market a decade of no rate increase. details of the fed intentions. olivia: nintendo getting into the smartphone business. is it too late? pimm: microsoft launches the latest edition of its flagship software. they are doing it quieter than before. we find out why. olivia: good morning and welcome to bloomberg "market day." i am olivia sterns. pimm: i'm pimm fox. a look at how markets are faring. u.s. stock is higher, s&p 500 gains .4%.

dow adding 77 points. people waiting on the fed's decision. earnings today -- facebook, northrop grumman. a lot of earnings. olivia: all eyes on 2:00 p.m. yesterday, the s&p posted its biggest gain in two weeks. let's show you what's happening the fedollar ahead of statement. nothing, essentially pure little changed. 96.78.dex euro above 1.10. a surprise in the housing market last month. pending home sales fell by 1.8% for june. first drop this year. economists forecasted sales will rise. the housing market is not going as many expected due to tighter lending standards and a limited selection of properties. lloyd blankfein is bullish on u.s. markets. thelopment sachs ceo --

goldman sachs ceo took part in an interview with mike bloomberg. he was asked why he was optimistic. >> consumers have to leveraged, banks have de leveraged. housing prices are starting to stabilize and move higher. we're in for a long, positive market. olivia: glenn fine says the u.s. -- lloyd blankfein says the u.s. will get a jolt when the federal reserve raises interest rates. after that, he says people will move on. pimm: general dynamics has raised its full-year forecast. that beatprofits estimates. the defense business has rebounded and it is selling more gulfstream business jets. they are some bad news, more bad news about the f 35 joint strike fighter program. the pentagon's most expensive weapon system.

the marine corps version demonstrated poor reliability during an exercise that -- at sea. the f 35's or for flights only half the time they were needed. and microsoft cofounder paul allen wants to bring the prestige of the art word to seattle. allen's investment company is coproducing the seattle art fair, which begins tomorrow. an estimated quarter billion dollars of contemporary art will be for sale. the event will attract wealthy entrepreneurs. those are your top stories. coming up in the next hour of the bloomberg "market day," nintendo posts its best quarter of sales since 2012. there's optimism about the future of super mario. he may make the leap from consult a tablet. we take a look at the process of growing strawberries. how driscoll's is creating the strawberry of the future today.

find out whyl there's little excitement about the release of its windows operating system. windows 10 launches today. those stories and more all i had. olivia: the zero interest rate era in the u.s. is nearing an end. today's fed meeting could be the last where we know for sure the fed will do nothing. nobody is expecting a rate hike today. basically nobody. analysts say with near certainty that one is coming in the fall. we could hear a hint today about whether that means september or october. watchers,sual, policy investors are going to be reading the fed statement carefully. what you got to do is bring in two institutional investors, people who manage money. global chief investment officer at columbia management investment advisors. he oversees more than half $1 trillion in assets. johnpasadena, california,

of western asset management. he oversees more than $450 billion. with you.begin if you could describe exactly what do you expect to get out of the statement? what does it tell you about future fed moves? >> i don't think we are going to get anything definitive today. the fed needs to acknowledge the labor market has improved, the employment rate is close to their estimate of normal. growth looks better. they need to acknowledge that. they do not need to commit to the first rate hike date. they will be somewhat vague as far as timing of the first rate hike. olivia: what are you looking for in the statement? >> same. i do not think they are going to take any action, as you indicated. i think you will see change in the language to say the economy is in better balance now. which leads up to what you were speculating on. an interest rate in september and october. they are trying to pad the market for what is coming rather than do anything today.

olivia: in the new economic assessment, you think janet yellen will signal the fed believes the u.s. economy is improving? >> yes. and better balanced last time it was out of balance. we will see that language continue towards predicting some change in the rates. pimm: john, do you concur? what should investors do? >> i think that is right. i think the focus will be on how they characterize the labor market. we've seen the unemployment rate fall towards 5.3%. janet yellen still thinks there is lack. that will be the focus on how they balance yellen's view of slack with the fact that the unemployment rate is close to normal. sorry? olivia: keep going. >> opportunities, i would highlight two. u.s. treasuries space, we think there's an opportunity towards the back end of the curve. moderate growth and accommodative central banks

are in place. a fed hike is not going to change that. will remain high and buying yields will remain low. you can take advantage of that by being in the back end of the curve. widened quite a bit with a notable underperformance, especially at the back end of the credit card. investors can buy ig bank bonds, conservatively managed banks. yield for good credit, we think that is attractive. there are some opportunities. olivia: where do you think the opportunity is? >> i agree. most of the movement will be in the front end, not the back end. what is really saying is that is why people are claiming equities are cheap. as opposed to not too much damage on the back end of the curve. that troubles me. saying equities are cheap because bonds are expensive is not as compelling as it was a few years ago. it is probably. a drift towards equities.

pimm: do you think commodities are cheap? >> i do. i admit to being contrarian. gave you that it will never get better in most commodities, particularly oil, we know there's political influence that changes how oil is being priced. overproduction because of political requirements in saudi arabia. ultimately, production will reduce. we will see the supply-demand balance and prove. there areas of the energy complex you would be interested in buying? you've got oil drillers, big multinational corporations. where's the greatest opportunity? not having the courage of my own convictions, you go where you get paid to wait. shell yields 7% now. versus the opportunity in the longer end of the bond market. that is where -- pimm: why is that such a difficult sell? why can't you get people interested in buying shares of shell at 7% when you look at a

comparative yield of under 3% for a 30 year? >> the momentum is against it and people are generally not good at wanting to go in while the news flow is bad. i think that, for an investor, is the opportunity. timenk it will be a long before you are going to get a basket of securities yields from 5-7%. the interest rates have a balance sheet to survive and lower commodity price. e&p are probably not brave enough to go that far. olivia: we are talking about the selloff in commodities and opportunities there. sent people talk about the plunge in the commodities sector, what layoffs in the oil industry could do for the labor market. one of the many risks janet yellen might be weighing if she decides to delay a whitrate hike. talk about the broader risks, the selloff in china, greece? what you think are the key risks

that could make the fed wait. >> oil is differently a risk. -- definitely a risk. the dollar is a risk. due to the strength of the oil.r and the weakness of oil and the dollar has moved sideways. it has been somewhat volatile but more or less sideways since march. there has not been an additional reason for the fed to respond. the other thing is risks can go both ways. we've seen volatility in global markets. there's negative sentiment out of china. if that were to stabilize, our view is that china will have the policy backdrop and policy accommodations to stabilize their economy, if you see , that couldabilize make the fed more confident and make them more confident to hike rates in september and december. risk in the current environment

go both ways. there's enough volatility to keep the risk pretty high. >> one of the other things, i think it is also incomes as opposed to employment. we are talking a lot about unemployment being at 5.3%. we really have not seen the convincing income data to suggest that things are -- olivia: wages and wage inflation. itself may pose a risk and allow rates to go up later than the market -- olivia: i want to see next week's gdp report. that could be make or break for september. thank you so much. >> thank you very much. pimm: chief investment officer of columbia thread needle investment. of western asset management, a portfolio manager. full coverage of the federal reserve decision begins at 2:00 p.m. on bloomberg tv. olivia: still ahead on the bloomberg "market day," you

might remember this? [mario theme plays] olivia: the company that brought you super mario is still trying to adjust. my older brothers used to terrorize me. i could never jump over the green tunnels. super mario is moving into smartphones. is it a way to win back casual players? this is a lot fancier. ♪

olivia: welcome back to bloomberg "market day." a look ate hyman with what is happening in the markets right now. some big earners.

julie: we have a lot of them. yelp, we were seeing terrible performance from yelp today. biggest one-day decline ever. trading at its slowest in two years. it is going to stop selling , locall advertising advertising rose by 43% by the company has been struggling on the national side. there is competition for ratings and add dollars as well. an incredible collapse in the shares of yelp today. atthe flipside, take a look what is going on in the food business, casual dining. buffalo wild wings shares up by 14%. the company said at company-owned stores comparable sales rose. at the as that, look

first four weeks of the third quarter, those sales were up 4.8%. the company basically is seeing .osts sales grow at a good clip the company-owned stores and franchised stores. you are seeing these as the franchisedt is stores, and orange lines. down here is the." group. the chart tells you that buffalo wild wings in terms of sales growth is rising at a good rate above the best of the industry as it continues to see growth. let's look at panera, same industry. this company did not do so well last quarter in terms of its sales andomps, earnings per share. it looks like investors and traders are looking forward. in the first 27 days of the third quarter, comps rose 4.7%. that is a higher clip and we see for the rest of the casual dining industry. another one on the downside is akamai.

manages streaming traffic, down sharply, 7.5% after missing estimates. olivia: stocks down on the news. thank you, julie hyman. pimm: i'm looking at twitter shares. drop.: a huge incredible part is the after-hours move. when jack dorsey started talking, it headed down. pimm: top stories crossing the tournament. the leader of the taliban is dead. a government official in afghanistan says mullah omar died three years ago in pakistan. sheltered osama bin laden

while he was plotting the 9/11 attacks. omar was overthrown in the 2001 u.s. invasion of afghanistan. the house and the senate have found a temporary way to keep highway and transportation aid flowing to states. congress is supposed to pass a three-month extension on funding. lawmakers could not agree on a long-term plan and the highway trust fund runs out of money at midnight friday. amazon is proposing rules of the road for the air. the company wants the government to control a drone zone so it forgo ahead with its plans package delivery. amazon floated the idea yesterday at a conference sponsored by nasa. nintendo -- olivia: back in the black after it reported net income of $67 million. this is the right camera to look into. one reason nintendo is doing so well is the weaker yen.

its performance has been uneven. i want to show you a chart that gives you a visual of how uneven quarterly revenue has been. the super is like mario game. struggling to adjust to the world of apps and online players shifting their time from sed games to tablet and mobile games. michael joins us now from los angeles. give us the details about nintendo. think that, as you said, the upside was primarily from foreign currency translation. theink the surprise was little figuring, there entry into toys to life. about two dozen of these. that is more of a collectible than it is useful. they are not integrated particularly well but it looks

to us like they sold about three amiibos.ion more looks like that number was up to 8 or 8, they did not disclose the number of amiibos. if it is just for collectible purposes, it is a toy. nintendo fans like that. those numbers are going to get a lot bigger. they are probably going to remain profitable. the core problem with nintendo is their hardware is doing terribly. the wii u sold under .5 million units, that is terrible. to compare, sony sold 5 or six times as many ps4, microsoft sold five times as many xbox ones. they are not competing in the next generation. their handhelds sold about one million units, the three ds, they are getting destroyed by smartphones. they have to have a mobile strategy that works or i think

this company is going to drift into oblivion in the next five or 10 years. olivia: perhaps you are saying the mobile strategy should be games only. do you think nintendo should get out of hardware? nintendoi think -- invented the concept of proprietary hardware supported by the proprietary software. they executed well from 1985 until a couple years ago. they now are in a bad place. nobody really understood what mobile phones were going to do to the casual end of the market. exacerbated the problem. they should keep making hardware as long as it is profitable. the console is not working for them. the handheld is a little. do both.lution is to older catalog titles on other platforms, i think they would monetize much better. the biggest platform is probably mobile. they've announced they are going to do it. it is a hard business to actually execute.

companiesnot many good at mobile games that make a town of money. there has to be some condo a perpetual pay loop where you feel like you have to keep coming back and spending money and you cannot finish the game with nintendo, you can finish everyone of their games. they really do not have the dna to succeed. we will see if they figured out. aivia: you should never be in position where you have to pay to jump a level on super mario. that business model is on congruent -- incongruent. pimm: thank you very much. michael, a research analyst from los angeles. olivia: have you played supermarket brothers? pimm: a long time ago. olivia: coming up, much more. california's historic drought is hurting another crop. strawberries, how strawberry farmers are working with scientists to create a smarter, easier strawberry to grow. ♪

olivia: the california drought has caused farmers and businesses -- cost farmers and businesses billions of dollars. it has cast a shadow of shame over on the milk drinkers. it has hit the strawberry industry. california has lost 4000 acres of strawberry fields in the past two years. driscoll, the largest player in the u.s. strawberry industry, may have a solution. they are going to work with farmers to create strawberries that require less water and less care. this is the kind of genetic food modifying engineering that europeans are afraid of. pimm: just to be clear, this is the kind of modification to food that has been going on for a long time -- olivia: in the u.s.. the world. all over the strains of strawberry come from plants that have been

around for a long time. the issue with what is going on in california right now is threefold. first, they been using a pesticide for a long period of time that makes the soil saltier. that got to have a heartier strawberry. ofber two, the issue inexpensive labor. labor costs are going up so labor costs are an issue. as you described, abundant water is not so much anymore. that is a challenge. it got to find strawberries that take less water and can grow in drought climates and live in salty soil. olivia: a new version of strawberries. i hope they taste the same. pimm: they will taste even better. see you later. more coming up on the bloomberg "market day." ♪

pimm: welcome back to the bloomberg market day. let's take a look at some of the top stories of the hour. investors will be looking for signals from the federal reserve.

policymakers are concluding a two day meeting and their statement may give everyone a hint about when they will raise interest rates. for the first time since two. six. bloomberg surveyed --nomists and say there is two technology companies stocks are getting hammered. twitter is down 13%. .elp plunging as much as 29% investors are concerned twitter is not adding users as fast as it used to. as for yelp, the website reduced revenue forecast and said it is going to stop selling national branded advertising. lloyd blankfein says markets are poised for prolonged growth. ief executivech of goldman sachs. he knowledged there will be a jolt in the markets when the federal reserve rages -- raises

interest rates. >> i think it will be jarring when you see an interest rate hike because we have not seen one for some time. people get out the smelling salts and recover because when we have that first hike, the said has suggested -- the fed -- suggested it will be pimm: blankfein said he would support a moderate for president who is open to compromise. americans have definite opinions about what the u.s. currency should look like. jack lew says he has gotten more than one million responses on the topic, includ\ing what women should become the first female on u.s. money in more than a century. a redesigning of the $10 bill that would replace the portrait of alexander hamilton with that of a woman.

markets are closing in europe. let's go to london. >> you can see that the ftse in italy is the death -- the outlier. gains of100 leading more than 1%. of course investors in europe have been looking ahead to the fed focusing on that. what has been in focus is deal activity and corporate earnings. a lot of them coming out today. these three are the biggest gainers on the stock 600. man group first profit was a beat. bayer too. all the stocks gaining. crude oil has seen a rebound today after declining earlier,

still in a bear market. tullow earnings came in better than expected. -- total came in better than a spec it -- better than expected. salpem, that had an unexpected second quarter loss. .ays it is going to cut jobs certainly not the only oil company to be doing that. the bigger picture here with the stock 600. your desk europe's equity benchmark. its biggest two-day gain in two weeks. pimm: coming up on the bloomberg , lloyd blankfein and michael berg speaking up -- bloomberg speaking about

the minimum wage and more. rent to own homes are making a comeback. we will to you how wall street is getting bloomberg speaking i. at 1:00 p.m. we will sit down with the prime minister of canada. going to ask him about energy in the country as well as the downturn in canadian currency. 2000, microsoft windows ran on 97% of the world's consumer computing devices. now it is under 20%. the technology giant is trying to win back customers with windows 10 which launches today. microsoft promises it will reach one billion users within three years. covers technology for us here at bloomberg. what's going on with this new release? alex: no fanfare. no big celebrities. that in -- if they get to

one million in three years, that would be the fastest adoption rate for any adoptions -- for any operating system. pimm: it is one million not billion? one billion. ceos.a big release for this is a business that used to be worth $19 billion back in 2013 for microsoft. amy hood said it is around 15 billion. they are competing in this market we have seen for pcs which has been on the decline. customers are not buying as many machines anymore and they are having to compete with the likes of apple and other big operating systems that are out there that have gained traction with consumers. pimm: this would be, for the business consumer -- in other

words everyone has a computer on their desk. the idea being everyone upgrades and microsoft supposedly makes money. what do they need to keep upgrading? alex: when you look at windows debacle. was kind of a they built it for tablets. pimm: you were supposed to be able to tap the screen. alex: it was not quite a tablet world. this new one brings back functionality like a start menu. the business customers want but also keeps touch screen stuff .nd adds cortana pimm: a human voice at the other end. alex: appealing to business customers and regular customers who have their windows pcs at home. pimm: i have to assume you like many other people, not only use a computer at work but you some kind of mobile device that is a different operating system. this is going to look like that android system or the apple ios? alex: it will look different.

the pictures i have seen are similar to what ios looks like. you see with microsoft surface they had that modular display. some of that has worked in too. the thinking seems to be a more simple user experience, more intuitive which is something apple has been uploaded for because their operating system -- applauded for. it is lot -- it is a lot more seamless. microsoft might be marling -- borrowing some of those ideas. pimm: is this refresh going to help get the surface tablet out there to become more popular? alex: it seems like they might continue to push the tablet. what we won't probably see, researchers have said us might not help pc market. this might not help turn around that number we have seen decline. with the tablet, maybe this brings people in who are used to the pc operating system and they

want to switch over to something more portable. pimm: thank you very much. alex barinka on microsoft and its new windows 10 operating system. still ahead, lloyd blankfein and our boss, mike bloomberg speak about revitalizing the u.s. economy. ♪

pimm: welcome back. let's begin with a look at top stories. expenses climb and profits fell at mastercard. second-quarter earnings match analyst estimates. stronger dollar has hurt his

overseas. the company generates most of its revenue overseas. there is no sign u.s. consumers are spending the money they saved because of less expensive gasoline. the largest seller of tobacco in the united states exceeded analyst estimates. -- higher has raised prices are increasing sales. altria is developing products for the e-cigarette brand. shares up in arab red set a panera bread. panera has been redesigning its restaurants and it is also putting a bigger focus on natural ingredients. those are your top stories at the moment. an important day at bloomberg. we are hosting the goldman sachs 10,000 small businesses investment event. the initiative pledged half $1

billion to help entrepreneurs create economic opportunities in distressed cities. stephanie ruhle spoke with lloyd bloomberg.nd mike they talked about the state of the u.s. economy. a lot of job creation and angst amongst people that we are not addressing the big issues. worrisomethere is things happening all around the world. the average person is not doing all that badly. in all fairness to obama during his own ministry should -- during his administration, the jobless rate is way down. there is always going to be problems. it is not perfect and i am worried about the future, iran and all of these different things but the average small

businessman -- is this person seems to be coming -- business person seems to be coming back, being able to create jobs. blankfein: i think the sentiment is negative in the middle of an election cycle. a lot of things that are wrong with the economy and a lot of things that could go wrong. my core job requires me to worry and deal with all the things that could go wrong but i think if you just kept it simple, you would say that the united states -- kind of a trend growth. rate holocene and for very -- interest rate policy and for very good reason. financial conditions are easy. situation, most of the economy in europe has broken to the high side. if you look at it very simply, things are going to go very well . a number of things to worry about but that is an added

complexity people are putting sf the economy in in. i would say, keep it simple and things are moving forward. stephanie: do you think this will run we are seeing in the stock market is warranted? blankfein: we will know that with respect to history. when i got out of school in the late 1970's, inflation, unemployment. that sentiment in the world. the jimmy carter -- with reagan inaugurated, very bad time. it was the start of a 20 year bull market. while all that bad stuff was going on, people were deleveraging. they would not have forecasted. we chewed through those problems . since the financial crisis, especially in this country, a lot of problems we chewed through.

consumers have the leveraged. -- have the leveraged. housing prices starting to stabilize and move higher. longishwe are in for a positive market. like looking down at a big ugly city from 30,000 eight and when you get on the ground you see the problems. , there the 20 year cycle were bad moments but if you look at 20 years afterwards, it was a bull market cycle. stephanie: it seems there are so many problems around the world, yet the market can use higher. bloomberg: i have run my life assuming the worst is going to happen. dealing with success the. yet to learn to deal with failure. we are not teaching our kids how to deal with failure. lloyd and i just did an event these 10,000 small business organizations. one of the things lloyd said

was, no career goes up in a straight line. you will always have reversals. i think we will have reversals. in my own investment policy i have a lot of cash in terms of the company. i worry about what can go wrong. we have people working to make sure things go right. having said all of that, it is not and gloom. -- it is not doom and gloom. we have not changed our tax policy in a long time. everybody agrees it should be done. we still go on. we have a fractured congress that can't get together but we are still going on. the big things you have to worry about are things like the iran treaty which is worrisome to me. our relationships with some of the other countries around the world. our immigration policy. those of the things that can have long-lasting consequences.

we are selling our birthright in terms of not having good schools for our kids and not having sane fiscal policies in government where we are not spending money today that our children will have to come up with tomorrow. pimm: that was stephanie ruhle with goldman sachs chief executive lloyd blankfein and bloomberg lp chief executive mike bloomberg. catch the complete conversation at bloomberg.com. having trouble getting a mortgage? how about the rent to own business? that is next on the bloomberg market day. ♪

pimm: wall street firms are looking for other ways to make money in the housing industry and they are eyeing the rent to own programs area disallows consumers to rent with the option to buy later.

this is not a brand-new program. people have been doing rent to buy for quite some time. betty: we know this from the car business. back in the 90's when consumers or homeowners were cash-strapped, they did the same thing. different companies rented homes to potential homebuyers and after a certain period, let's say five years, they have the option to buy the house. of course, at a higher price. right now, what you're seeing is instead of smaller shops that used to do this, you are seeing bigger companies go into this market. you are seeing former wall street bankers form companies. .ne such one is home partners they got a $500 million equity investment from blackrock. it is run by a former goldman

sachs executive who is ahead of their european mortgage business, william young. he says there seems to be a demand. people want to be in a home and eventually own a home. this is a bridge type of product for them to do that. pimm: what kind of premium to the get to charge as a result of the program versus what you would get if you had to buy the house outright? betty: it depends market to market. all property is local. they say they track the increase in home prices in that neighborhood. there were examples given of a home that was purchased for $420,000 in one area. if you waited five years to buy it, you be paying over $500,000 for that same home. you have the option to say, i don't want to buy it. to walk away. -- anotherartners company that does this as well

. they say you can exercise that option and we will reread the home to someone else -- re-rent the home to someone else. pimm: the rising value of the house. if the house were to decline in value perhaps the renter would be able to buy the house for less in five years. betty: i find the stories fascinating. and are the little stories the markets that form because of regulation. because regulators have clamped down on banks and lending companiesthat these have been able to come in and fill that gap. pimm: thanks for bringing it to our attention. time for today's options insight. julie: coming up to the top of the hour. rose to highs after we got the oil inventories.

boost in energy stocks. seeing a lot of individual movers on the back of earnings. joining me is jerod watered -- jared woodward. fed is going to be releasing its statement this afternoon. we are not expecting any meaningful change and yet, what do you think is coming from the fed? jared: just as the fed is looking past oil klein -- oil decline, we can look past the fed meeting to friday. the plymouth cost index comes out on friday. -- the market is looking for a down take. 2.8 year over year per -- 2.8% year-over-year growth last quarter. if you look at the atlanta fed gross tracker, you will see that

it tracks employment cost index well. showing a similar increase for the second quarter. i think there is potential for upside surprise. julie: what are the implications of that? this is the last piece that that has been looking for. -- the fed has been looking for. the reason wages are so key, the one thing that that has been looking for is the kind of wage growth that would boost consumption. if you look at where labor markets are tightest, places where education levels and wages are low. the kinds of jobs people are more likely to spend every new dollar of income they get. that will feed them to consumption. between policy changes and policy affects the fed usually sees. julie: if we look to friday and get that upside surprise, if we

see rates hop up on that number, what played you make in anticipation? jared: if you look at into submission of the fed move in september -- look at anticipation of the fed move in september, i think when the fed lifts off it will not be a big boost to utilities stocks area instead of going short, i think a better way to look at this is by selling a call spread. sell in the case of utilities, a 46 call spread, we price that this morning, he gives you an attractive carry over this period going to september. if the fed does move or the market becomes convinced the fed will move, that should keep upside caps on xl you. u. one way of getting position for

the changing sector. julie: why utilities versus other sectors? jared: you could do a similar play in rates. the one place where i am skeptical is the bullish center on financials. said aings calls they half-point move is not going to change the whole world. if anything, some -- sentiment has gotten over extended. julie: great to talk to you as always. ♪

pimm: good day. it is not :00 and san francisco, it is noon in new york and midnight in hong kong. betty: the fed gets ready to make an announcement. we will have a preview of what

they may say about the future of interest rates. pimm: ken facebook face up to wall street's expectations? whether the social network and sustain the rapid growth. betty: tom brady bows to fight his suspension in the deflate gate scandal saying he did nothing wrong. pimm: i'm pimm fox. betty: i'm betty liu. seeing strong gai