morning. it is august 11. you're watching market makers. i am erik schatzker. if you do not think this feels like august, you are not alone. the news got are smiling today. google reorganizing its business. stephanie: we will talk with one goolsbee.ustamnn he may have an opinion or two about donald trump. erik: we get -- we begin with a big step by china to boost the economy and perhaps get its currency rated. china --e's bank of

make it easier for exporters to sell overseas or last off, if -- they fell last month over 8%. earlier on bloomberg surveillance, we heard from blackrock's chief strategist. at the market reaction in the bond market and it is a risk off move. the of interest rates leading the rally. it is a testament to concern that chinapicture coming after the export data is making a move on the currency. a lot of ramifications. the initial concern is, what is the saying about global growth. stephen says he thinks china's currency will -- currency wars will get worse. the agreement will give the

greeks as much $4 billion in loans. $86 billion and euros. greece has a payment due to the european central bank on august 20. stephanie: google wants to become the berkshire hathaway of the tech world. google is reorganizing into a holding company. the search and advertising units will be separated from new businesses such as self driving cars and help technologies. each subsidiary will have its own ceo that has a structure similar to warren buffett. a longtime deputy will become ceo of google. it is being called a new front in cyber crime. broken up an insider trading ring. have beene

identified. officials say -- shares of shake shack are feeling delicious this morning. .p as much as 7% 75% in the second quarter thanks to new locations and higher prices. shake shack has about 70 restaurants and says it will open about 12 more in the united states later this year. there are shake shack's in london, moscow, and those are your top headlines. erik: the five things you need to know this morning. devaluing view on by the most in two decades. it came as a big surprise. we knewfrom hong kong, china was concerned about the

pace of the economy. when you see exports slump in the space of a month, a month of july, you knew that had chinese policymakers concerned. why was that such a big surprise? almost killing two birds with one stone. on the one hand, devaluing those who suffered for some time. of course, the economy is slowing. .hina wants the currency it is a win-win for them. erik: the question is, what is the biggest priority? the flexibility that they are introducing to the one, which may help them with the imf, just political cover to reduce exports? >> exactly. slope to the perfect

do this. you can say we are devaluing the --, just a way the reformers just the head imf said we have a bit more work to do. at the same time, it will always help exporters. will be a game changer overnight. it is certainly a step in the right direction. we will see if we continue the process over the coming days. thank you very much. it is good of you to stay up late with us. stephanie: a look at the market reaction to the big policy move in china. it is no surprise major currencies are taking a beating. take a look, the aussie dollar is down. the korean won's down the most by 1.7. the singapore falling by 1.3% there.

commodities are getting hit as well. copper is down the most since july 7. the reason of course, china's's move almost cheaper. it makes it more expensive for them to import goods overseas. the biggest producer and consumer of metals. finally taking a look at u.s. futures. the dow is falling the most. >> we have been talking about google reorganizing the holding company about the off about. they will be separated from other new businesses. what is your thought here? i think they're trying to create a holding structure if you will to give investors greater transparency on some of these investments that are

non-core investments for google. saying,s over time are these investments are getting more and more numbered. see more details about how the capitals being developed, and i think this is a little of a quid pro quo. they will probably be even bigger in size. response, it will give investors greater transparency. here's a question i feel like i will be asking all day long. the fundamentals of the business do not change. it makes me wonder, with google that much of a trust may stock, it is not like the numbers are bad. the numbers are amazing. lately, they have been accelerating.

>> investors are saying, this looks like another positive move . first of all, when they released earnings the last quarter, they very clearly said with a new sheriff in>> investors are sayis looks like town, there is a renewed focus on cost-cutting growth. giving the second major win for investors for the last couple of years. we do not know what they're going to disclose going forward, and it may be very little and investors may be disappointed. at least they're making a commitment that, from a structural perfective -- perspective, we will make structures that hopefully , and perhaps they will provide and maintain talented or perhaps i will so my company to google if i could

have it run as a standalone entity in an arguably, longer-term, it might provide a better way to spin out and monetize. stephanie: what do you think of the name alphabetic? >> i like it. names likei love google and over. when i search for them, that is the only thing it could be. example, i cannot stand the fact it is called up. when i search for the word up -- uber, google, i like that. alphabet, not so much. second quarter sales fell heinz.t times -- kraft stephanie: it is hot dog season. erik: these two companies officially merged july 2.

3g has a phenomenal record of cost-cutting. this underscores the degree to which they will have to buckle down. both of these businesses are slumping dramatically. stephanie: it has almost been a foregone conclusion that investors to leave it 3g. this is what i want to know. does this make mondelez a more attractive acquisition because you are saying, i have got to or doeser and better, it say -- bill, an empty seat and we'll is have one for you. number five, the company selling its data storage business, the

price tag is a cool $8 billion. we will have more on that surprise move by china. i am moving on because the university of chicago economics fester, friend of bloomberg tv, and former chief white house joinsist austan goolsbee us. from a policymaking perspective, what is going on there? china? austan: they have been getting , having basically paid their currency to the dollar over the last several years. the dollar has gone up and up. relative to their age, they have been in a tough spot and they are trying to counter out -- counteract that, especially with the fed talking about raising rates in the near future. i do think it is a sign that china continues to slow down faster than what the government

has been telling us, as fast as its the market feared in most pessimistic days. this is a sign that is the way it is going. they are trying to figure out a counteract the slowdown. i do not think there is that much you can do if you have been pushing it as hard as you can. out,the gas finally runs you cannot push it anymore. erik: is that to say this is that policy? be.an: may it depends partly on what the world's's reaction is. you can see the currencies of all their neighbors go down more. this starts us on a cycle. it convinces the u.s. that we need to devalue. then it would definitely not the good policy. if they in some sense get away with it, they devalue relative to everyone else and try to export their problems through other countries, then you would in theirwas at least

interest. erik: you just raised a very interesting point. how, with where the united states economy is in the economic cycle, could the fed or the treasury department for that matter engineer a devaluation? if they postpone the rate increase, the dollar would go down. part of why everyone's currency goes down is everyone thinks rates will go up in the dollar. therefore, money flowing into the dollar. i think if the u.s. treasury simply announced they had concerns about everybody's currency going down, rather than the u.s. and the dollar going strong, markets would react to that on the feeling the u.s. was planning some action. the short run.

what are: institutional investors asking you about china and does it seem like they are actually putting their money very this point? it seems like an untrustworthy market. austan: that is a great question to people about china, the first thing is, people try to get a they can get fast a handle. the official statistic shows a .lowdown the actual reality, if you measure how many lightbulbs get turned on at night, how many commodities,arious

as well as you do not have to just rely on the statistics, they suggest a slowdown has been a lot faster than the government has said. a lot of people cannot get their head around that. these moves announcing big direct capital investment, in a way, there are surprises but it away, there are not surprises at all. they feed into that nagging fear it is not growing near as fast. i would say people are pretty nervous. erik: we are going to shift focus to the u.s. economy ran after the break. you give u.s. growth a be at best. whenwith austan goolsbee we come back after this short break. ♪

erik: you rate u.s. growth a b. i want you to put that in contest for me. inevitably, we talk about policy. speaking with tom keene yesterday, he was told if the fed were evaluating economy based on employment around -- alone, he would have to raise rates. do you feel the same way? addan: yes, though i would gdp in there. it has been growing ok. not bad and not great. i gave it a b. think gdp has been modest, inflation is well below the target, and job performance is relatively strong. that is the collection of

things. he is my old teacher and i am a baked fan of his. they have been, itching, they have wanted to raise the rates for a long time. they will try to find a way to do it. i do not think it is warranted. i think the economy is not growing that fast. china is slowing down in europe is a disaster. the problem is the fed does not have a gdp mandate. a way, that isn the problem, but the gdp and inflation are tied together. they have a dual mandate of employment, deflation. employment is strong and deflation is very weak. what specifically would you look at if you ran the whole thing, what would be the most important factors for you? not a: look, the fed is

kingdom. there is a whole committee. i think what they ought to be looking at is, before you start raising rates, have we achieved -- how to we achieve some form of sustainable liftoff in which you feel the economic growth is not just a blip, doing pretty good. it is not just by one measure doing well. the jobs are good therefore we should raise. you want to be consistently sustained growth of something like 3% before you start raising rates, in my opinion. erik: a quick question before we have to hit a quick break. worried about be popping bubbles at this point? austan: yes, probably. it is just really hard to do that, as you know. how do you figure out whether something is a bubble and even if you thought it was, what would you do? you certainly do not want to

drive the economy down. erik: i have got to interrupt you. we are taking a quick break. ♪

stephanie: welcome back. austan goolsbee has made no secret of what he thinks of the republican braced -- race, donald trump a picture -- in particular. he posted this tweet -- clearly, they are pointing to a trump building. is still withe us. you are well versed in the world of politics. some people are calling it a circus when it comes to the republican race. it, do you make of all of

and why are you going after mr. trump? austan goolsbee we were just having a good time paddling down the river. if you watch the debate, it was certainly entertaining. in all the controversy, forgotten was the part where donald trump said hillary clinton had it coming because he gave her the money. it was a strange event and the polls that came out after that that the topshow four candidates are trump, ted cruz, ben carson, and carly fiorina. the top four are not conventional candidates. it is pretty interesting. something is going on in the republican primary electorate. they really do not like conventional, establishment like candidates. it will be interesting to see how it lays out. erik: let's talk about what an

unconventional candidate would mean in the white house. let's say, however unlikely, that donald trump becomes president. what would that mean for fiscal and economic policy? we do not totally know. he has not outlined most of his policy ideas except building a wall on the border with mexico and make mexico pay for it. i think this kind of harsh attitude, i'm going to get up and tell everyone they are a loser and a fat slob and a jerk if i'm criticized, it has in a long time since we have had a thin-skinned person in the white house. i think it would be a little bit of a weird that -- we're fit. -- weird fit. when you are in the white house, you take criticism for everything you do. it would be an interesting approach. erik: he is a fruit is this man.

i do not think anyone would deny him that accolade. knowing what you know about his track record in business, what kinds of things might we begin to hear from him as he and others are forced to do voltage a few details about what they truly believe in, and what they might do given the executive office? would: i think you probably start hearing from trump more on the economic sphere. he is a businessman. a lot of people in the republican primary would be inclined to give him some latitude if he says, this is how business works, they would say, he must know. i would not be surprised if you see more of the traditional massive -- tax cuts that pay for themselves. that kind of policy thing coming from trump hear it but i do not know. i do not have any deep psychological or policy insights into the mind of donald trump. i do think the other candidates are going to get sucked toward

that vortex. you have got this gravity toward bluntness and an abusive style. you already started seeing that in the first debate. rand paul and chris christie yelled at each other. everybody is trying to get that that they would like to take from trump. punchnie: can ted cruz just as well as anyone? you yourself debated him in college. watch out.ple better ted cruz is a good debater and they underestimate him at their peril. stephanie: did you beat him in college or did he beat you? austan: yes i did, he never beat me. he said i was a year older so it was not fair. erik: let's now shift our focus to what we might hear more of from democrats. if the conservatives, if the republicans are shifting more into a populist mode thanks to

the leadership of donald trump in the polls, is that going to mirrored on the left? of an: in a way, but kind fun house mirror. i do not know who is on the bend side. i think you have seen hillary clinton and bernie sanders, the two have been out promoting policy, if you will. strategyergence on over education funding, inequality, building up the middle-class, things like that. i do not see hillary clinton veering away from that one iota. that is her focus and that will be the focus the whole time. in a way, that is populist. is just smart politics or that is where most of the voters rp or do you will see them gearing the policy toward that. if donald trump were somehow the democrats would be thrilled. because they would say, look, we

are for ordinary people. do you think donald trump is an ordinary person? they would probably make fun of whatever -- stephanie: wait. donald trump might not be an but do yourson, think hillary clinton is an ordinary person? i have met hillary clinton and bill clinton only a few times. that is way geared toward middle-class people. thus far, if donald trump's campaign goes the way his personality has been taking it, it will not be -- it will be about things that are more anded toward business anti-immigrant type of stuff. i think they will be clear contrast on the policy side. says he cansh

return the u.s. economy to 4% gdp growth. first of all, is that even possible. secondly, to the degree it can be celebrated, what is the one thing either party should do? austan: gdp growth in the united states i do not think has ever been a sustained 4%. ongoing in the future. i think that is unrealistic. that said, i think the most important thing we could do in the gdp is start -- stop trying fight the last bubble or the u.s. economy has got to shift to more export lead and more investment led and more innovation led growth, not trying to drive back up housing starts and consumer spending. could take view place. that slow and hard work is not an overnight thing. stephanie: i know we have no

time left. advisor to the white house at one point. if the president called the right now and said, what is the one piece of advice you want to give me, what would you say? austan: i talked to them sometimes. i can the president does not want to be a lame duck. realistically, we are coming to the end of the administration. if they could get anything done in a bipartisan way, i think they should try to do that. bipartisanship is may be coming to an end until after we have another election. stephanie: thank you so much for joining us today. one of our favorites. the former white house chief economist, and a man who clearly loves to paddle. i guess that was a kayak. erik: time for our top stories. the computer company is selling its status door edge -- data storage business. for moreht veritas than $13 billion back in 2005.

this deal would be the largest private equity takeover of a technology company announced this year. stock buybacks, plowing money and costing the billionnear than 3.5 dollars in the last five years. by a ceo who has suspended buybacks but says they will resume in october. here, etiquette dilemma for diners. the waiter at mcdonald's? the company is testing table service at 50 u.s. restaurants. you have to ask for your food at a kiosk feared it is one of the tongs mickey d's is doing try to reverse a sales slump. i'm not a restaurant analyst or a fast food enthusiast.

what do you think? erik: nope. stephanie: the whole reason you go there is the fast food experience parity for an get a cheeseburger in the car, pretend you did not, and throw it out quickly. more on china's evaluation or you can see all the ripples through the currency markets and other financial markets, for that matter. a chinese expert joins us next. ♪

raising concerns about growth, the second-largest economy is headed for a slowdown. simon, one thing we have not covered this morning, winners and losers. who wins in the chinese valuation and more portly, who loses?

simon: it is an important question. it is deflationary for the rest of the world. you touched on the u.s. already. it will clearly have an impact on the u.s. and could delay any intentional rate hike. dominates.et china that will put real pressure on china. it will raise the prospect of devaluations. you can look at technology.

i think i mentioned before asia is increasingly the coming more of a value story. you have to jump in at more lower valuations in the hope divideey will ultimately demand. ultimately, you will see property markets stabilize. you will see that debt problem is in the banks. you could buy a lot of those companies that really depressed valuations. at 50%.buy those is there an immediate catalyst, no. but if you're willing to take a bet that the chinese government knows what it is doing, -- stephanie: do you think the chinese government knows what it's doing?

simon: absolutely. the reason you will not see big steps, china takes baby steps and then it adjusts accordingly. 2008made a mistake back in over stimulating liquidity and creating a huge bubble. they do not want to do that again. they will take the right steps. erik: back to the immediate fallout, what about a company like apple? this makes that cheaper, but it is also dependent on china for growth and iphone demand. do not know about the margin impact for apple. but certainly, when you're looking at demand, one of the areas they are being very cautious on in china is consumption, cautious because of the anticorruption drive. i have been cautious because of the fallout from the stock

market. it is the wealthier investors who have been in the stock market. you have already seen it in the likes of bmw and you have seen it in demand for spirits coming out of europe. erik: so it is apple [indiscernible] simon: right. apple is not operating in a vacuum here. there is a growing chinese hang seng industry. the functionality of an iphone for half the price. the world will become a lot more aware of that. an important thing to happen over the weekend in the u.s. is that for rising formally ended asset subsidies. the u.s. consumer will become much more aware of the price of smartphones going forward. those chinese smartphones if anything will become even cheaper. will pay 650 or $900 for, that will stick out like a sore thumb in the market. erik: great to have you back to head of asian equities. stephanie: consumers are hungry

for shake shack, but they are leaving behind the condiments? you know what we are talking about. heinz is having a tough day but shake shack is stealing it. we will have that and more when we return. stick with us. ♪

stephanie: welcome back. mym stephanie ruhle with partner erik schatzker. consumers are skipping the catch up but burgers are still in high demand. and shake shack reported earnings yesterday. kraft heinz missing analyst estimates with revenue falling 4.9% as sales slow. .ichael covers the industry last week, when we saw that bill ackman took the stake, i thought

all morning long we were talking about the genius of 3g, what a brilliant idea heinz craft was you look at the stocks trading, there is a potential. potential for what? what is important is stepping back and looking at the big picture. we are only six weeks into the merger. kraft heinz is not giving guidance. almost $100 billion company. heinz was private. there was not a ton of public information there. it is very difficult to model that out. the investors are in a profit -- a tough spot. michael: you really have to trust in the genius. stephanie: [indiscernible] companies,es to tech investors trust us right, left,

and center. if bill ackman says they are geniuses, i don't know. they are in a sales tailspin. how quickly can they cut costs to balance out the weakening demand for the product, not just on the heinz side. michael: that is an important question. we need to step back. if you look at burger king, the first three years were really all about cutting costs and laying the foundation for the new company, the new vision that they had for the company. in year four, sales really started to accelerate. they have done a great job for the last year and a half. it takes time. you cannot turn around an aircraft carrier on the dime. erik: maybe it is not such a bad thing to have no guidance. maybe they are not setting the bar so low. to run the business like it is supposed to be run.

shake shack. michael: unbelievable quarter. planning to open even more locations. stephanie: if you think about the price point in terms of burgers and fries, they definitely work in new york, chicago, l.a., and wealthy suburbs. if you think about your typical fast food customer, they love the dollar menu. they love the inexpensive pricing and shake shack does not have that, by comparison. moreel: it is really attractive to higher income customers. that is good for them because that segment of the population has been doing better. also, there is a long runway of growth. they only have 70 restaurants altogether. next couple of years, they will only be opening in major markets where the average sales will be strong.

before we go, there is one thing erik schatzker loves. is having the inside skinny and restaurants. during the commercial break, michael was telling us about a secret menu at the shake shack. i live right near is having th'e all the time and no one has ever invited me into the secret menu. what is on it? michael: this is what i do for a living and i research restaurants. butter baconeanut burger. i have not had the pleasure of trying it. stephanie: how do you order it? michael: just ask for it. erik: i would call that news you can use. a secret menu item. stephanie: what else is on the secret menu? honest, i am not really sure. that one stuck out to me. i made peanut butter lover and i eat it out of the jar.

stephanie: news you can use. ask for the peanut butter bacon burger, assuming you do not have a net allergy. let us know what it is. tweet us. we will be back. ♪

erik: coming up, senator claire , there is a lot to discuss there. stephanie: we are about 35 minutes from the start of trading here in nyc. we are joined now with a look at some of the stocks on the radar screen. k, i will turn you to twitter

or someone sent us a photograph of what someone at for lunch. the bacon peanut butter shake shack burger. thanks. good morning, everyone. i want to take you to general motors, falling. general motors in the premarket is down by 1.5% and ford is down 1.4%. the reason is because chinese consumers are buying fewer and fewer vehicles. numbers not seen since november of 2014 per looking at the data delivery, two .5% to 1.3 million vehicles delivered, a 17 month low. u.s. automakers will stand to lose because of automakers. china'stoday, surprising devaluation. of grand the maker theft auto. look at that. they are blowing a tire off of

earnings, down 6% in earnings. they missed their earnings estimate. $.31 versus an estimate of $.36. doubled, which makes up 70% of all of its revenue. love withre still in stocks. the company is in the best shape it has ever seen. it keeps its $38 price target. symantec is up about .8% here. higher on acquisition news. that is all the time i have now. still to come, hacking press releases to get inside information. the latest insider trading ring will get broken up u.s. authorities.

how they did it and who is involved next. ♪

>> live from bloomberg headquarters in new york, this is "market makers." erik: good morning, everybody. it is a tuesday in new york city . not soie: the weather is hot outside. it is rainy. you might as well stay in and watch tv with us. futures lower this morning on -- china devalues the dorm -- here is a look at your top stories this morning. a lot to cover. china is moving to end its deepest economic slowdown since 1990. it was devalued by the most in

two decades. that should help exporters overseas. the move is being called a one-time adjustment. stephen spoke earlier on bloomberg surveillance. a one off.im it is i doubt it. it is not a coincidence this was taken on the heels of sharply declining exports and continuing downward pressure in chinese growth. exports fell more than 8%. u.s. authorities broke up and insider trading ring. stills broke into corporate press releases. the hackers were thought to be in ukraine and most likely russia. erik: the price of oil is dropping once again today, down more than 2%, almost 3%. month is output last

the most in more than three years. most oil since 2012. it accounts for 40% of the role posits oil supplies. rick perry, the former texas governor, responding to a cash crunch. rick perry is far behind on the polls and his fundraising has been sluggish. those are some of your top headlines. google shares are up after announcing a big change. it has reorganized a holding company. what people know as google will be one company within a broader organization and other projects will be separated out under an umbrella. we are joined now. he is now on his own. the market likes it. what you make of this? >> there are a couple of

implications here, number one, it finally gives some permission from wall street that it is ok to dream. and give some transparency on the other things you are doing. was the stuck up 7%? it is interesting to know, from a organizational structure, at the alphabet level, and soon at the company level and all the other bits, but the other aspect is wall street in general has been excited about all of these transformational opportunities .oming up in the last two years, tens of billions of dollars have gone from public to private markets. theoretically, in google, wall street has a way to participate in some of these things that have a long-term payoff. and also not participate in some things.

collects that is right. the company has flexibility to hire people for emerging businesses and keeping it separate from google. it allows them a lot more flexibility for google and non-google things. the other thing that has been talked about a fair bit, this is similar to berkshire hathaway. it is textbook berkshire hathaway. there are echoes of it. abouthas certainly talked warren buffett's structure. google is a cash cow here. let's not forget that. despite the fact they have several billion on youtube, android, etc., the difference, .t is very clear of moontself has a lot

shots. they are not done with innovating. i would argue there is a tremendous innovation right there, unlike the insurance business. erik: the fact that investors are responding so positively, trading up $40 this morning, it means immediately apple and and alibaba all have to consider doing the same thing? templatestablishes a here remember google pioneered, in the tech industry, and made it ok to had dual >> shares when they went public. since then, almost every new emerging company has. this structure is something i , because of technology ofnging every industry, all

these are going headfirst into so many businesses. alibaba are winning emmys. they are making movies. they are building drones, etc. in theory, tesla, apple, google, and a burke, will all be competing theoretically of 35 years. thisll street likes structure. for the long term, meaning the next two or three years, the companies we are talking about

let's stay with google. an interesting thing about the structure is potentially it also pays a cleaner -- paves a cleaner path. it becomes very tough. we talk about apple. frantic.t but if you start to break things ,p and allow those companies they could grow into their own market cap spare i would wonder what would happen if microsoft move back inad a the 1990's. if windows had been a separate company. we do not have time machines. it could have been very interesting to see microsoft in that kind of mode.

stephanie: thank you so much. i will say he is one of act -- one of my favorite guests. isk: the chinese valuation rocking stocks and others around the world. emerging markets entering, potentially bear markets. stephanie: stick with us. ♪

erik: a surprised evaluation from china. the fallout is everywhere. look at the emerging markets index -- equities, that is. two points shy of entering a bear market. what is this going to mean for emerging markets? blackrock's managing director and head of emerging markets, fixed income, we have to put it in terms of economics, credit,

stocks, the whole gamut. what are the implications of this? >> 13 two important questions. or iss one move of many this a one off? it is crucial going forward. is, what ishing this telling us about the state of the chinese economy? are there other measures to come? these things are still and uncertainty. if you look at past behavior, you have to draw the conclusion, one and done is not going to be enough. and ithat is the case, is mentioned a strong exchange rate and other currencies around the world, 2% will not do it and you are right on that.

the question is whether they will attack that with different measures were not that we do not know and will not know for a while. for market, the uncertainty means there is something else on thing every other emerging markets are dealing with, lower commodity prices, that emerging markets will have to deal with. uncertaintye more out there that the market will have to work through. to see not just for emerging markets but for developing markets. what happens with dollar right now on what happens with the fed, because up until now, the dollar remained one side. important gamean changer. erik: to the degree there was an opportunity in asian emerging markets, let's say korea.

malaysia, for example. developing emerging markets, better. does this move by the chinese erase the opportunity? >> first, we look at the facts. clearly, this is a long dollar move. rates. could be a little different. worldk to the rest of the are u.s. rates are going nowhere. in most places, rates should go lower as well. there may be opportunities in asia rates. it depends. stephanie: if there is one company iarkets

should invest in, what should it be? >> the right call it short emerging markets currencies. long dollars to the emerging markets. i would still shy away from those commodity users. you see what happens with oil. if the price in local currency for the bigger demand in the world, i.e. china, is going higher, they might be demanding less. you also saw that go on oil supply. this is commodity producers in emerging markets. if you want to think about the long dollar, it would have to be -- brazil has its own dynamics right now.

the potential rate in downgrades. it has its own dynamics. columbia is another place where currencies get weaker. dollar, -- >> let's try to put this in perspective. how much more less of a challenge does this become relative to what the emerging market economies already face with a rate hike? >> it is one more challenge. if this is one of many, it is a big challenge. also, it is also the story where actually, the fed will react to this and say,

maybe we need to wait as well. maybe this is another story. most likely not. the fed is on the way of willing to move from years and years of super loose policy. but the fed has been talking about the strength of the dollar . this makes the dollar stronger. is there a potential positive on the credit side, with some of the exporters? >> yes. if this finally gets the chinese economy going, it is good for everybody. we do not know yet. we will see as we go along. showinguarter data was soft landings. the latest numbers were not that positive.

one thing to say is actually, not beenxports have performing other asian currency exports jirga maybe the idea currencyneed so much is not necessarily true. it is very positive. brought higher growth for china, that is good for the world. it is a little bit of a window of uncertainty. a lot of people are jumping to a currency war this morning. is this a race to the bottom? >> we had a lot of the rest of the currencies, the euro, the yen, causes on the other.

we need to see whether this is a one-off. nots what it will be or here it is too early to call this the beginning of a currency war on the chinese side. to change to what everyone is asking china to do. ideahether this is the that has to be progrowth -- erik: this could be the end of it? >> yesterday everything is moving to percent. we are in line. commodities, that is another accelerated story or not. it is too early to say. we need to be monitoring these shared we are. this is one thing that, while it comes in, it is not a risk we

have been considering for a while. , the samething we do way we monitor everything that could go right. it is our job every day. all right. saying it is too early to call it a currency war. stephanie: this is a big story everyone the financial industry's top outcome, the insider-trading ring that has been cracked. this time, it involves cyber criminals. allegedly stole press announcements and profited by trading on the sensitive information before it became public. eight people have been arrested this morning in pennsylvania and georgia here more are expected to be charged. covers theey community and joins us now. michael, walk us through this and tell us who the hackers are and exactly what they were doing. michael: one thing that is

interesting about the scheme is it is a merger or partnership between hackers in ukraine and possibly russia and traders in the u.s. was, ang this morning longtime wall street expert who worked at morgan's danley and started his own hedge fund and who is getting information from hackers allowed to manipulate markets. they hacked into other business wires to get press releases on market moving events including financial numbers. they got as many as 150,000 of those press releases. they put in trades and had a relatively short window. they managed to make about $30 million. erik: it is amazing they did not make more than that. it reminded me to a degree of the insider-trading story, the

guy, david, was accused of getting early copies of this this week so he could read the inside wall street column and trade on the basis of that. word of m&advanced transactions, for example, i guess if you are limited by capital -- capital, it is limitless. >> that is were they being cautious because they did not want to be caught? some of the best paid off very well. you have got to be careful about not making big bets that pay off well. when you are in high school and stealing out call from your parents house, you're theng a sip or two from bottle or you're not draining the bottle and put it back to hello, have you ever stolen anything? is probably true.

these guys were not careful enough. that is ultimately how they were caught. watchare algorithms that profits, unusual profits that going one direction. they flag these guys and gave their names to the fbi to that is in fact how the holding was caught. it was not caught by the entities. they had to be told they were packed. thank you so much for breaking this down for a spirit i was not so smart. i took it out of the freezer. every time i would force them out, would pour water back in. realizing that water freeze is an lot does not. the vodka bottle out of the freezer and it was frozen. we will be back. ♪

day in newa grey york city. a few minutes from the opening

bell the u.s. tracy is in the house with three things you need to be looking at today. brian, a senior investment strategist. should we start? i bring you today a special edition. d.c. united? what fun we have here. number one, you have been talking about the chinese one being devalued. the big issue now for markets is it has been the basis of a massive trade. people have been borrowing in low yielding currencies like the u.s. dollar and then investing in higher-yielding angst and nominated. the question now is what sort of fallout you see in china from the unwinding of that trade. international supplements estimated a few months ago that china has something like more than $1 trillion worth of u.s. dollar denominated borrowing.

it will be a big deal for markets. saw a figure this morning that for every 1% devaluation of the chinese one, there is a $40 billion exodus of capital for china. >> that is what they have to navigate date -- navigate now. >> this will be the million dollar question for the global economy. be, it has been a long story of slow growth, deflationary pressures, and central banks around the world. to supports to try growth. the reality with china is china is going through a long progression to be a consumer-based economy. they missed the opportunity in 2008 when the world was going through a crisis, to really take necessary steps. to prop upng investments within the economy, what they need to do is allow the long-term reforms to take

lace that will allow growth to flourish overtime. how much pain are investors feeling this morning? the reason i ask is, from moments ago, he said this was well known to be the risks. talking because it was strengthening so fast in long step with the dollar. we saw the x boards figure in july. it seems like it is not maybe as much a surprise as it seems in the cold light of this morning. pain in thesome markets this morning. rally.entivized we have to remember it happens every year. a greater than 5% correction every year going back to the 1980's. we believe it will continue to be one of the longest equity cycles on record.

the fact that policymakers continue, everyone in the u.s. is so focused on rate hikes. when will we take away the punch bowl. we are still in a very slow growth growth inflationary environment that has policymaker supporting growth. of all the market cycles, none of them die of old age. they die when the federal or the central banks of the world murder them. we are not there yet. >> special effects number two. we're talking about the pain devalue meant. let's look at china southern airlines. in one day.8% that is the biggest fall since september 11. the company has 90% of its outstanding debt in u.s. dollars. a lower yuan means higher interest payments.

that is one fallout from the move. whether or not this is a one off or if the devaluation becomes a longer-term trend, certainly we have seen market reaction already? an extremeis example. copper is taking a leg lower. the currency fallout, whether it is the australian or kiwi dollar, the korean won, the list goes on. >> number three of special-effects. stephanie: she likes that joke. she is not letting it go. at the brazilian benchmark stock exchange. there has been pain in emerging markets. we know there is a brazilian political scandal that seems to be getting worse. this is down 1% year to date. let's look at brazilian stocks

in u.s. dollar terms. down 24%. in theocal terms, 24% u.s. dollar, gives you an idea of how much the dollar has been appreciating in markets and how much of an impact that is having. erik: that raises the question whether it is time to start -- whether it is brazil over other markets -- whether it is time to start fishing for the bottom. even though the crisis is mushrooming, a lot of this has braziliand into credits and equities. need to be thinking about individual credits and companies rather than rod markets. it has been an environment in the last six years. the rising tide has lifted a lot is itts, but the reality

will be a bottom-up pickers market. you are seeing that debate across markets and you always see isaiah in emerging markets -- you only see it in emerging markets. to say is it time to bottom fish in brazil -- you would not want to buy the result index. you would want to do that on a credit by credit and company by company racists. that applies throughout the emerging world and the united states. stephanie: thank you. pun ever never do a again. stephanie: you're welcome to do puns in this house. the bell has run. -- has rung. >> first looking at google. google is up 4%. google itself is up over 5%. the news that it is reorganizing

into a holding company called out for that is -- called pushing the stocks higher. it will give its web operations more --. analysts have been out with their new calls. keeping it at a 1700 dollars price target. an $800 price target. to 800aising its target $40. it is now $693. ofke shack is sizzling off gangbusters q2 earnings. it is up 3.5%. revenue and profit, as well as the same-store sales, blew past expectations. earnings-per-share came in at nine cents versus three cents and revenue rose 5%. weresame store sales

up by 13% versus 8.5%. the red.nz is in it is down by nearly 2%. this missed revenue and sales. the estimate was $4.7 billion. they are not giving guidance going into the future. stephanie: thank you. i will not point out the fact -- did you notice -- the three things that are most important to tracy, the stocks that are on the move. what is the most important to you? >> i continue to look at policy accommodations throughout the

world and a look at what we will see from the fed as we move into september and beyond. i continue to think that we will remain in a low interest rate environment, and i think any tightening will be glacial. it will be slow-moving, which is usually good for equities and the credit market if you go back historically. it going to be even slower because of what china did overnight? >> i think it will be slower. not just because a foot they did overnight, but because of what many people have come to expect. we have heard for years when will the rates rise and when do i need to get out of the market? despite what was going on in greece, or what is going on in china this morning, the equities are undervalued compared to other classes. it doesn't mean we don't have near-term volatility in markets, but in the long-term investors will be more well-positioned in equities other than other asset classes. credit is tothink relative to equities? lookshink that credit

very attractive compared to most income generating assets. i think that equities -- stephanie: in spite of the fact that you can have liquidity problems in credit? >> let's remember what we have seen in the credit markets over the last couple of years. what you have seen is most companies take advantage of the low interest rate and ironman and push maturities into the future. coverage ratios are reasonable. you don't have the wall of maturity or the tight spread at the end of the credit cycle. disruptionve seen is from the energy sector, but most sectors in the high-yield market remain. investment spreads were whitening. at the same time, we are not seeing the kind of pullback in equities that is often led by a widening spread in the credit

market. carefule have to be about what we are seeing in the short term versus the long-term. you are seeing markets ahead of the long run without a meaningful pullback. these types of things happen every year, and you are getting disruptions in markets. investors are concerned about the chinese slowdown and the beginning of a rate tightening cycle. for a variety of reasons, investors are becoming more cautious. that keeps me optimistic longer-term. when there is too much bullishness in the market, that is when you have to be worried. erik: the senior investment strategist at oppenheimer funds. sending a bearish signal. transportation stocks going in reverse. is this a sign the dow will stall out? stephanie: stay with us. you are watching "market makers."

stephanie: welcome back to "market makers." here withnie ruhle, my partner, erik schatzker. industrial cannot rally without the transport, then houston, we have a problem. data keeps following. it is down seven times in 9 surveys. recentlyeter touched its lowest level since the doldrums of 2012. we have the managing director and the analyst behind the research joining us now. >> demand is certainly incrementally weaker. it is down seven of the last nine surveys. the weakest level in 31 months. it gets weaker on an incremental basis. we don't make anything, we just move it. it is slower in terms of what they are moving.

we are seeing weakness across the board. it is concerning. erik: are you a doubt t just focusedre you on transport? ken: you have to bring the dow into play. we follow fundamental stocks. in the big picture, if the data is going in one direction you have to follow it. if the data is getting weaker and the dow keeps climbing, at some point something hast to suggest -- we argue with our economists all the time because their numbers go up and ours gets weaker. stephanie: what do you think about:? ken: it is one of the weaker commodities. from a 33% from what the rails moved down to 17%. ofis cut in half in terms the rail reliance, but it is still a major commodity that

they move. erik: you have to account for that in studying transport? if coal is being replaced by natural gas, which is being moved through pipelines, do you account for that? ken: you can look at rails in thirds. 1/3's industrial commodities, one third is retail, and 1/3 is whether commodities. if you are losing a chunk of coal you have to think about what will replace it. rails have been working on growing intermodal. erik: how much to the point of crude by rail, how much is that being affected by oil prices. everyone is looking at the rig count to determine the supply of taking place. maybe crude by rail shipments is even a better indication of what is happening in the shale patch? ken: it was a fast-growing part

of what they did, but it was still relatively small. it was a big part of the growth story. that is another thing you have taken away from her placing what could have been on the coal side. stephanie: favorite stock? ken: fedex, because it is a self-help story. the rails, we have downgraded. we took down all of the trucks. that is something we follow in the survey and the survey tells us things are getting weaker. stephanie: thank you. merrill lynch's managing director. this is the guy on the move following transport. erik: let's look at th top stories this morning. a computer security hated to thelling carlyle group at $8 billion. to air british soccer

in the united states for six years. they're renewing the rights. no terms were revealed. healthy --n's america's healthy eating trend is not averting bacon sales. belly used forrk 174% in fouris a months. those are your top headlines. the bacon then answer, it is not for me -- the , it is not for me. the infomercial where you turn a bacon into a bowl and you put ice cream and it -- erik: like a taco salad shell? we will be right back. ♪

erik: today, wall street is

buzzing about 2 big names. google and twitter. there are rapid development at both companies. our internett with media analyst. we have to start with google. yesterday they announced a reorganization into a holding company called alphabet under which google inc. will be one unit and the rest of google's businesses will be another unit. how important is this? >> i think it is huge. investments have been looking for transparency and clarity of across advertising businesses. youtube, as well as he. the organization brings that to the top. more clarity on the margins of the core business, which is significantly higher than is being reported now.

now the margins are being weighed down. that means that investors, like myself, and abroad wil assign higher multiples to the core business. correspondingly, they will have to assign a low margin. the sum of the parts does not change. google is to your google. stephanie: if you are factoring in any discounts because of the lack of transparency, that now disappears. that assumes total transparency, and we will probably not get total transparency. we will not get line items on everyone -- you have more than before. how is that a negative? erik: it is not a negative. victor: four youtuber left for our own margins and revenues. that is eliminated by this structure.

we are taking baby steps. ultimately, they will tell us what their revenues are. stephanie: they will wait until every individual business is profitable, then separate it out. universe, beyond google, what are you looking at? victor: i was supposed to talk about twitter. i have a hold in the stock. selloff is somewhat overdone. they have recouped some losses yesterday, but i think the stock needs a catalyst. they now have a new management team. notink they need to resolve having a ceo quickly. isphanie: doesn't matter who the ceo? it seems like they have had management and personnel issues forever, but the product seems to be so special that the beat goes on. andor: originally the media

investors had coalesced around adam bain. not everyone is around jack dorsey. i think they need to get someone new with fresh ideas who can tell in with a new set of strategies that can drive user growth. stephanie: is it a problem that jack is the interim ceo. dick costolo is on the board. is on the board. do we need a shakeup? victor: if a new ceo comes in, they need to resolve that. i think they need to change a few things on a broad level to give that new ceo freedom and flexibility to implement strategies to drive user growth. is a good ceo and a good analyst and a good banker.

from what i understand, he is a good operator within twitter, but i do not think he is ready to take the ceo role. he will have to prove himself as a cfo. erik: when you think about catalysts in terms of stock and operating performance -- are you thinking about catalysts in terms of stock or operating performance? victor: first they need a new ceo. they need to resolve that quickly. that does not promise operating performance, it is just a potential path? victor: correct. right now the company is operating without a permanent ceo that is not give investors confidence. the project lightning, that is promising that will be launching within three months. that is another catalyst investors are waiting for. those two are the biggest ones. video ads is another one.

gloom forall doom and twitter. they need to drive the user growth. that is the biggest issue for the company. erik: thank you. victor anthony. the senior internet media analyst. stephanie: picture this. some of the most extraordinary images out there. turnedo's animus river orange. a toxic spill turned 100 miles of water bright, iridescent orange. the epa says three million gallons of wastewater laced with heavy metal, including lead and arsenic, was accidentally released last week from an abandoned mine. we don't know how long the cleanup will take over the health risks for animal and plant life within the water. i do not like this image. selfie with a

difference. they are a group of syrian refugees celebrating their safe arrival on the greek island. they floated from turkey to greece in a small ding a. than 50,000 refugees arrived in greece in july, high er them for all of 2014. stephanie: i'm glad they got there safely. that wraps us up. tomorrow, alibaba's new ceo will be on. ♪

erik: it is 10:00 a.m. in new york, 3:00 in london. the huge move in china. the government values the dna -- the yuan by the most in 20

years. in yet another effort to combat the biggest economic slowdown in a generation. it is having ripple effect on markets around the world. erik: google shares soar after the company reorganizes its infrastructure. it will now be known as alpha that incorporate -- as alpha that incorporated. matt: can anything stop donald women,he has insulted ceo's. but he keeps rising in the polls. matt: good morning. i'm matt miller. erik: i'm erik schatzker, dropping things. matt: that is because you are excited about economic data. for that we would go to mike mckee in the newsroom. mike: