greeley travel to jackson hole. the vice chairman will discuss inflation. it is the one thing donald trump has not discussed, the stronger dollar trumps all. good morning, this is "bloomberg surveillance." it is wednesday come august 26. i am tom keene. i take two days off, look what happens. a tent in central park, i had my insect repellent. trout fishing in the pond. i found nature in new york city. >> did you do the boats? tom: we did the gondola rides. i did not sink. it was great. tom: for all of you worldwide, come to new york city for vacation.

here is vonnie quinn. europee opening lower in . pointing to a higher open in the u.s.. indexanghai composite down more than 1% of the steepest five-day slide since 1996. it came after china's central bank cut interest rates. chinese stocks have cut their value since june. european stocks have resumed falling a day after a rally. germany is done more than 1%. in the u.s., futures indicate stocks will be higher at the open. the s&p 500 is coming off its worst six days in four years. yesterday's stocks sort of the open, but ended up thing down for the day. the for the open, but ended up down for the day. jackson wyoming, will fed officials give any hint about the timing of an interest rate hike? mohamed el-erian has an opinion.

>> is certainly reduces the probability significantly and understandably so. if the volatility continues, which it will, then the fed will be very cautious. it will not want to fuel further volatility. in such circumstances, it will most likely weight and not initiate the interest rates cycle in september. vonnie: betting the fed will push back the rate hike. fallen to 26%. another day, another media feud for donald trump. this time the republican presidential candidate got into it with univision jorge ramos. ramos stood at a press conference and began asking trump about his immigration proposal. down.use me, sit you were not called. said down. sit down. sit down. go ahead. >> [indiscernible] >> you have not been called. go back to univision. >> [inaudible] >> sit down, please.

you were not called. >> [inaudible] >> go. >> i have the right to ask a question. >> excuse me, sit down, you're not called. sit down. sit down. sit down. go ahead. later let backas into the press conference. he argued with trump for about five minutes. the pentagon is given oshkosh on the $7 billion contract to build a replacement for the armies hum vee. it would into service 30 years ago. it beat out the maker of the humvee. the pentagon plans to buy the about -- to buy about 55,000 by 2040. terrence, if you want kids to make big money, forget tennis lessons, work on their punchline. forbes is out with a list of the highest paid tv actors and sitcom stars are laughing avoided the bank. jim parsons of "the big bang

theory" is number one, making $29 million the year. his castmate is second with $27 million. 11 of the top 15 are in, these. -- comedies. i think we could rebrand "surveillance" as a comedy. news, we of breaking will see in the coming quarters, rip up the script dramatically, resources for $14.8 billion. this is 120,000 employees. this is what you're going to see an oil in the coming months. week thato this last the financial restructuring of oil must occur. we will rip up the script. david perl with us with epic investments. this is about cash flow. you come down the income statement and bad things happen, doesn't it? >> the good things are, when you have positive cash flow, there

is value. when you are at these low is much,s, the roi much better. the synergy of moving these two companies together is really, really positive right now. when you are the market down, you will see even more m&a because there's so many cash-rich companies. inorganic growth from these -- tom: is it enough to support the equity markets when whatever the pop is -- what is it? vonnie: schlumberger is down. the price is down. cameron holders will own about 10% of schlumberger. tom: what we're looking at is 2016, right? >> right. yet to be a long-term holder. there's nothing we can predict over the next few weeks or months that will change the valuations. year torecursor to next see schlumberger and cameron.

let's go to the markets. we begin our coverage of global markets and economic worries this wednesday morning. deutsche bank particularly sharp on china this morning. david perl on cameron. resources. we will talk to mr. perle about cash flow. michael regan with us at bloomberg news inequities who went back and looked at his -- noon you have a cathartic bottom, that is not the only bottom. you need to double or triple test as well. what do you assume now after your wonderful call of a few days ago? >> looking at the futures, they're looking pretty strong right now. same story as yesterday, they were even stronger yesterday. theaded toward the and of session yesterday. obviously, the biggest focus is william dudley speaking at 10:00. the speeches are getting to be so important. i feel like they're going to start breaking into the soap operas to cover them. tom: are you calling as a soap opera? hold my hand, vonnie.

oh, it's terrible, we're all going to get divorced. >> it has a fever. there's only one cure. cowbell.is more you called it yesterday. vonnie: christopher walken is here. tom: i can't do it, and virtually. , what is knownte as a retest in the technical analyst mexican -- lexicon. running a good portion of the global analysis. i look at all of this link to the real economy and real fears about global slowdown.

in the last four days, what has changed about the new medium? >> normally, through linkages across two countries. one is exports and imports. from that perspective, china is not that important for the u.s. u.s.what about here in the as we go to the jackson all meetings? deadly today, becomes very important for this has been internalized by the today, becomesly very important for this has been internalized by the members. recognizing what is happened in the last few days. these beaches often prepared well in advance -- these speeches are often prepared well in advance. will there be a sign of desperation or with a rather basically show some stability and say, you know what? markets go up and down, some people lose and people win, that is what happens. vonnie: i think we're going to play a video of what happened in the stock market yesterday where

we started out higher. you mention this. we were pretty high all day long, and the turnaround tuesday, if you like. toward the end of the day, we began to drop and ended up in the red. it is a real hocus-pocus day. tom: can i ask, why? why did yesterday happen? you are on the desk with 20 people. what happened at 2:00 p.m. >> whenever you have a big sharp selloff like that, it is greeted by short covering in the morning. then you have to test out where , where is the line in the sand. for now, that 18.67 level is the line in the sand that held yesterday, but clear the momentum that brought it up in the morning -- cueie: do they take the from europe? today europe is lower "bloomberg surveillance." -- today europe is lower. >> obviously, this is what volatility looks like.

tom: do you have cash to put to work? are you writing buy tickets on the desk? >> we are fully invested. the retail investors, they make a single call mostly, in or out of the benchmark. they went out and then they're going to pick up the next three days, so still money to move out and retail. the professionals, we have to decide where to put the money. we have to shift. we don't have that much cash because we're not allowed to. we're thinking about whether it should be more cyclical, more defensive, more domestic. tom: can you buy quality blue chips? that is what epic investments is known for. >> when you look at the valuations of the market, we would from three years of qe were defense stocks got very expensive, so there is real bargains of economically sensitive stocks right now. tom: much more to talk about. michael, thank you so much. come back when you get another brilliant crystal ball michael

regan with bloomberg in the news. coming up, we will talk with joe weisenthal on the volatility. a particularly want to talk to him about what he has been reading since he asked, what did i miss? this is "bloomberg surveillance." stay with us. good morning. ♪

tom: good morning, "bloomberg surveillance." good 1.2%, up 24 points. jeff futures up 185. deal of the day, schlumberger and oil restructuring with cameron resources. a nice 34%, some pop on cameron resources. much more on that in "bloomberg surveillance." two major servicemembers

are killed in afghanistan with afghanistanng uniforms. her motive is not known. no claim of response ability. it is the so-called third insider attack. by wearingd security afghan uniforms. dylan thing starting earlier than christmas shopping is hyped over the new "star wars" movie. september 4 is when they will roll out all the toys linked to the film. awakens.""the force the first time, amazon is offering one-hour delivery of wine, beer, liquor in the united states. it is limited to seattle for now. amazon delivers wine and the rest of the country and offers quick of all delivery in london. -- alcohol delivery in london. we know where to go. tom: news you can use.

out a noteding thinking was starting with the hokey pokey when he got out. joe weisenthal has been following every squiggle in every chart this week. he joins us with a crazy first half of the week for the markets. joe, what stood out to you most in the last three days of trading? >> i think back to i guess it was monday's action in the currency market. that still seems like some of those charts of dollar- yen, dollar-euro. one person yesterday in an article saying it was the craziest day. vonnie: the mentality has changed. we saw the euro top 1.17. >> for a long time we had gotten used to the idea there was the dollar was the risk of currency. her long time now, we assume the rally in both, so it is that surprising when we saw the deterioration in stocks people were so bullish on the dollar, so confident the fed was going to be the first out of the gate.

when that reversed, all of those positions -- great, youou do so sit down and you look at what what of is writing and investors does as well. i'm noticing the percolation, the ft today about the stability of the chinese government. is that on your radar? >> absolutely. the question i think everyone is trying to wrestle with is why does china matter for the u.s.? torsten had a great idea. historically, the shanghai composite, just looking at from a stock market respective, it has never been particularly in secret will stop tom: do you agree, david pearl, we should ignore it? is not the chinese stock markets, whether the stock market is exacerbating the slowdown economically and china is the issue. tom: we will talk about this in a bit, but do you agree? >> no matter what indicator you

look at, it is very difficult to establish a strong link between what is happening in china and significant impact on u.s. on sentiment, pimples, or financial markets. thatbring the media frenzy we have gone to the last three days. we tried to be adults about it. >> you did. and we are, but i still think we can get enthusiastic when we see -- tom: it's great. >> one question i have about the china lake we had up -- link we had up, when china did that small devaluation. that doesn't really matter much. but given how much of a gap there is between china and every other emerging market, currency over the last year that is absolutely crushed, could we see a bunch deeper devaluation at some point and could that be the justification for much bigger market reverberations around the world? vonnie: the other fascinating thing in the last few sessions, the commodities drops we saw. we saw them across the board.

it seems like everything fell out of bed. >> that is the only way to put it. i have seen a lot of notes and people are been trying to go through history and say typically these selloffs last this and maybe global selloffs -- this many days or 20%, whatever. in times like this, historical markers -- tom: i want to emphasize, we are with the bloomberg commodity index near retesting lows. green on the screen this morning. folks, this is -- david, you have been through this 18 times before. is this normal for cathartic moment or is or some characters different this time? is a typicalthis correction. the issue is, the world is low. gdp around the world has been decelerating. europe is barely out of recession. china, we don't even know how positive gdp is anymore. the u.s. is the best place to be. tom: are we in global recession?

>> i don't think so. we see commodity cycles normally last 6, 7, 8 years. what is a big difference is the excess capacity. joe weisenthal, thank you. to forget, coming up, the alix steel show. what did you miss? that will be at 4:00 p.m. weekdays at 4:00 p.m. on bloomberg television. coming up, one of the most important interviews of this week, charles calomiris, sharp critic of the fed. charles calomiris of columbia and the manhattan institute. stay with us worldwide, "bloomberg surveillance." ♪

tom: good morning. this is the roulette wheel of europe. i usually do not show this. on the screen. even if we see green and the united states, the dax, nice dividend, a little bit of currency risk. the dax challenged, as are many markets in the past coming weeks. let's get a look at the morning must-read. vonnie: currency is the better performer of europe, it looks like. ftse done a percent. morning must-read --

we have david pearl of epic with us. owned cameron before the steel, which looks like it is going to go through -- before this deal, which look like it is going through. will there be had talked at the top? >> they will be definitely cutting dividends. we have seen that already. companies have to remain cash flow positive because this is not the market to run out of money. you cannot borrow, go to market. we are going to see the restructuring that is happening, consolidations like the cameron deal with schlumberger. vonnie: are banks going to force the oil company's to do this at the end of september, beginning of october? >> some of them may. some will get extensions. will restructure. but it is going to be a tough environment because the stock market has been looking over this. the problem we are having is a natural contrarian, this would be an interesting industry to be a buyer in. it is been a poor performer.

the problem is, the asset value of a lot of the energy companies is still high. tom: that is where i wanted to go. we saw that yesterday with all of the challenges in australia. there has to be a balance sheet adjustment, to say the least. how bad is it right now? explorationof the and mining companies, this terrible. roi has been negative. these companies have not even earned their cost of capital over a cycle right now. they are going to restructure. it is really a tough industry to buy, even if you want to find a bargain. tom: this folder to your world and that we don't know where the real rate is, do we, torsten slok? we don't know the cost of money. >> it is critical for what is going on at the moment. the central banks globally push isn't aerest rates and lot of tourists into the equity market. now people are saying, they are

very high. tom: but i don't know what my cost of capital is. >> in the long run, you don't know what it should be over the longer period. china has more of an excuse saying, hey, valuations are high. many questions i'm getting, it doesn't really matter what it is, any vulnerability will make us more vulnerable. tom: david pearl and torsten slok making you smart. how about a twitter question? us, "bloomberg surveillance." ♪

tom: it is a global challenge this week. japan gets a rebound, on their dell-like average. some yen conversion.

yen stronger. we have seen that over the last few days. vonnie: five chilean dollar equity market rout in china -- $5 trillion equity market rout in china. shanghai composite index fell more than 1% in the session. 's extended the deepest license 1996, day after china central bank had interest rates and bank reserve ratios. chinese stocks have now lost half their values since june. european stocks resumed following a day after a rally. germany dax is down more than 1%. stocks will be higher here at the open, s&p 500 is coming off its worst six days in four years. buterday, stocks soared ended up down for the day. central bankers think of china's position to cut interest rates again? we may learn this later this week. many will attend the kansas city federal reserve annual symposium

which takes place in jackson hole, wyoming. there are some responsible central bankers in the world, like in india, that is very low -- reluctant to cut interest rates that basically has currency stability in mind rather than propping up stock prices. vonnie: he also said central banks have created a huge systemic risk. the drop joe biden movement is picking up steam. draft joe biden movement is picking up steam. it says more than 250,000 people have signed on to the effort. democratic front runner hillary clinton has won her first endorsement from a member of president obama's cabinet. agriculture secretary tom vilsack praised her for her leadership and her loyalty.

a huge deal in the oil services industry. summer's day has agreed to buy houston-based cameron international. the deal is falla died almost $15 billion -- valued at almost $15 billion. cameron makes oil and gas pressure control equipment. summer's day is the world's largest oil field service provider. antennas, serena williams has been named the top at u.s. open. williamsnis, serena has been named the top at u.s. open. on the men's side, novak djokovic. those are your top headlines. tom: i walk down central park south yesterday and there was a tennis woman having her breakfast in white, has her stack of rackets. vonnie: bloomberg radio is there as it is every year. tom: after jackson hole, radio goes to watch tennis.

what do you call it? -- forests stadium hills stadium? at china with massive volatility and moment by moment speculation, one thing is certain, all eyes are not on the chinese stock markets, but on chinese economic growth. a needed stabilizer to global instability. torsten slok from deutsche bank says angst is missed laced. china will proper. -- china will prosper. the fears are way overblown. why? tom: if you think about the connection between the u.s. and all the other countries, there's a very intimate link in particular in the financial system and across multinational companies. ,hina is very, very separated and particular in the financial system, very few ties which means wobbles in the financial system -- tom: they use the same textbook

you used in school. a challenge of fiscal, monetary, and politics. is they have had that for many years. this is why we at deutsche bank -- for many years they've had this build up or they were basically exporting. everyone should be asking themselves, why is this happening now? tom: what does peter garber say? he invented the concept. >> he basically says it is here. we are still in this universal system because china has done shifted away from the export model towards consumption. china so exporting its way -- tom: david pearl, d.c. further depreciation is the only solution within a modest currency battle or war? >> that is our biggest worry. the koreans at some point will have to match with the chinese are doing. that is not a good thing for u.s. corporate earnings, for

sure. this devaluation helps u.s. consumers. just like the price of oil has gone down because of demand and slowdown, so will the cost of goods for many u.s. companies and purchasing power, wage purchasing power is up. tom: do you get the run weight just because of the new mediocre? >> definitely a higher rate. at the moment, less than two but it continues to run higher. an important point about china, the weight of the chinese currency and the trade weighted dollar is very small. tom: how much is it? >> less than 5%. tom: i did not know that. vonnie: david rosenberg pointed out it is important to stress what is not impacted by china, yuan, and rebalancing. for you, how important is this? >> the u.s. is the most insulated country. we're in a recovery. it is sustainable, tepid, but

clearly recovery. small-cap stocks or almost all domestic. small-cap investor, this is great. the set smart guys on this morning. the shanghai index doesn't look normal. david pearl, i am no idea what reversion to the mean means for chinese equities. >> you realize even where it is today, it is at 60 times earnings. the chinese market really is of oh relationship to any other normal stock market. we don't pay attention to that in and of itself. the wealth held in the stock market -- tom: where is it held within china, real estate and empty cities, right? >> as your chart shows, it was allowed to sell real estate and start to put it into the stock market. roller coaster ride. vonnie: can i make a point about what you said about the yuan and its place? we at a great story on bloomberg.com about how the fed

is looking at the basket. the chinese yuan makes up 21% in that. looking at the dxy, not so much. tom: i have to ask you the money question. what does the deutsche bank call on oil? >> there is a lot of excess capacity -- tom: supply production. >> it will keep pressure on prices. we have all been surprised they have fallen as much as they have. we're going through super cycle were access is everywhere. -- excess is everywhere. across the board, cross commodities, excess capacity is the issue >> tom: what does that develop if we see copper continuing down, iron or down, and oil below 38? >> if you take your fed textbook out, the model, and you look at page one and see if oil prices go down, that is good for the u.s. economy. tom: do you agree?

is, we have are not even getting the normalized inflation he have in a recovery. we're not getting the wage inflation because the really is no need right now. there is excess capacity, even in labor. stupidtried to avoid the question, but the fed? >> they may have missed the window, no doubt. tom: we're telling an inaudible because i've been in a pup tent for two days. this is what the pros look at on the bloomberg terminal. it is a little messy for tv, but this little redline here is the stanley fischer line. and the answer is, this little line down here is him a oops, there's no inflation. this is a snapshot of the september call. vonnie: changing their views. could change out to march of next year. j.p. morgan chase is still sticking with september, just

buy in and. tom: look at this. distribution.n this is what the pros look at. they are swearing at me and the control room. vonnie: i think we may have gone over. up, we have a single best chart. we are doing it now. how is the dollar reacting to market volatility? stay with us. vonnie as a smart single best to you next. stay with us. ♪

tom: good morning, russian ruble i am watching. this is one of the three or four canners in a coal mine. strengthening ruble. thank you for watching from london. he knows hydrocarbon nation is doing better this morning. futures of 31. dow futures up 240. let's look at a smart singer best chart. vonnie: thank you. you are helping me out. the dollar showing new strength getting out -- if we could show it. tom: single best chart coming up. there it is. good morning. vonnie: you can see we have the lehman low and the strengthening, strengthening --

tom: weakness coming off 2008 and 2009. nowhere near the move of the so-called rubin dollar. huge moves,ave seen but nowhere near the big crisis. tom: torsten slok, who is the horse in the cart, the dollar or oil? >> i've had a discussion for many years. tom: i think oil is the horse. >> i think the majority agree with that. if the dollar moves the people think it is driving things, but it is clear at least the move was driven a lot of by the ecb saying something last summer. that means it was triggered by central banks and therefore, by oil. last time we saw a strong, strong dollar, we were not as multinational as we are now. how does this affect johnson & johnson, minnesota mining? >> translational he, this is going to hurt companies were

multinationals as they translate back. the issue is, most companies are now more diversified as far as their production, the cost of goods. so they are more naturally hedged the needs to be. they have plans any criminal outside the u.s. they are investing overseas. their revenues and costs -- tom: retail investors watching and listening, you don't change your investment model based on dollar dynamics, right? >> well, you think about it and take it into account, but it is smaller than it used to be. vonnie: you are saying you would still invest internationally in spite of having to hedge for currency moves. >> if you have a company that has a good demand -- think of apple computer right now is a great example. they have to sell into china, the biggest growth area. yes, it will be impacted by currency, no doubt about it. the question is, if the chinese economy continues to grow -- vonnie: what about investing in european companies? >> it is the same issue.

you really need europe's economy to grow. the dollar relationship is discounted very quickly. so from here on, if you want to own mcdonald's, it is about european growth, not about the dollar. tom: what is sure number one exertion missed shock and currencies -- exhaustion missed shocks? what is a focus? >> the chinese situation as we keep on talking about it. if the thing the chinese are doing, the beginning of a long string of development or just a small step down in the staircase? tom: vonnie, we took some kids around on my day off and we world tradethe center. the new museum is spectacular. i have not seen it yet. tom: i was there for the 10th anniversary for michael mckee. it is phenomenal. worldwide, your first visit in new york city. emotionaltough an one, i'm sure.

let's take a look at some photos making news today. after 9/11, many images became iconic list of the subject of one photo has just passed away. "dust lady" died of cancer on monday night. she was pictured covered in dust inside one of the twin towers after it was hit by two planes. may she rest in peace. number two top photo, soviet world war ii fighter bomber plane found in a river, which are but three in central -- chimichurri. -- tributory. the pieces have been moved to poland. even a sheepskin coat and parts of boots were found. receded,laciers they're fronting all sorts of stuff. global warming. scary. vonnie: we have a new crayfish species found in indonesia. tom: it's a lobster. vonnie: it is been named after edward snowden.

misss originally identified as a similar species. the german researchers who named it says it is banned after the american freedom fighter edward joseph snowden. tom: it is a photo from a chowder house. someone took a snapchat and brought that in. look at that. it is a lobster. it's a lobster. it's a crayfish? how big is that puppy? vonnie: i don't know. big enough to eat. tom: we're going to talk monetary policy with torsten slok and david pearl. our jackson hole coverage will begin tomorrow. the hostess of kansas city, kansas. many different opinions. we will give you complete coverage. our twitter question of the morning --

stay with this with torsten slok and david pearl. it is "bloomberg surveillance." ♪

tom: good morning. keeping you abreast of the markets. one that is not moved, oil. bid,oing to call that a maybe. a four dollar spread gets my attention this morning. with our top headlines, here's vonnie quinn. will bejames holmes formally sentenced to life in prison for the mass murder at a movie theater in colorado. he was convicted for murdering 12 people and trying to kill somebody others in 2012. jurors rejected his insanity plea. they could not agree on giving him the death penalty. client suing ashleymadison in a data breach. hackers exposed personal data of more than 37 million users. ashley madison promised users would remain anonymous. is not surprising lawsuits are being filed under the name "john doe." pittsburgh steelers have signed michael vick to one-year deal.

he has spent 12 years in the nfl with the falcons. philadelphia eagles and new york jets. he missed two seasons while in prison for his role in a dogfighting ring. out -- s tweet came vonnie: pretty accurately sums it up. continue. this is a major role. what was your 13 week for resume comes 18 months or for that matter, 13 years. david pearl from epic investment has been through this a few times. horizon changed. >> the longer you have, the better it is to own equities.

that's it. we have been waiting years for correction, now we have it. there are buying opportunities, but is it over? who knows? that is what you have to say and therefore, the rise and -- tom: it goes back to one of the valued investors, johnson alton -- templeton. he told me once, shares are on sale. that is when you buy. are they on sale enough for you to deploy capital this morning? >> oh, yeah. there are companies at a significant discount to the s&p, which is already down. this a 10 times earnings or 10 times free cash flow with money in the bank. if i were the private equity guy buying the whole company, i would do it. tom: carl icahn steps up his call. the activists -- if the activists loved these stocks to weeks ago, think of what they think now. vonnie: you owned cameron. are you going to hold onto your

shares of schlumberger? >> is difficult to say. we're trying to find companies who have already discounted the low value of oil today. most have not. for instance, the integrated companies -- if you look at their assets, their valuing oil it six to five dollars to $70 a barrel. we are not there. tom: where is the terminal value of oil? you are allowed to say you don't know. >> we don't know. we are seeing downward pressure. vonnie: where are your other -- anadarkoample, we own who is arty taken a hit and it will go a pretty much in lockstep with the price of oil as a goes up. we have to be in there. we can't own zero oil. vonnie: where do you see deals happening? >> they will happen now as long as you can have access to capital. if you can get it, it is really, really -- tom: they enjoy 7.2 billion or

whatever down to one point whatever billion. but they still have cash to deploy, even if they got it wrong for years ago, right? >> that's right. you can have high roic on these deals. in chapter 22 of every economic textbook, torsten slok, is the idea you have to know your rate. we talked about whether it was nominal, a real rate. we don't know where that is now. when will janet yellen allow us to have a normal rate structure? >> it shows the fed expects the short rate to be around 3.5, 3.75. tom: they have been wrong on that for three years. >> there has been a credibility issue. they thought the recovery would have been stronger. tom: can build dudley land credibility? -- theally is a very

framework continues to be how close are we to full capacity. are we there? the question is, are we getting closer to the inflation point? tom: what you make of the richmond number? was in a terrible? >> consumer confidence was pretty good, so it is a bit lax. the economic data in the u.s. is not bad. vonnie: can the fed say these markets are stable enough to move? >> their textbook is about jewel mandates. vonnie: but they mentioned it would be a little bit of a on.le if there was -- go tom: we could go another three hours. david, appreciate it. notice,slok, on short thank you. we will continue our coverage on the markets. let's look at foreign-exchange. a swirl this morning. the nimby, 6.41. somedollar-peso, showed

sure signs of life. charles calomiris will join us next. stay with us worldwide, "bloomberg surveillance." ♪

tom: markets struggle to find a certain stability and the dow down 12% for the year. central bankers are michael mckee and brendan greeley. vice chairman fisher will discuss inflation and it is the one thing the donald trump hasn't discussed. the stronger dollar trumps all. this is bloomberg surveillance and we are live from the world headquarters in new york. i am tom keene and i took two days off. well-timed? vonnie: you could've taken any two days off in august and you would've missed something. tom: will bring you up to speed on currencies and commodities. let's begin with our top headlines. isn't asoday's decline steep but the direction is still investors were not

encouraged by the interest rate cuts. starteduro the stocks skidding again the day after germany britain and france all down by 0.66%. the s&p 500 coming off of its worst six days and five years. central bankers plenty to talk about they all gathered it sent -- jackson hole, wyoming. we asked mohammed. >> it certainly reduces the probability significantly. cautiousill be very and it will what to fuel further volatility and it will most likely wait and not initiate the

trade cycle in september. vonnie: betting the fed will not raise rates next month. the tensions between donald trump and spanish language media boils over the heat ejected jorge ramos from a news conference. mr. trump: sit down. you were not called. no you don't. you have not been called. go back to univision. sit down, please. you were not called. the news that is jorge ramos who is called the walter cronkite of latino americans. ramos was readmitted and he and trump spent five minutes arguing about immigration.

oshkosh won a contract worth nearly $7 billion. -- if you want your kids to make it big forget the tennis lessons. work on the punch line. sitcom stars are the ones laughing all the way to the bank. jim parsons is number one making $29 million a year. galecki's second and 11 of the top 15 are in comedies. tom: i think tv is where it is at. it is something that old fossils can't get used to. it used to be you made $15 million to $20 billion in movies and now it is tv. take thee could surveillance script and make it a little bit of comedy. tom: i could see it. we could be funny.

vonnie: we are funny already. tom: the futures are up big but we will see where we are at four clock p.m. this afternoon in the euro confounding the parity crew and still oil. it is finding a bit but up ever so slightly. we begin our coverage of polo markets and with us is charles calaveras of columbia business school and the manhattan institute. we will speak on china and his views on the fed and maybe even touch on greece and his perspective on europe. us fromregan joins bloomberg news. what is a retest? traumaticu have a maybe cathartic selloff, you set a low to a lot of people believe

is that watermark now. so there was a lot of short covering. if there was ever a time to cover your shorts yesterday morning was it. so the retest is when you go back down to that previous low. we closed right on the dime of the low on the previous session so it is anyone's guess what the next move is but you are a better guide than me but they seem to come -- tom: they go back to maggie. i do not put a lot of credence in them other than i agree the behavior is real. what i want to know from you, ofhael regan is this idea august volume and august quiet.

from where you sit is it distorted that there is less volume and less people working? >> volume has been huge but i am not sure it is a lot of active decision-making. to me andteresting david perlman a great point about this earlier is we talk about low latency. we have written a million stories on low latency which is -- time it stakes takes to send a signal that retail is now able to act with low latency. this boom in index investment. no one is a stock picker anymore they just want to buy the market and would you a quick you're selling the whole thing. charles was at yield

university and he took smoke signals 302. what kind of smoke signals are coming out of wyoming in the next couple of days. simplere 70's it was a world. i think the fed is adrift. they should stick to their knitting and are already behind but the markets are currently spooked. vonnie: some in the plays a big role in this is equities. >> yes but remember the fed has been inflating risky asset .rices monetary policy is five years of the zero interest rate

policy that has been inflating markets. for them to take the signal that it is requiring them to do more of the same -- tom: i talked to you two or three days after the crisis certainly the world of michael regan is telling the world of stan fisher and charlie calaveras what to do. where are the vigilantes? >> i think that the tail cannot wag the dog. short-term market movements it have to look at that but you also have to look beyond them. what is going on with china has little to do with day-to-day market strategies and everything with horrible news. vonnie: if it is a data dependent fed it is not just u.s. data but this data, too. >> they could but that is not what inflation targeting is all about.

the u.s. should not be looking too much of china. it is a global slowdown and it will not be reversed very easily. retail sales fell 10%. tom: have to get your blood going. longul krugman and brenda syncs up and correct? >> no. the quick answer is no. tom: do need a surrogate answer for the fed that will get us up to some form of global run rate? know if you remember but maybe six years ago we had a special event and we talked about fiscal policy. what i said then i will say now. we have some need in this country for infrastructure investment. there is a lot you can imagine. lack -- get we capacity. -- debt capacity.

real reform which we could have done with bowles simpson could've put us in the position with the debt capacity to do this. tom: i think paul krugman and charles just agreed on something. [laughter] congratulations on your work of the equity desk as well. we will continue with the professor. the twitter question of the day a huge response. as the selloff changed so did the fed's timetable.

tom: the german stock exchange, the dax. some call it the roulette wheel of europe. quiet there. the green on the screen decidedly in the united states. there is the dax at -.5%. but green on the screen within the united states. , thank you for his

appearance yesterday on surveillance. this is a sharp paragraph. it is entirely misleading to blame this fall on global stock markets on fear of china's growth. the biggest problem has been excessively high associated with deflatingeg to the dollar. it is been the federal's reserve intention to tighten monetary policy into a weakening u.s. and world economy. within the moving parts of david goldman's analysis is people get overcome by events. events? vercome by >> i said before they are a drift. goldmanagree with mr. pre-much on anything he said. i would say, let's point out that china's credit growth has

been 15.5% and automobile sales down 10%. when is this discussion shifting toward services and i don't really believe it. china is innate long-term slowdown that reflects long-term problems. that in the classic textbook how do they let the steam out of the pressure cooker. that so in theo trilevel world china's solution has been to limit capital flows. the problem is things have changed usually. here is the big change. capital doesn't want to go into china as much. there are long-term risks. vonnie: but that is a temporary fix. once we figure out where it is going and how to stabilize

capitals will return. >> i don't think so. i have been a china pessimist for seven years so i will crow. china has deep troubles. vonnie: but the consumer has been nonexistent. >> for good reason. tom: we will come back. on bloombergview television, with all due respect at five ago p.m., donald trump. stay with us. p.m., donald trump. stay with us. ♪

tom: what hasn't moved? not much. rateollar yuan front and center, worldwide the currency of china. bloomberg surveillance. let's go to our top headlines. vonnie: to nato service embers are killed today in afghanistan

by gunmen wearing afghan -- service members are killed today in afghanistan by gunmen wearing afghan uniforms. it is the third so-called insider attack this year by gunmen who eluded security by wearing afghan uniforms. star warsts to force toys onto the shopping list. the flick opens seven days before christmas. for the first time amazon is offering one hour of wine, liquor and beer in the u.s.. amazon already delivers wine nationwide and quick alcohol in london. the futures are up 41 and dow jones industrial average futures up a good 319 moving away down 14% for you bear

market watchers and we're moving north. let's look to china now with an important guests. seattle or vancouver or l.a. or the rest of the united states what will we look like in 2025? ctpc bank is on a wave and suggests the asia slowdown will spur forward asian immigration. tumultt comment on the we see in china. the is the stability of chinese government when he speak to your customers. >> thank you for having me. customer base is we don't sense any concern because the transition mechanism by which

any contagion would occur is indirect at best. so this is private investment are using to come to the united states they are primarily interested in commercial real estate or mortgages -- tom: charles is with us that very question in keeping capital flows coming. from what you have observed, does the spigot stay open? >> it is too early to tell. tom: i will go with that. >> but we have not seen any slowdown yet. if i had to venture answer i wouldn't think so because if you look at the stock of savings and moneytention, this is with the intention to come here. tom: we have seen this morning donald trump talking about immigration. of are in the absolute nexus

immigration. what does mr. trump get right or it is hard for me to comment on mr. trump's ideas but certainly what we are seeing is we are one of the facilitators of immigration that we think is good because of the amount of investment happening in california and new york, a strip malls and setting up of hotels and commercial property and from $30h of last year more than billion in residential finance it would be devastating for the economies of california and new york if it gets turned off. vonnie: there are more and more concerns about reserves in china. adam rosen saint maybe they are not as strong as we think. from your perspective is is the

direct beneficiary? >> it will take some time for the rate cut to have an effect but i do think we'll see more and more investment in china. tell us about your family from greece in the u.s.. when did this occur? >> about 120 years ago. >> there was the same angst that there is today we have this asian experiment right now in the united states and i believe these people pay taxes once they get here. your grandparents paid taxes. >> absolutely they paid a lot of in fornd i think nora is a booming business because i think everybody in china who has the money and wherewithal will want to get out of dodge. tom: what about our fears of dollar as the ultimate strength?

>> of course that not going to happen. one of the pieces of bad news has been the imf's decision not -- yourporate the rmb cannot run china the way they run it and expect it to become a world currency. >> are you going to get involved in deals and buying up small banks. >> we do see ourselves as a net consolidator but staying within our market and staying within the focus. as the professor said there is curley a boom. the larger banks are not position to service this community but this community in particular because the language issue see us as the gatekeeper.

tom: the realities of immigration in the nine states and the markets as we see them one of our most popular guests will joined us next.

tom: good morning everyone. the 10 year yield at 2.10%. charles sprained and elbow falling off his chair at columbia when we went to 199. you see that with equity futures

down about 291 points. let's get straight to our top headlines. stock market's last $9 trillion in interest rate cut is not selling the selling. it was the steepest five-day slide in nearly 20 years. yesterday causing a change in investor minds. selling resumed as the indexes in germany britain and france are improving. u.s. futures pointing for a higher open. the s&p 500 coming off its worst in six days in four years. it finished lower yesterday despite a buying search at the start. what do you u.s. policymakers think? we will find out or we could. bloomberg news asked for

forecast from mark copper. some responsible central bankers in the world that are very reluctant to cut interest rates that basically mindurrency stability in rather than propping up stock prices. >> he says he thinks central banks have created a huge systemic risk. joe biden movement is picking up steam. the organization says it has more than 250,000 backers. hillary clinton gets her first endorsement from a member of the president's cabinet. the deal valued at almost $15

billion in the price hike represents a premium. yesterday iran made oil and gas pressure control equipment. the topna williams is seed for the u.s. open which begins right here in new york. she is trying to become the first woman since 1988 to win all four major women's tournaments. on the men's side, djokovic. he won in 2011. tom: everyone is walking around mid -- manhattan and all of their pulses are like 52. vonnie: you are tall. you could be a good player and take djokovic on. tom: let's go look at oil right now not on the demand side but the supply side. loyal oval -- global oil production was once flat and then it went up up up there it

this curve appear as more and more in accelerating oil production. charles, you teach this and there is a point where the micro economics gets a little bit squishy. do we know where the price is? >> $40 a barrel tom: but it is still moving. >> i think with this graph is telling you is pretty clear. what has been the major shifter? expansion of supply. that will continue. that is getting better especially natural gas is. so i think this is a big positive. tom: within your wheelhouse is that you have been an ace on an intelligent conversation on regulation. i would suggest it occurred without a national energy policy , what it occurred contrary to the policy could the administration has been doing everything it can to slow down

the growth in oil production. tom: should we slow down to bring stability to price. >> i am not an environmental scientist i am an economist. national --ring the natural gas expansion i think it has a lower carbon footprint and there is a lot to like about it. this is good news for the u.s. economy. vonnie: how long until the consumer spends that oil dividend or companies? >> we want consumers to spend when there is a fundamental that is very positive with our potential to produce and this is so theme example of it permanent income hypothesis when you have a major improvement go ahead and spend. tom: we could spend an hour on this and the heated debate in

economics. s&p futures up 39 points in doubt futures up 279 euros confounding the parity crew and there is west texas intermediate. i am vonnie quinn along with tom keene. note saying been a he doesn't read course go to doesn't really pay attention to charts but sometimes he does and the euro chart right now is one of them. thank you for joining us. does the euro continued to be in a safe haven or have we returned to the status quo? >> i think if we had another dreadful day in global commodities and equity prices you would still see all of the three major currencies rally against all of the commodity producers and the emerging-market currencies and

of those if the world gets itself in a bad place we all push back forever in the day the fed raised rates but i don't know that we completely got out of that. vonnie: you called this week messy. does the federal reserve clear that mess? >> no. just beingyellen away from it will get pointers from jackson hole but i do think anything clears us up until we get to the data and into the run up to the fed think that is part of the problem. >> let me go to your morning note as funny did earlier. here is a different part of it put out by mr. jukes and when you look at what is going on the apparent scale of the fx innovation indicates a powerful genie and the central bank is allowed partially out of the

bottle and what we're left is a slowdown of the central -- second biggest economy. a clear downturn in global fx reserves. gauge the contagion effect this morning. moment it is a risk of contagion spreading to other places. you can see it in terms of how china affects not just commodity prices but capital around the world. that the biggest holder of u.s. treasuries and foreign exchange reserves and as that number shrinks it titans monetary policy globally. tom: but jackson hole, to get to our next conversation, are we importing deflation into the debate. >> i think we will discuss a bit where we are importing deflation

into the debate but we are also talking about good disinflation and bed disinflation. there is a rebalancing of global growth and i think that is the debate that needs to happen. how are you spit -- split between winners and losers. to the emerging-market currencies hold on to the strength? pastthink we have to get september the 17th before we can begin to relax about any of that. us that this kind of correction after such a big move takes a long time. tom: thank you so much. charles, you are nodding your head as he gives us a global synthesis. >> he nailed it. looking during

the first part of the fed loosening three years ago you would've seen capital flowing hugely into emerging markets. i was at the beach and the waves come out and the waves come out? tom: really? a surveillance first. >> it is inevitable the longer the fed wakes the more painful they will make this process trip tom: we will come back and talk exactly about that. charles is with this as we truly begin to prepare for jackson hole. brendan greeley and michael mckee will be in jackson hole. jim bullard of st. louis always making news. he will become bold in his comments and mr. lockhart avenue -- from atlanta as many of our stellar guests and speakers.

tom: good morning everyone. bloomberg surveillance.

vonnie: donald trump ordered staffers to eject and influential univision anchor and iowa. >> excusing, sit down you were not called. sit down. go ahead. no, you don't. you haven't been called. go back to univision. sit down, please. you were not called. vonnie: ramos who is called the walter cronkite of latino news was asking about his immigration proposal. was this as bad as it looked? >> it depends. what's funny is i was e-mailing as this was going on i was e-mailing with other republican campaigns and one of them said tell me how this hurts don't trump because it doesn't i think that is the view which is most concerning.

but there is a big history between them that goes back a couple of months. donald trump is suing univision and posted publicly his cell phone but his point is one that a lot of us share is that he wants specifics of these proposals. >> what i would expect is that i can ask a question as a journalist, and i would expect mr. trump to answer honestly about what he wants to do. he has a given us the specifics. i saw your so sunday and you pushed him on how he will deport 11 million immigrants and he didn't answer yours and he didn't answer my. what i did not expect was to be thrown out. vonnie: aside from being thrown out of the press conference, i saw the show, togo and he did not give george stephanopoulos and answer. when will he have something more concrete? >> there is no incentive for him to do so right now. it is not hurting him.

one thing you hear from candidates is this is the beauty part of the primary at some point the talent portion will have to come in but try to figure out somebody who has been able to pin him down on this. the big question is when does that happen and is there a tipping point. tom: what is donald trump doing to the hispanic boat for who is the candidate? >> decimating it is a concern. mitt romney got 27% of the latino vote. the expectation amongst republican analysts going into 2016 was they would need at least 40% to win a national election which is what george w got in 2004 and no one has been close with mccain or romney since then. so the hope was that they would build relationships with the hispanic community.

jorge ramos has been called the voice of latino voters usually cover of the magazine as one of the most influential people and attacking him is only going to hurt things for the party. importanting of an interview mr. trouble beyond all the respect tonight. the most important interview. stay with us this morning. ♪

tom: that is green on the screen surveillance. stay with bloomberg television and radio through did it -- through the day. 258.utures up let's get to our top headlines. vonnie: tropical storm in the atlantic could reach hurricane strength tomorrow. forecasters say that erica is gradually getting strength. ofnings and puerto rico and virgin islands are up already. stock split would tighten the control of the sportswear maker.

months ago tot stop the suit saying board members were out of line. new nflael vick has a gig. this still while in prison for his role in a dogfighting ring and i would expect you would expect your twitter and facebook pages to light up with off-color jokes. the jets have had an interesting summer to say the least. let's move on to the festivities of the moment. andoke to michael mckee brendan greeley moving out west as well they should've moved a long time ago and they did not. at this jackson hauled there will be a collected what if only. more important is the view forward.

charles is the senior vice president at the manhattan institute and darkens the door at the columbia business school. so, i told you so, we know all that but after speaking with sam fisher they have boxed themselves into a corner haven't they? cycles were the fed has raised rates what has happened to stock prices? answer -- flat. it isn't necessarily true when they raise interest rates that it collapses. tom: what is the angst right now? lackthink the problem is a of some sort of guidance from the fed. tom: stan fisher says he has

real concerns as mark carney does about a lack of inflation. do you observe service sector inflation they can give him cover to raise rates? >> i do not agree with this deflationary bogeyman even if my good friend stan fisher is the one bringing it up. nominal gdp growth has been strong and significantly positive. what you think the big spike in inflation is coming from. >> inflation is very noisy and if you look at the longer term expectations, 1.5 to 2% has been the constant and that is not changing. vonnie: so white raise rates? >> with respect to where we are from a per's a taylor rule or other perspective where behind

the curve. that is not to say that you want to stop being accommodative but we are currently four percentage points accommodative it tom: thisis critical because sam fisher invented this phrase altra accommodative will be the ramifications to our listeners and viewers daily lives? i cannot figure out what changes? >> all rates will start to move up when the fed increases rates but if they do it slowly it will not have a big immediate effect. certainly mortgage rates will start to go up and longer-term rates will start to go up. tom: even if they say we want have a greenspan measure format. here is the interest rate to get us away from stan's ultra accommodative stance there is damage to the system if we do that? >> there could be.

the rates could be damaging for consumers are when money for homes. there has been no connection for 20 years between wage growth and inflation. at our guestsook at jackson hall. greeley, jim bullard is a neutral voice and always makes news. how far apart are these chosen four from vice-chairman fisher? >> they're pretty far from each other. i think esther george is the most sensible of the bunch and i think that my friend has been kind of out to lunch for the last couple of years so i think the fed is very divided right because it has no basic

rules. tom: the money issue here is in the last two days we have all had heartburn and heart attacks over these markets. what could be worse than what we have seen? >> there is a school of thought. you look at gary gordon that yale i can't rim his name right now at stanford and what they have been arguing is that the fed has been reducing liquidity? -- so talk of4 qe4 -- charles, tom has to go to radio so we have to say goodbye to him. sorry to cut you off. questionk a twitter early on and we have some answers and with to give you some of those answers now. has the fell off changed the fed's timetable. of and thatreminds

fed that we need to have tools in the tool chest. rates going up. vonnie: that is pretty self-explanatory. to second answer i will get is the selloff will be short-lived and the fed won't delay because monetary reorganization will send positive symbols about the economy. think somewhat i people are hoping for because as i was starting to say before? with the fed has been doing with quantitative easing is taking treasury bonds and putting them on its own balance sheet and out of the financial market and you could argue that the liquidity might even go up if we bring quantitative easing. vonnie: here is the final answer. yes, with cash idle. nothing spectacular but it will

punish safety. >> to me, this jackson hole meeting is very interesting. jackson hole is the meeting they have used as kind of a roadshow even mario draghi last year where he said we will do whatever it takes. it's telling me that janet yellen is not even going to it and everyone is looking at this past week as the weakness. the market started rolling over in may. 22 janet yellen had a speech in rhode island where she said where probably going to raise interest rates this year. thentelling she said that and is not going to jackson hole and idle and she has done much to back off those comments. it will be interesting to see if bullard is banging the cowbell. vonnie: that is part of my agenda today.

withe going to be speaking all sorts of guests from there but we and deadly's news conference will take place at 10:00 a.m. eastern and we get a bunch of economic data today including durable goods and the fed is obviously still data dependent and finally we will be glued to the markets all day long. bit of a diversions lower in europe and higher here pointing higher towards the open. >> that again yesterday we saw very robust reality that fated for he quickly so it is hard to read these futures team leaves obviously this is what you want to see. vonnie: our thanks to charles of columbia university and the manhattan institute in my crescent wonderful stock roundups everyday. bloomberg surveillance on radio

continues. market makers coming up next. thank you for joining us. ♪

erik: good morning everybody.

it is wednesday. stephanie ruhle is out. i'm erik schatzker. what kind of day will we have to date? -- today? stocks staged a big rally and went down along with the other indices. futures are pointing to a higher open, but we have seen choppy trading in europe where the current major average is in the red. china.n be said for crazy night trading for china. the field halted $5 trillion route. the shanghai composite all over the map as you can see. ending down 1.5% today. in a few minutes i will be speaking to the investment officer from aberdeen