morning oil tries to find a fragile bid. we consider the commodity elephant in the room. think china. and it is not what jack dorsey said, it is how he said it. twitter confronts wall street. twitter confronts it's very future. this is "bloomberg surveillance ," live from our world headquarters in new york. i'm tom keene. joining me, brendan greeley -- and it is about emerging markets this hour. brazil is leading the way in weakness. one of our themes. brendan: they have had to revive their estimations on what their fiscal surplus is going to be. they had one and it wrote it. for the finance minister, he was pitched to have credibility. does he still have that? tom: one of our themes on brazil and we will touch that twice. there are top headlines with vonnie quinn. vonnie: investors are waiting to

hear what the federal reserve says about interest rates after wrapping up its today policy meeting. -- it's two-day policy meeting. a survey by bloomberg put the odds of a september increase at about 50%. in china, a late rally in stocks. the composite -- the shanghai composite index rose 3.4% halting a fallen -- a fallen one at 11%. the government reports oil inventory figures a few hours from now. the congressional review of the iran nuclear deal is entering a new phase today. managers will hear from defense secretary ash carter and joint chief martin dempsey. house panel quiz secretary of

state john kerry yesterday. the more jack dorsey kept talking, the more twitter stocks fell. down as much as 14% premarket the stock went up yesterday when twitter posted second-quarter revenue that beat estimates. jack dorsey: have not yet had meaningful impact on growing our audience or participation. this is unacceptable and we are not happy about it. over the past few weeks i have had a deeper understanding of where i need to focus our team. vonnie: among regular users, fewer than half check twitter every day. in pro football, it looks like there will be a court battle before tom brady plays in the game this weekend. roger goodell has upheld the four-game suspension for the

quarterback for the deflategate scandal. he says that brady tried to conceal. the players union says it will appeal. those are top headlines. tom: did he dropped his phone into a drink? we have all done that, right? vonnie: the question is intense, tom. tom: let's look at our equities bonds, currencies, commodities. our data check right now. the euro has gone nowhere for a week. crude oil is well below -- brent crude is soggy as well. on to the next screen, if you would. the vix 13.44. the dow down.

the ruble gets up that level a stronger ruble this morning. one indication of commodity pain -- a week brazilian rail. we are almost back from this agony. brendan: we have a re-decision coming up today from the brazilian central bank. it is impossible to really do justice to how important psychologically the strength of the currency is to brazil. when they established a currency, they called it the real because it meant a real currency, a solid currency and this is something that has been so crucial. tom: would you explain to everyone here these good years? how did a socialist come in and we get a marital? was -- and we get a miracle? brendan: everyone expected him to be an old-time socialist, like hugo chavez, but he was

not. he did amazing work on poverty reduction in brazil and it rested on his ability to keep the economy going. tom: there it is, brazil with challenges today. it is fed day. tomorrow brings in a calculation of how we measure our economic rose. it is all belted into one. janet yellen is suggesting that america is doing better. michael mckee is senior vice president of reality for all of "bloomberg surveillance." he is with us this morning. and jeffrey davis. michael what do i need to look for at 2:00 p.m. this afternoon? aren't i bored stiff? michael: hillary clinton was running for president last time in 2008. brendan: when is she not running for president? michael: for six years we have

been saying that what they say is more important than they do come and this may be the last meeting at which we do that. everyone is looking at changes to the statement to see clues as to when they might rate -- when they might raise interest rates. there is no news conference, no dot plot no economic forecast. tom: i was watching "elizabeth" last night, that magnificent kate blanchette movie from 20 years ago. janet yellen has a palace court. what are you watching today e? michael: you could parse the statement. look for what they might tweak when they talk about economic growth, is the economy getting stronger, and will we see advances continue in the labor market? is the labor market getting stronger? are we seeing any growth in inflation going forward. the most important thing

everyone says to watch for -- do they drop the word "nearly" from their assessment. tom: it is like deflategate. brendan: i want to do some role-play. we have geoff dennis here. michael mckee, you are playing the role of janet yellen. explain to him, as a proxy for the world markets, why everything is going to go ok. michael: the markets have already priced in, we have sent enough signals, and we are going to sense a more signals in today, we help. geoff: i think michael is right. to a large extent the fed has moved priced in. tom: are they adjusting to the higher u.s. rates? geoff: two is certain extent. you have had a commodities

selloff. the fed is going to raise rates anyway, because of the u.s. economy. to a certain extent, it has been priced in, even to emerging. tom: in the united kingdom they make the pageantry of the red suitcase, the brown suitcase. does janet yellen get a suitcase with tomorrow's report in it? michael: she will get the numbers probably in advance, but not in time for today's meeting. tom: why would they do that? that seems stupid. geoff: that is the q2 number. what matters for what janet yellen is doing is all the numbers we are getting now. what does it look like as we head toward the end of the year. the housing numbers have been mixed. we think they are going to raise rates probably in september, and one of our basic point is they want to get away from zero. that is what you're getting

that is what janet yellen is all about. they want to cut them down the road. brendan: mike, what do you think is going to happen? michael: the economists we have talked to say september is most likely, lesser chance going forward, but may adjust because they are data dependent. we have those code jobs reports, the gdp report tomorrow the revision of gdp, and a number of revision numbers when they meet again. it will change a 2:01 once everybody sees the statement and he will change data point by data point. if we get a bad report on august 7 and right now we're not expecting one, we could see september fall out. but the odds are it is going to move heavier toward september. brendan: what caught my attention yesterday was rushing -- was russian banks going to hong kong.

will we get emerging markets looking elsewhere for debt issues? geoff: there has been some dislocation for russian financial markets for the last several months, partly because of the fallout from the ukrainian crisis the imposition of sanctions etc. so they probably want to go to different markets to raise capital. financial markets in the end are more robust and liquid than they used to be. i do not see this particularly as a trend. we like the russian equity market right now. tom: the probability of a rate hike from the bloomberg terminal 39% september, 69% by december as well. michael mckee, thank you so much. michael will be going to washington for the 2:00 p.m. meeting. i think it says palm steakhouse tonight. we will have the fed decision at 2:00 p.m. this afternoon, not

to: 15. -- not to: 15. this is "bloomberg surveillance ." good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." vonnie quinn and brendan greeley with me this morning. here are top headlines with vonnie quinn. vonnie: there are reports now that the leader of the afghan caliban is dead. according to the bbc, afghan officials say mullah mohammed omar died three years ago. the taliban says they will have a statement shortly. there have been reports about his death in the past.

the british bank posted second-quarter earnings in line with estimates. the chairman is pressing asset sales. early this month, john mcfarlane fired the ceo to pick up the pace of the overhaul. for the yankees, the hits keep on coming. the new york yankees fell behind the texas rangers 5-0 last night in the first inning, then scored 21 runs in a row, including 11 in the second. final score, yankees 21 rangers five. new york has won 16 of its 21 games this month. those are your top headlines. brendan: they are going all the way, scarlet fu. vonnie: there is another team in new york. tom: excuse me, i am periscope it. brendan: jack dorsey trimmed his beard. there was a 60% -- a 16% jump in

revenue, and then he broke everybody's hearts, said that the company is not aligned. what do we want jack dorsey to do? >> and a lot of people are waiting for an update related to what twitter's vision is going to be, and frankly who the ceo is going to be. it is not clear and i think people expected jack dorsey yesterday to indicate that he really was not in the running for that permanent role. i think people have concerns about that. vonnie: can he run two companies? scott: i think it is unlikely. twitter put out a release a couple weeks ago indicating they did not want a part-time ceo. that to a large extent took jack dorsey out of the running. brendan: do you see it as a strategic shift that they can take or they -- or do they need more fundamentals to get right first?

scott: if you think about twitter what astounds me is the sentiment is negative, people focus on the user growth, but the reality is they grew at 61% forex, 68%. this is a healthy growth company. tom: so it is an acquisition candidate. is google the natural acquirer? scott: if there is an acquisition here, google would make sense softbank, that i don't know that people should be banking on an acquisition. there is a value here, and the sentiment provides that opportunity. vonnie: we are periscope and right now and it is a lot of fun, but can it make any money? scott: it is fair to say that people are interested in and are

engaging with periscope like we are right now. obviously you reference the fact that the call yesterday was periscoped. thousands of people tuned in to see that. monetization is probably a wild down the road. tom: how long do they have to play the twitter game versus adult companies that have to actually show pre-cash flows? scott: i think if you look next year, we're looking at $.60 to $.70 in earnings. i think it is very attractive given the growth that we just talked about with revenues over 60% in the last quarter. brendan: there was a note from a twitter shareholder about two months ago saying that they need to do two things -- one is focus on events, and two is to finally kill the timeline. are those things going to happen? scott: they are focusing on

events. that is one thing that is an emphasis, and events-related products. brendan: to tom's obsession, how does that make money? scott: if you can organize users and engagement around defense, that will result in more targeted advertising. tom: how strong is facebook this week? google plus will step away from competing with facebook. the answer is this is a moment for facebook, right? scott: it is. everyone is watching facebook to see what they are going to do. expectations have been tendered. the reality is that we think facebook is firing on all cylinders. it is a strong growth company and they have a lot of levers to accelerate gains. people under appreciate what they have been able to do. tom: a shout out to david kirkpatrick, who never gave up on facebook.

vonnie: can i just say you were periscope thing, tom? brendan: we are going to our twitter question of the day. appropriately enough, does microsoft matter? i think -- scott: i think microsoft matters, it is just a different kind of company. brendan: no longer definitional to what technology is. this is "bloomberg surveillance ." good morning. ♪

tom: good morning everyone. "bloomberg surveillance."

good morning to a beautiful new york city, and a bit of a heat wave. i can say that because i am privileged to be in air-conditioning today. it is fed day. it is also time for a morning must read. here is brendan. brendan: in the newly nikkeied "financial times." the starting point for any solution to the greek crisis should not be to ask who is to blame. better than non-sentimentalism -- better than non-judgmentalisnm of st. luke's gospel. geoff dennis is with us again. is there an understanding in europe that creditors face a moral hazard? geoff: yes, i think there is. without any question.

what we think is one of the issues as far as europe is concerned is the fact that all of the adjustment being forced -- all of the adjustment is being forced on the deficit countries, the countries that are under pressure. you would like to see more pressure on the surface countries such as germany, holland, to expand the colonies. but if they put more money toward greece, which is what is happening, there will be potentially the demand to do the same thing for other countries down the road. that is the risk of this whole crisis. brendan: did you see that same moralizing tone that john k writes about? geoff: schauble, within the german government, then you have these smaller baltic states and some of the eastern european states who are incredibly hard

line. it is very hard to do. frankly, although our view is this has kicked the can down the road and greece avoids a deficit for the time being, it cannot compete long-term. tom: in the last three days we have seen greece-german spreads widen for whatever reason. can they still kick the can down the road until another crisis? geoff: i think so. they do not have a lot of debt repayments now over the next two to three years. the point is, what this will do is push the greek economy even further down. it is already contracted by 26% over the last seven years. how much more can you take? vonnie: and emerging-market -- geoff: i think you keep an eye on it, but if you get the wrong links of gdp growth and interest

rates did we mention brazil a few weeks it -- a few minutes ago? interest rates are low enough and not in crisis. it is a bit of a sideshow. when things get ugly there are things you have to focus on because the dynamics can deteriorate pretty fast. tom: we get employment statistics rates august 6. stan collender will join us on america's fiscal deficit. robert schiller as well. it is "bloomberg surveillance." good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." fed day today. worldwide, top headlines, here is vonnie quinn. vonnie: investors will be

looking for signals from the fed today as policymakers wrapup that two-day meeting. we may get a hint about when they will raise interest rates for the first time since 2006. and bloomberg economist says there is about a 50% chance of a rate hike in september. heading for a dead-end, on the highway bill, congress takes a shortcut. an extension will keep transportation money flowing but only for three months. they could not agree on a long-term plan and they are racing toward their august vacation. fox is letting everyone into the act for the first presidential debate for republicans. there will be not one but two debates on august 6 in cleveland , one for the top 10 candidates and a second for the other six. brendan: i have a theory that

this is a conscious attempt to dilute the influence of donald trump. vonnie: they would not qualify under the old rules. microsoft's new operating system windows 10 was released at midnight. in the past, a release of windows would have sparked a surge of computer buying, but that is unlikely to happen this time. >> this is a pursuit -- this is a pretty significant watch for anyone who uses pc's and wants to get things done with technology. we have had big windows launches that have brought in things like windows 95 and i think with windows 10 we will reignite people's excitement around pc's. we are going to rejuvenate it. vonnie: microsoft is offering windows 10 as an update for existing pc's.

in philadelphia, an eight-year-old boy is believed to be the artist ever to have both hands transplanted. ryan harvey appeared at children's hospital at a news conference. he lost both his hands to infection. pretty amazing. kudos to the doctors involved there. tom: amazing. brendan: could it can be any cuter? tom: it is the call that pushes against the china gloom for geoffrey dennis suggesting a soft landing. the stock market close, but for centuries the chinese have somehow adjusted. they adapt nobody does it like they do. since 2015, they adjust to imploding commodities. geoff dennis is the head of em for ubs. when we look at 7% down to a presumed 3%, you push back against that? geoff: we assume that growth continues to slow gradually.

we have 6% growth this year, 6.5% next year. the stock market declines 30% or so with the asian market. with the commodity decline, it is making everybody think the economy is going to perhaps be the weaker than that. as the stock market declines, the argument is that it was not because of the economy, and a stock market decline would not necessarily impact the economy. they are independent. we know the economy is ok although recently there is some downside risk. tom: do we overweight how china is hinged on these other nations like brazil, like indonesia? geoff: i do not think we do. with respect to mining for sure. it is closely tied to some of the other manufacturing countries within asia itself, so you have seen some concern about

taiwan etc. i think it is very closely tied because china accounts for something like 40%-plus of the global consumption, and there will be pressure on the exporters. i do not think we overplay that at all. brendan: in china you sit equities go up and down for technical reasons. are they tied to the government treatment of credit? geoff: i think government policy is contributing to a certain extent. for the central bank to ease policy to support the market or for china policy to bring the market down, it is the direct intervention in the market that people do not like to see. but the actual run up that you had had very little to do with credit policy per se. it had to do with the sense that the change in the ability of

foreigners to invest in the a share market last year caused resale to buy the chinese market on the view that foreigners were coming. then it got too expensive and the government was concerned and took a few measures and it rolled down again. i say technical. what i mean is noneconomic reasons. vonnie: msci is coming to a big decision whether to include china a shares or not. how do you navigate that? geoff: we provide recommendations rather than doing direct investing, but i certainly thought there was a decent chance on june 9 that they would start to build -- start the process of introducing a shares, the shanghai composite. the fact that they did not do that led to them contributing -- i think what a lot of people did meant a lot of people poured into china not looking at these

companies. now the delay on the decision has meant that it has stopped for the time being and we are getting back to normal investing, which is challenging enough right now. brendan: how far has that intervention delayed the msci right now? geoff: msci does not like to see a big market in an index where you get out right government manipulation. that is a bit extreme, but government interference in the market is not -- tom: are they the marginal mercantilist economy? are they the ultimate 17th-century mercantilist economy? geoff: in a way. i do not think it is any different from china, maybe a little. but the problem with a strong dollar is it makes all these exports cheaper.

the problem with the strong dollar is that there is such liquidity out of emerging markets. em does poorly in interest rates go up. nobody talks about the long-term benefits to these economies of a stronger dollar. by the time you get there -- tom: how can stanley fischer and janet yellen ignore the headline in "ft" today. are they telling me they are in a vacuum? geoff: they have got to do what they have got to do based on the u.s. economy. we think at the margin, a strong dollar plays a role in tamping down the u.s. economy. and of course you can see it in the company results. they are all reporting weaker foreign revenues. it does have an impact. if the fed does not go in september, the dollar and weak currencies will be one of the factors that delays them, let's put it that way. brendan: i am doing a quick

metaphor count. the fed has been compared to a vacuum and also to elizabeth i. we will take a look at brazilian -- at the brazilian president, how she is doing. this is "bloomberg surveillance ." good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." looking at commodities. brent crude, 53.08. maybe that is the single best chart. here is brendan greeley. brendan: the brazilian central bank meets today, and it may need to raise rates again to step on inflation. here is what we're looking at since march of last year inflation increasing 6% to almost 9%. that is the white on the bottom. it is sadly not the sum of -- brazilian twitter has pointed out that if your approval rating is lower than inflation, you are doing something wrong. geoff dennis is here from ubs. is dilma bad or unlucky?

geoff: i think probably a bit of both. to a certain extent, we are paying for it in brazil now, but also the big oil company clearly turned out to be much broader than anybody anticipated. i am not saying -- brendan: sucking in members of parliament. geoff: indeed. i'm not saying that dilma rousseff did not know what was going on but it has to go into the category of being somewhat unlucky. brendan: so when you see your approval rating -- when you see the approval rating, you are talking about the carwash scam. geoff: absolutely. tom: explain why brazil and the other commodity-based south american countries matter for

americans. is it geopolitics instability? geoff: i would push back. they are not unstable. they are going through tough economic times because a lot of them are commodity-based. of all the five emerging markets in latin america a report this week has got current account deficits. that is an issue. tom: you are so good on this brendan greeley -- you are so good on this, brendan greeley. the stereotype for americans is butch cassidy and sundance getting off the train in bolivia. brendan: the old song about brazil is that the -- it is the country of the future and it always will be. the idea that the new finance minister has credibility in the world, can he still act? is there any way he can get it

right? geoff: the reason why they reduced the target so dramatically a few days ago, which is what has caused the latest selloff -- there are two things. it is hard for him to get some of these majors through congress, who want to protect spending and their rights. but the other plot is good old-fashioned economics. if you tighten fiscal policy into a weak economy, the economy gets weaker. the dramatic news in brazil reflects how weak the economy is. brendan: if there were one structural reform you would wish for brazil, what would it be? geoff: dramatic cuts in the size of the government. 40% or so of gdp -- you need to cut government pensions, government wages, government employment. easy for me to say that, but the government sector commands too much of the economy and therefore the private sector is

crowded out. brendan: just what you get if you are a lifetime government employee. geoff: that is a series of reforms, but that is what they have to tackle. sheer inefficiency of the size of the public sector. vonnie: it is time to take a look at top photos making news today. scientists announced that they have identified the remains of four leaders of virginia upon jamestown settlement. they were unable to open a serious -- open a silver box. the contents might be shards of bone. the president of jamestown rediscovery says it is the most remarkable archaeological discovery of recent years. tom: the first anglican minister to the united states. it was ugly. this is not like the pilgrims to say the least.

vonnie: absolutely fascinating. a youth organization in mexico transformed a seemingly boring hillside into a piece of art. the project, a little over an hour outside mexico city involved painting homes on a hillside. i wonder if they spray or they used brushes. isn't that beautiful? you would not call that graffiti. tom: it works. if you said we are going to do that, i would say we will screw it up. but it works. vonnie: the home of "breaking bad" character jesse pi nkman the house has been put up

for sale. brendan: what is amazing to me is that the house served as a metaphor for the development of the character over the course of "breaking bad." it became a meth lab and that he kicked all the losers out of the house who were living with him. if you watch the series, you identify with jesse. vonnie: it is $1.6 million in albuquerque. that is a lot of money. brendan: coming up, we want to find out if microsoft's windows upgrade will boost pc sales. our twitter question -- let us know what you feel about microsoft and if anyone still cares. let us know. "bloomberg surveillance." good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." let's get to top headlines with vonnie quinn. vonnie: the american dentist to killed a well-known line in zimbabwe says he has no idea that the animal was protected.

he says he relied on local guides to make sure that the hunt was legal. he has a felony record related to shooting a black bear in wisconsin. shares of yelp plunged down as much as 19% premarket. the company said advertising will drive its growth. amazon is proposing rules of their own -- rules of the road for the air, declaring a drone zone so that it can go ahead with airborne package deliveries. the company wants the federal aviation administration to modify its rules for drone flights. can i just say it has been the best marketing tool for amazon in decades? tom: it is totally ridiculous. you put a drone zone around

central park? brendan: look at those images. i am absolutely with you. this is the best policy stunt ever. tom: where are we hear? let's talk about another stunt the survival of windows with windows 10. we used to care. the truth is, no one cares. it is one big yawn. windows is the foundation of a $90 billion revenue stream. our guest knows the difference between windows numeral mine and windows 10. no one else does. you need to sell me -- between windows numeral mine -- between windows 9 and windows 10. no one else does. >> they skipped windows 9 maybe to distance themselves a little bit from windows 8.

that was considered a disaster. windows 10, they are looking to rebuild their name and get back into the market that has now been winning by the likes of apple and google and say we have something that can bring back the delightful experience of windows on the computer and on a touchscreen. tom: next question. i hate internet's -- internet explorer with a passion. the only one who uses it is dan arnell of bloomberg television. it goes away? alex: in this new update, they have something called edge. tom: are you two get a royalty on this? brendan: joe belfiore a points out that it is a security feature. joe: we are doing everything from getting consumer credit

cards to cover my some corporate data security. windows 10 has a range of security features from our new browser, microsoft edge. it was architected using our new app model. tom: this guy is like a senior vice president cliche. brendan: the word "sandbox" means something to security architects. alex: we have seen that you cannot necessarily track companies these days to keep your information safe, so now technology companies have to come in and say we can help you out with this. tom: are they sweating in cupertino? alex: apple on their machines their operating system has done so well and it is such a more interesting, delightful experience, which is why microsoft has had so many problems. they cannot keep up here it --

they cannot keep up. brendan: everybody is saying, everybody get ready, we are upgrading to windows 10. alex: back in 2013 their operating system was a $19 million business. their cfo said it is now a $15 million business. that is a $4 million gap there. brendan: he said i use windows explorer, then sheepishly put his blackberry on the table geoff dennis. tom: is this important news today? alex: it is important news because apple has struggled with these enterprise customers with their businesses. it is an opportunity because microsoft is more well known in the ubs's and the bloombergs of

the world. that might be why we are seeing this update going on. brendan: how does making this os free help them go to the clout? alex: automatic updates. you do not need to get a cd jam it into your computer and update. if they find bugs in the system, they can fix them automatically. tom: you are talking about cd's in a computer? alex: this is the new world. they are trying to get away from that, and that is what cloud does. you can fix things as you go. alex: i have cd -- geoff: i have cd's. tom: very good. that was a terrific briefing on something i do not care about. that was very good, with bloomberg news. geoff dennis, thank you.

particularly a quieter view of china than what we see with the gloom crew. on a fed day, 2:00 p.m. announcement today on bloomberg television and radio. how about forex? we see the ruble doing better this morning. it is "bloomberg surveillance." ♪

tom: first do no harm as janet

yellen of the fed looks at september. they will choose their words carefully at 2:00 p.m.. oil tries to find a bid. and many republicans and i selected democrat go in search of america's good society in a conversation with robert schiller. this is bloomberg surveillance. joining me is brendan greeley. we have that all in debate change at fox. the idea that everybody gets to debate. brendan: i think that complete about-face from fox is active to dilute the influence of donald trump. if you have donald trump and five other candidates it is different than if you have five -- donald trump and 150 other candidates. tom: the democrat from brooklyn

says it is great to have this book. vonnie: there are two true debates. not all on stage together. tom: two debates in the same day. brendan: it is like debate idle. tom: on fire today. the federal reserve isn't -- vonnie: the federal reserve isn't expected to announce interest rates today. rates have not been raised since 2006. there is a 50-50 chance it will happen in september. the fed statement is expected to :00 p.m. et. a late rally today ended a session route in china. that stopped a slide of more than 11%.

oil prices started slipping again. west texas intermediate is trading at more than 48 dollars per barrel. the congressional review of the iran nuclear deal is entering a new phase today. senators will hear from defense secretary ash carter and joint chiefs chairman martin dempsey. they're looking at how it could affect their neighbors and military ballots in the mid east to our panel quiz them about the plan yesterday. remarks by twitter's interim chief did nothing to stop the skid in the share price. twitter is trading sharply lower in the premarket. the shares fell again when jack dorsey started talking. >> have not yet had meaningful

impact on growing our audience or participation. this is unacceptable and we are not happy about it. over the past few weeks i've had a chance to get a deeper understanding of where to focus our team. vonnie: among regular users fewer than half check twitter every day. it looks like there will be a court battle before tom brady place next season. nfl commissioner roger goodell upheld the suspension. goodell said that brady tried to conceal evidence by destroying his phone. the players union plans to appeal. those are the top headlines. tom: let's do a quick data check. a headline without question is nymex crude 47.70. don't want to be inflammatory -- that was upon. -- that was a pun.

oil is a little bit weaker. tomorrow brings a new calculation of how we measure economic growth. janet yellen suggests that america is doing better than good. the gloom crew must catch up with reality. stand colander knows nothing about monetary affairs. great to have you here on the fed day. tom: i guess this is exciting. find the excitement as we go to 2:00 p.m. versus waiting for september. mike: your open got me to thinking -- do no harm. what would it be like. the last time they initiated tightening cycles they said this is coming. if they don't do that we will

get something like that temper tantrum when they did not move that. right now we have them where they want them leading in the direction of raising. tom: i look at the irp function for the first time in four you i -- four years that shows the probability of a rate increase. when i look at chair yellen how do she interpret the phrase -- ultra accommodative? michael: if they raise rates from zero to 25 basis points from 25 to 50 basis points that is still as low as it has ever been. they went to get moving in that direction so maybe today what they do is tweak the statement a little bit. they upgrade their assessment of the economy and they say that it appears to be going in the right direction and we still see labor market progress but everyone will want to know do they see inflation going forward.

the most important thing everybody says is they may drop the word nearly balanced to say the risks are balanced. tom: so we are at adverbs? brendan: we have always been at adverbs. michael: they may not say anything about the commodities. they have referenced oil prices in the past. the question is, do they do that again. but at this point we are not sure where commodities will take us. brendan: every time janet yellen speaks publicly she reconfirms that paces more important than timing. >> it is in the statement right now. one would assume that it will stay in their. brendan: preceded maybe by a no seriously. funny girl -- vonnie: what will the exact tweet be?

what will we look for? michael: it could very well do that. but what is the difference between moderate and modest? i don't really know. that is the effect they are trying to achieve. one of the things that mike hasn't said, my guess is that congress will end up raising the deficit. the fed may look at it saying for the first time in five years we have some stimulus. tom: so the chief function of the economy will move from the trolley to a little bit of a goose? >> a little bit of a ghost. it does provide more of an excuse. brendan: we look at greece and say they need structural reform but we need it right here, is there any chance we will get basic tax reform?

>> to you want a straight answer? no. i don't see tax reform until 2019 at the earliest. tom: when you look at this of ballet from september to december. have you ever seen this before? have we ever had this adverbial ballet to get out five months? michael: they only started putting statements out in 1994. we have not been this low for this long. it has been six years saying they will not do anything so let's parse the statement. vonnie: the idea signaling a september move today would imply the fed will move in september doesn't know that it will move in september? michael: they want the markets

leading towards a september move but they are still data dependent. they don't want people believing it is locked in. what they want people leading in that direction so they are not surprised. >> tom is frustrated by the approach. i hear that and i think it's the same as it ever was. this is what we do with the fed. >> tom: if they went out with a quarter-point rate increase will happen in 2:00? michael: markets would fall out of bed. after a couple of weeks they would normalize again to it is not really a major impact upon the economy, it is the surprise. tom: i am dazzled. brendan: we would have a parade of people come onto this set and talk about her credibility. michael: it is the surveillance for employment act. [laughter] tom: i like that. what are you doing at 2:00 p.m.? michael: standing on the balcony.

tom: at 2:00 p.m. will see what chair yellen has to say today as well. we have an important moment for bloomberg this morning. stephanie ruhle will be sitting down in an interview with michael bloomberg. and lloyd blank fine. this in celebration and to steve of goldman esther 10000 small businesses program. somehow i think the future of wall street will be part of the discussion. 9:45 this morning. from new york city with futures up four, it is bloomberg surveillance. ♪

tom: good morning everyone let's get to the discussion on housing. brendan: 4.4% year on year, 10% in denver 9.7% in san francisco. who better to talk to than robert shiller of yale? the bubble pops and the market recovers. is housing now rational? robert: rational? i don't think so.

it does not easily admit professionals moving in and out directing things. brendan: you said in a piece on the new york times last week that in housing the smart money has relatively little voice. we don't have the tools to hedge housing. do i understand that? robert: i have been working on -- and my colleagues at the mercantile exchange, created a futures market for single family homes. but it never took off. it does not have liquidity. what it means is, if you think home prices are too high and headed for a fall, the best thing that you can do is not invest. you cannot profit from the knowledge that they are going to fall. that knowledge does not get into market price. brendan: that is a harder decision to make if you are a homeowner. he cannot not invest.

you have to buy a home. they talked about how dangerous it is to have it be part of the portfolio, do you see that now as you see prices rise. >> they're going up and in some cities fast. it looks like a bubble areas the dallas was a great performer this time. there is some excitement. people think that dallas is looming and corporate headquarters are moving in so there is a little bit of excitement and that can generate over excitement. we will have to wait and see. vonnie: part of the problem and the way the market operates is antiquated. it takes months to buy a house. it just seems completely ripe for destruction. robert: yes. real estate has emerged as a major force in the aggregate economy.

this financial crisis was really tied to a bubble in home prices. that has not been the pattern for the united states. it is a disruptive market. tom: we will continue this discussion. i want to speak to you on the good society. an interview at 9:45 on bloomberg radio. look for that this morning. futures up 43. ♪

tom: good morning everyone, it is "bloomberg surveillance." vonnie: the leader of the taliban in afghanistan is dead. a leader there says he died three years ago. reports say he died of tuberculosis in afghanistan. he led the victory over rival groups after the soviets left

afghanistan. barclays topped estimates with a second-quarter estimate of nearly $3 billion. the investment banking and credit card operations were both strong. >> it was once the books last night. the yankees were 21 -- score 21 straight runs to clobber them in texas. new york's total was the highest for one game, in a game this season. tom: this is an important conversation. we are thrilled to have stand with us. the conversation maybe that our next president will need to consider. this is a search and debate for america's good society. this is his thoughtful book finance and the good society addressed how a nation defines and treats and searches for a better good. >> with us the stand colander the vice president. >> professor shiller, you speak of the illusion.

the great illusion that we are in search of. we have 47 republican candidates, one democrat candidate. what is the illusion they are in search of. >> >> are you talking to the democrats or the republicans. >> it can be either. >> a big issue in this election is free market. and how much the government's role should be. unfortunately that is a ambiguous and tricky question. >> we don't want just more regulation we want intelligence. and we want self regulation from the business community. >> i'm a big believer in chambers of commerce and better business bureau's. >> within your study of our good society where is the middle ground. >> does bob jill are -- bob shiller find value in the common independent and middle ground to >> we have lost audio with

professor shiller. we will work on that up and new haven connecticut. we are fortunate to have stand colander -- stan collander, you are in the nitty-gritty of washington and there is no common ground, is there? >> that is what i was just about to say. good regulation is someone else being regulated, not you. a regulation helping you get what you want. tom: the mean-spiritedness i saw in lincoln -- nothing has changed? >> it is just intensified. if you watched yesterday you saw senator ted cruz calling mitch mcconnell a liar. yesterday you had a resolution introduced in the house by speaker boehner -- it is getting nastier and this is republican versus republican violence. brendan: i hate to do this without giving robert shiller a

chance to respond but i will do it anyway. he prefers self regulation. does it work? >> it does until it doesn't. your -- you remember alan greenspan saying how shocked he was the did not regulate themselves. that happened -- that happens all over the place. everyone is for free market until it breaks down. brendan: what is a good rule for intelligent, limited regulation. >> there is no weight in the current system to make them objectively. they are all subjective and done on a power basis. who is in charge of which committee? which political party has the majority. how do you decide between -- brendan: there is a libertarian ideal of no regulation. i agree that it is bad in theory but in practice you need some. how do make these decisions?

i don't see either party advocating for a way to make the decisions. tom: within that is donald trump. >> i knew that would come up. tom: does he have any constituency in washington? we knew -- no he does among truly disaffected republicans. are they represented in your washington? >> not that i have been able to see. if anything, he throws a wrench in. no one was expecting him and no one was thinking about him. he doesn't represent the establishment. he is totally outside the system. brendan: in this primary it is a feature and not a bug. >> in the primary, yes but not the general. trump may do very well appealing to the primary audience but once you get to the general audience it is different. vonnie: the older republican candidates will be debating now. >> to the extent that debates

are important at all. it will not mitch much difference at all -- it will not make much difference at all. vonnie: we could be seeing a spectrum of republican views. >> in a limited amount of time they will not get points across. debates seldom make much difference except as an image. remember kennedy as next in, it was the one in the dark suit who did not blend into the background compared to the one in the grace it. >> everyone -- gray suit. >> everyone who watched it on radio said in one. >> and on television they said kennedy one. brendan: i paid for this microphone. >> it is not a substantive debate. don't put too much weight on these things. tom: steve collander with us as we look at the politics that links into a better society. part of that is -- cheap oil.

down from $100 a barrel. we need to go to bloomberg intelligence and look at the micro dynamics of american oil. does that mean $30 per barrel?

tom: good morning everyone. let's get to our top headlines. vonnie: if not now when? that is the question hanging over the federal reserve about raising interest rates. they are wrapping up two days of

meetings today and then they issue a statement. rates have not been raised since 2006. economists say there is a 50-50 chance it will happen in september. we will have the statement for you soon as it is released right here on bloomberg. a prime minister of greece blames creditors for making it worse. alexis tsipras told a radio station he was forced to accept strict demands after six months of talks went nowhere. greek officials are meeting in athens this week to finalize bailout loans worth $94 billion. vonnie: fox is letting everyone into the act. it is easing the rules to let candidates with low poll numbers qualify. there will be not one but two debates. that helps lindsey graham george pataki and george

fiorina. they would not qualify under the old rules because they do not have enough support and pulls. a thumbs-up to windows 10. they say microsoft's new operating system is better than windows eight. windows 10 was released at midnight. microsoft officials tell bloomberg it is still important. >> this is a significant launch. for anybody who uses pc and wants to get things done with technology. >> we have had big windows launches that bring in things like win 95 allowing the internet to happen. we will reignite excitement about pcs. we will rejuvenate it. vonnie: microsoft is offering windows 10 as an update for existing pcs. it is a free download if you have windows seven or eight. in philadelphia, edit-year-old

boy is believed to be the youngest -- an eight-year-old boy is believed to the youngest to receive transplants of both hands. they are pretty stunning that he is getting. tom: thank you so much. truly a medical miracle. other miracles are the technological -- rewired up to the college professor of economics at yale. professor shiller we are talking about economics and the commonwealth and the common wheel. where is the shared common interest in america? is that a quaint idea from the past? hans: -- robert: we have a sense of nation and carrying for each other, even though it might not seem that. the business world creates incentives that are highly focused and those focused incentives improve productivity.

but underlying it we have a sense of value as a nation and ultimately those values are extremely important for how it works. tom: i want you to comment on donald trump. you studied burkey and conservative theology. the idea of a gentler, kinder all encompassing conservative. do you see that within the many candidates? robert: donald trump is not exactly kind learn and gentler. he is a tough guy. the nice thing about him is he proceeds to speak the truth but i am not sure whether that is always right. if i had to pick among republican candidates i don't think it would be trump. brendan: when you heard hillary clinton speak about opposing capitalism.

did you hear financing the good society or did you hear peasants with pitchforks? robert: i wrote a book in 1991 called who is minding the store and that was about this issue of the short-term is him. in that book i discussed capital gains taxes. you have to remember that the reason we have a one-year threshold is because of this short-term is him argument. that came in decades ago for just this reason. i would be a little bit wishy-washy about it -- it is not clear that it will solve all of our problems. tom: let me do a fed day data check. futures up for the euro churns here. weaker over the last two days. i am watching nymex crude where

we have no ability to lift. i will say that the bid is holding here. commodities are soft this morning. brendan: this is bloomberg surveillance and i am brendan greeley. west texas intermediate has been bouncing at 50 since the end of january. vince piazza has been holding hands on oil production for six months now. we got used to the idea of the swing barrel being opened by some guy in north dakota. are we seeing another new dynamic and supply to understand now. >> the one thing that be i has been mentioning is this concept of just-in-time. where the operators and the unconventional bmps have a greater capacity to bring it on

much more quickly than the conventional time of years ago. >> what is that mean in terms of time. six months to one month or 20 minutes. >> in terms of bringing a well on line you drill it and you wait to complete it when prices are much better. you are able to complete these wells and about a week. you're able to complete that well and tie it in to what production in a much faster pace than you did during the convention fun. >> we have come down twice now and you were skeptic of the bloom crew down to loyal -- lower oil prices. have you changed your view to where it is and $39 a barrel or the 20 level that ed talks about. >> when we think about cash costs you are taking into account lifting costs, g&a and interest costs. the operators have done what they could do to bring down there overall cost. tom: does the market tell them

what to do here. >> the capital markets have been wide open on the equity issuance. the day of reckoning comes sometime in 2016. when they reassess the reserve levels and the price deck's going forward. vonnie: they will be pretty patient as they do not want to lose money on this. will we see banks hammering down ? x in general what you have seen is banks taking a more conservative posture as of late. tom: we have steve colander with us as well. >> oil prices and gasoline prices, let's talk about it a year from now. are they going to stick around and go lower organ higher. >> when you think about crude inventories they are roughly 27%

above the five-year average. roughly 100 million barrels of oil. tom: up to our eyeballs 27% more than normal? >> in the five-year average. what is interesting is right now you are in the seasonal. where the demand is quite high but when you think about it somewhere roughly around $2.80 at the pump. tom: i never asked this question is oil republican or democrat? brendan: i am confused about whether it is a radiant or brazilian. one of the statistics that bloomberg has reported on, an extraordinary amount of capital projects have been canceled. at what point can they no longer come back online? >> i think you have national oil

companies and the integrated oil companies. what is interesting here is on land and in the u.s. the capital recycling is much faster. i control the wealth and bring it online in a very fast period of time as opposed to these longer dated projects that are years out in hostile regions. tom: how do we get a bid on oil? that is what everybody wants to know. what is the mechanism? >> it has to come from the demand side. the supply side is pretty well understood and appreciated. you have players in the u.s. that have been resilient. keep in mind that over the last year we have cut rig count by 50%, price by 50%, capital spending by roughly 50% and we are still up $1 million a day. brendan: don't go anywhere, we

will need you again this summer. no vacation for you. does microsoft matter? let us know. -- forget that, top twitter question, is oil republican or democrat? ♪

tom: good morning everyone.

it is "bloomberg surveillance." we welcome all of you to new york city. this is an interesting story print one the son of a post office clerk and the other the son of a real estate agent. one is the chief executive officer of goldman sachs and the other is a manager of taking and measuring risk at his bloomberg lp. later they will sit down with miss rule and talk small business and it breaks down into a hell-bent conversation on the future of wall street but first small business. >> this is actually the second annual goldman sachs small business event the in held here at bloomberg where this program has spent the last five years. they have given capital business, education and support services. i just did a survey on this

program saying that 67% of the people who go through this program have made more money than they would have without. executive coaching for small businesses because at the end of the day, if you have coaching from a guy like mike -- mike and lloyd i will guess it will help you. tom: you count the limo's every night. >> less and less every day because they are cutting costs. tom: that goes right with what they have to do because the limos outside goldman are not as many. >> they will not say i sit high up on this perch and i am not paying attention to this -- small things. we sit 20 feet away from mike and he does sweat the small stuff. we will see what they think about the fed, china. brendan: in d.c., where you

spend your time. small business right behind mom and apple pie is the thing that everyone is for. what do they need out of d.c.? they have to consider the tactics of what they are doing. they have enormous pressure in washington. it is kind of like small banks. they get the benefit of the doubt almost every time. >> i would love to know how lloyd feels about d.c.. they are crushing it in m&a this year. goldman is always number one. how is he going to pay those hotshots still crushing it. >> on the fifth year anniversary of dodd-frank it is not quite as big as it used to be but the big tension is coming from main street. the average voter still hates

wall street. the reputation is really in the tank. they love their local baker but they hate banks. tom: this interview with michael bloomberg, look for that at 9:45 a.m. this morning. on bloomberg television and bloomberg radio worldwide. futures up five. stay with us.

tom: good morning everyone. it is "bloomberg surveillance." trying to find a bid on oil this morning. let's get to our top headlines. vonnie: the former navy analyst who served 30 years for hide bars will be freed in september. parole has been approved for jonathan pollard. he got a life sentence. the obama admin is and denies the decision is an attempt to smooth relations with israel after the iran -- iran nuclear deal. we will stop selling national brand advertising.

ahead of his appeal in court, tom brady went on facebook to plead his defense in the deflategate case. he writes that he did not know the balls were tampered with and he says it is not true that he destroyed a phone to conceal evidence. the nfl upheld its four game suspension of him yesterday. i think that defense is quite in order. tom: i can just see his lawyer -- what the hell is he doing? let's move to the federal budget. that is an important conversation. stanley colander has given us terrific value. but it is a victory lap that has not been taken. there's the faintest touch of reality that it could be had. he knows that true gridlock in

congress that could lead to a possible likelihood or shutdown of the government. i thought that we were free and clear. we got this huge improvement in the budget and you're talking the possibility of a shutdown. >> the two are not related. the fact for the deficit has come down has little to do with the politics of the budget. >> the problem with the politics is -- the shutdown is that it is everyone's second choice. no one what's to do it but the first choice is not available to compromise because no one copper misys anything. tom: is this a juvenile debate? -- because no one compromises anything. tom: is this a juvenile debate? it used to be normal and now there is madness. am i right? >> i use the word madness all the time. it is not compromise, it is considered collaborating with

the enemy. in the congressional primaries, they said the voters do not want compromise. they want someone who will stand hard and fast and that is why the motion introduced yesterday to get rid of john boehner has to do with constituents. tom: and featuring that in the morning notes today. this one congressman being that up. brendan: i am curious about senator paul ryan. -- or congressman paul ryan. he used to produce these primal scream budgets and then they got milder and milder. he has been a force for compromise. he is not running for president. what does he do? >> it depends on the white house but more than anything else it depends on the republican caucus.

the tea party will be in for a while so that republican congress does not have the ability to compromise unless the democrats are willing to work with them or congressman ryan is willing to work with democrats. if he does that he may get a challenge for his chairmanship there it that is why there is very little room to maneuver. >> you look at structural problems. even the most civic minded of senators cannot get this done. >> just the opposite, they get excoriated for trying. vonnie: tell us about the trajectory of rand paul. >> there was a story this morning that one of the problems he is having is raising money to he is just not extreme enough. unless he goes for a fund me type situation he may not have the ability to get his message out. tom: let's talk about the glide

path again. near 3% which i is to believe is nirvana. i am baffled why we are not celebrating as a nation this improvement. what is different this time? >> there are some economists celebrating saying a deficit of 2.5% gdp and with the economy growing it is just fine because the debt is falling but we are not calibrating it because of the politics. for some a dollar deficit would be too high. tom: i know that is a calvinist thing from another time but this is a triumph for all americans. >> it is definitely of extreme value for fiscal policy but you said calvinism, the balanced budget that is corrupt going back to the puritan's time and this has not changed in america. brendan: to sequester all of

those negotiations did not put the car in park. the just put chock underneath the wheel -- chalk underneath the wheel. has that heard it? >> -- has that hurt it? >> it is only making changes at the margin. it hasn't done much. there are always ways to do things that do not count against the spending caps. you can do things by cutting taxes or with tax breaks and still increase the deficit. tom: to wrap this up what should we observe in august or september that increases the likelihood of your 40% shutdown. >> not so much obvious because congress will be gone but when they get back in september, is there anything that will appease the tea party? is it likely to go in the other

direction with the highway trust fund or obamacare. if they are angry that they have not won anything or got anything in any negotiation, then the budget may be where they make their stand. tom: stan colander, what is our agenda today? vonnie: my agenda is the fed statement at 2:00 p.m. et. tom: my agenda is that the red sox will not score 21 runs this year against the yankees -- that is not my agenda. my agenda is loyal in search of a bid. we heard from fitz piazza. this is a challenging issue because the supply is up. brendan: why is oil like the red sox? every 80 years the dynamic shifts. tom: very good. brendan: all week people.

my agenda is facebook. earnings after the bell. he wrote in his note we see facebook continuing to build out advertising technologies and offerings and have noted impressive progress. what i hear is strength to strength. tom: i failed on facebook twice. it is better than twitter. it is more interesting in some ways. they are rocking it. brendan: to our twitter question of the day about microsoft, when you look at the success of the app and the success of their messaging app, they are becoming an operating system. the more they can get you to think inside the universe, the more they win. vonnie: it is time to answer our twitter question of the day. does microsoft matter? we got many responses. the first we chose, yes but only in the enterprise, cloud and

xbox areas. the second answer, yes it matters, knowing gates, the best is yet to come. tom: the headline here, they are minting billions. vonnie: and cutting jobs left right and center. third answer mobile matters and in mobile microsoft is way behind android and ios. they can use their pc for tax filings. difficult to do that on a mobile. brendan: that is the least of our problems. tom: will we see windows 10 here at the brick tomorrow? -- here at bloomberg tomorrow? vonnie: if we download it. tom: later this morning a conversation with lloyd blank find and michael bloomberg. on bloomberg radio and bloomberg

television at 9:45 this morning. the rumor has it that stephanie ruhle will be speaking with them. we continue on bloomberg radio. stephanie ruhle next on market makers. ♪

announcer: live from bloomberg headquarters in new york. this is "market makers," with erik schatzker and stephanie ruhle. stephanie: good morning.

it is wednesday. i stephanie ruhle. i've executive producer just said in my air, this is normal. guess what? matt miller is sitting next to me, nothing is normal. vonnie: i am -- matt: i am pumped to be sitting in for erik schatzker today. sudden cause after a 10 day plunge, a lot to discuss. also ahead, goldman sachs chairman and ceo lloyd and our own boss mike bloomberg joining forces. stephanie i am very inside it to listen to you talk to them at 9:45. stephanie: i will be honest i am a little bit nervous. before then, i will give you our top stories for the morning. in afghanistan, a government official says the founder of the taliban guerrilla movement has died. mullah omar provided shelter to