local i nantz government group joining us from chicago. always a pleasure to get your expertise. have a good weekend. we will continue to cover the fiscal crisis tuesday. the regionall be chamber of commerce. at its tuesday on bottom line. of next, on the markets report for this friday afternoon. hack attack on jpmorgan went undetected for months, we will focus on how much money companies are spending to protect themselves. bottom line continues in just a moment. ♪

>> bloomberg news has learned the hack attack on jpmorgan started in june and reach deep into the infrastructure. the fbi is investigating. jpmorgan one of at least four other banks hacked by at least -- by allegedly russian investors. at this point it is unclear about the extent of the damage of how have the institutions been preparing for the attack? >> one up there very few institute -- institutions that have ever been hacked. jamie dimon, the firm has announced they will spend $250 million by the end of 2014, 20 five cents increase for what they spent last year. 1000 employers. it's on like a lot of people but

about one percent of the net income. of one percentf of the entire staff. considering they're paying double-digit billion fines to the government, not a lot of money. did find research by sector. turns out banks are spending the most money impaired to other sectors to protect themselves from infrastructure hacks. they spend more than $10 billion and slightly more than i.t. companies and defense companies and far more than health care and energy, 10 times what it has spent on water and utility. >> how does jpmorgan hack -- stand up against the biggest hacks we have heard of? >> bank has recently been subject to the denial of service attacks. the big one we all know about his target. that is the fifth biggest data breach since 2000 five. the biggest last year was core

ventures, nearly 200 million consumers have their information stolen. sterns,beth -- olivia thank you. bloomberg is on the markets. matt miller is standing by with the details. of movement as far as the intraday trade. the s&p hovering around the 2000 level. we're looking at the best month this year since february, up three .6% compared to more than four percent in february. highlighting a couple of individual stocks. astrazeneca just advance to phase two trials, boosting hopes for success with speculation that talks have resumed after a failed takeover attempt by the u.s. drugmaker back in may. big lots. the discount retailer second-quarter profit came in just shy of estimates. same-store sales falling short as well. big lots raise the lower end of

the forecast for the year and announced a $125 million buyback plan. on the markets. we're back in two minutes time. ♪

>> welcome back to the second line.'ur of '"bottom i am mark crumpton. california is now three years into a drought. over 90% of the foreign yet is said to be in the mid-studs severe, extreme or exceptional drought. teamster is with no west -- -- national oceanic and atmospheric association. he joins us from washington. thank you for joining us.

in the past three years california has missed a little over a years worth of rain. have there been drier times in the states history? >> depends how long of a time span you are talking about. we have had times where the three years of precipitation accumulated has been lower. this is certainly one of the lowest we have seen but there are other aspects that are making this hard other than a lack of rain. this has been very warm. in particular, warm during the winter. that is critical in california because a lot of the water supply in the region is based on sierra nevada and cascade mountain snowpack. by april 1 they need a pretty good amount to start melting so they can spread water across the state. has been very dry the past few winters.

reason, the snowpack is even worse than the precipitation this past winter. they had about 60% of the normal precipitation but it was only between a quarter and a third of normal depending on who you talk to. the combination of the dryness, plus the higher temperatures we have seen make this a pretty bad situation. lot, may not seem to be a but tell us specifically why something of little skew it either way can make a difference. >> what you are talking about is as you go up the mountain, temperatures get colder. so if you're having precipitation, a difference of four or five degrees near the freezing level means you will move for the snow falls higher up the mountain so the snowpack normally closer to the ground

level will be instead higher up the mountain. you miss a whole lot of snowpack. do you think the state will get any relief from the el niño weather system? >> earlier this year it looks like we might have robust el niño develop. , you typicallyop get a nice feed of moisture that gives the states have a precipitation everywhere. unfortunately, as we have approached the winter, looking more and more like we think it'll happen but in the mild to moderate variety and not as reliable in bringing precipitation anywhere except the southern part of the state, not with the reservoirs are anyway. >> california weather patterns, they are also a regional phenomenon. what patterns are you seeing in

the northern versus the southern part of the state? not entirely sure what you are speaking to. >> what are these patterns looking like in the north versus the south? and he noticeable change? >> more recently we have seen quite a bit of precipitation and the south, especially during august that has relieved some of the worst of the drought. this area seeing improvement is in the desert. talking about a couple inches inches and not where there are reservoirs anyway. it looks nice on the map but does not good -- do any good for the impact. >> what is the outlook during the seasonally dry time during october and november? >> as we go into october, it is just the

time of year when rain or precipitation does not all. i can say with pretty high confidence that through the end of september am a it is not going to get any better. sense that you feel farmers will get relief? it would depend on what they're planning and where. an expert and agricultural aspects. i know it is different in california than other parts of the country. a lot of times in california crop start your gated. they are almost always ok as long as they get water. what will happen is people who are afraid they will not get water just won't plant. you will have fewer crops instead of those butter are withering and dying like those in the midwest. there was a study by university of california davis.

it did say there was 17,000 jobs lost because of this agar culture out there this year. >> serious economic impact as well. joining us from washington. thank you. coming up, one month before a presidential election, brazil goes into a recession. details are next. ♪

>>"street smart" at the top of the hour. trish regan joins me now with a preview. >> we're going to talk a lot about ukraine. a couple of terrific guest. peter king of new york going to talk a lot about the president's lack of strategy it comes to syria. don't forget the comments he made yesterday when he indicated there is no plan in place.

for the senator king white critical of that. all slow hearing from a retiree general for his thoughts on what they should be doing when it comes to vladimir putin and the ukraine and the islamic state. of hacked show. -- a packed show. thank you. we will see you at the top of the hour. time for latin america report. for the first time in more than five years brazil has slipped into a recession. the growth rate shrank .6% from april to june. raymond collect joins me with more. trying to stimulate growth with tax cuts and more spending. what are economist saying on why the strategies have not worked? >> the brazilian economy has been slowing down for several years. when she took over nearly four

years ago she inherited the fastest-growing economy in over there -- and over two decades and now presiding over a recession. there are three main reasons. one, the weaker demand for commodities such as iron or. than the fact that consumers are by using less, fewer tv sets, refrigerators and cars largely due to a rise in interest rates, and the third reason that came out very clearly in the gdp report, falling investment. that is closely linked to a lack of confidence. consumers are not confident the economy is going to start growing again. they complain about interventionism, especially in controlling market, prices, etc.. >> how are brazil's central bankers expect it to react? >>

we're hearing from some of economist they may put pressure to ee's monetary policy. there is not a lot of room to do so. inflation still hovering close to the upper ceiling of the target. many are expecting whoever the next president is will have to heldt rises that have been back such as energy and transportation and other utilities. there may not be room for the bank to start cutting rates. lex what is the impact on the general economy and how could this affect the reelection date? >> it will clearly get the opposition candidates more fodder to criticize and assess track record. we have to remember two things. one is that this is data from two months ago. to some extent it has already

been reflect it in opinion polls and the others we have a very unique situation in which despite economic slowdown, income figures and wages have remained quite strong. >> compared to the rest of the region, how is brazil faring? talk to us about the divide? >> not faring very well. investments as i mentioned earlier. of the already had one lowest investment rates throughout the region and that is sinking further. if you look at latin america, it is quite clearly divided between the atlantic and pacific. the so-called alliance countries that have adopted more market , which haveicies been more rigorous in terms of fiscal policy are growing

faster. more ofomies that have a state led economic policy come a few well will, are not doing as well. >> prospects for rebounds, are there were the economies? >> if any, very small and gradual. we are expecting 0.8% this year and 0.9% next year. i think that says it all. back to where it started, you do not fix the problems overnight. you did not get people to buy overnight, especially with limited option to cut rates as we discussed earlier. with the latin america report. have a good weekend, thank you. week.t, newsmakers of the we continue in just a moment. ♪

>> of reminder, multiple ways to watch bloomberg tv. we are on the web, mobile device, apple tv and amazon prior. it is friday, so we bring you a -- mostk at the most in notable newsmakers of the past week on bottom line. award shows are events. it does trigger conversations with twitter. you get millions of people commenting on what they said, who won and did not win. almost like the last 30 seconds of a marketing plan to engage viewers to make comments. early on inght very my career you do not fight the federal reserve because you will lose. those investors have not only been fighting the fed, they have been fighting the ecb, the bank of england and the bank of japan. you see where it has gotten them. likeu have the big event

that. there is a big learning curve and do improve the infrastructure to be in better shape compared to what they were two years ago. it is still a challenge. it is still very dynamic. you could call it the consequences from flooding to high winds. thegetting one attack of jewish museum in brussels. very concerned about follow-up attacks. even if people have not yet gone the isisnspired by message. this really is the most effective terrorist threat we have faith in several years. groups now the sexiest out there, surpassing al qaeda. counterterrorism officials tell me they're very concerned about a real threat to the homeland and allies abroad. >> lowing after a global footprint. after a global

footprint. no one really went after nike. now.nk the war is on when you have clearly an iconic type player like kevin durant, you're talking about the world. a financialecome windfall. >> a look back at the notable newsmakers from this past week. let us get you the bottom line line and what is happening next week. i called the in washington with the preview. manufacturing global central banking. the dual crisis in the ukraine and middle east. monday marks the unofficial end of summer with labor day. the good news is we get a day do u.s. bonds and .quity markets tuesday new data should show august manufacturing near its highest level in more than three years, signaling a pickup in the

economy and central-bank news wednesday, the federal reserve will come out with a beige book, summary of u.s. economic anditions getting the fomc dual information leading into this september 17 meeting in washington. elsewhere, central banks in australia, canada and japan are greatthose to announce decisions. mario draghi has signaled large-scale asset purchases may be necessary. wednesday president obama will meet with the president of estonia, lithuania and the castle city tulane. that comes before a major leaders summit set to begin thursday. leaders have expressed concern a might be russia's next target. it will be the topic of day one. following today's remarks i general rasmussen condemning

military action. president obama and nato leaders will huddle on the islamic state threats in iraq and syria friday. with theout the week august jobs report friday. economists surveyed by bloomberg expect to hundred 25 thousand jobs added and a job in the unemployment rate to 6.1% down from the current 6.2. >> thank you. stay with us. another check of the market movers on the other side of the brakes on this final friday in august. market mixed at this hour. ♪

>> get the latest headlines at the top of the hour streaming at tablet incom and your mobile phone. i am mark crumpton reporting from new york. i will see you to's a. enjoy your weekend, everybody. 56 past hour which means

bloomberg television is on the markets. not a heckuva lot of movement. s&p outsourcing back and forth around the 2000 level. the nasdaq at 3572. up a pretty good month. month since february. if you sold in may and went away, not only did you miss a decent rally in the stock market but breakout performances run some of the smallest niche etf's with less than 10 million in assets. join me to look at this mall etf's a big summer is the guru. do you like that, two? >> i will take it. so it is the friday before labor day and we decided to pull these out of the bag. i noticed nashville at the top.

story? >> this etf has been labeled as gimmick. and invest in stocks and companies headquartered in nashville. country music thing? >> a cost of doing business thing. a lot of companies go to national well they have low taxes, no income tax. a lot of companies that are over 100 million. what you saw the summer is this doubled up performance of the s&p. down to thecomes hospitals. hospitals had a great summer, up 25%. these are big weightings in the etf. this got juice from there. 40%. sector does well, the etf should follow. this is a gameplay.

>> the tax implication of nashville, tennessee. i know our laughter, ronald ,eagan's chief economic advisor moved famously from california all of his businesses to tennessee and moved his entire family there as well. like the etf market is elvis buying local. you are only marketing to tennessee residents. i do not know why they don't play that more. got for use have you besides nash? >> we go halfway across the world to china. the deutsche china small cap etf which want up about 18%. the best-performing china ats. chinayou had to live in and be a citizen to buy air should -- a shares but deutsche bank has done this for you. >> by getting small cap they have led the rally, plus small

tech exposure. that is where the heat is, the text area. that has given this one a little extra juice. still strong but very new. i got the ipass global carbon etn, theriot secure. in exchange traded notes. unsecured debt obligation. this tracks global carbon credits, which has not been popular since the economy has gone bad. china said they will look into this. that gave us 26% boost the summer. grn as well.is our etf guru, thank you very much. had a great weekend. you stay with us at home. a quick break. when we come back, trish regan here with street smart. ♪

>> welcome to the most important hour of the session. 60 minutes to go until the close ahead of labor. stocks mixed but on track. an the bulls push the s&p to second straight record close cap go i am trish regan and "street smart" starts right now. ♪ today the conflict between