this is the bloomberg market day i'm olivia stearns. i want to start with a check "on the markets." u.s. stocks are rebounding again today. this after the s&p posted its biggest rally since 2011. you can see the dow is up 167 points. the nasdaq up about 60 points. the big news this morning, we had second quarter g.d.p. coming in at a revised 3.7% growth. so that boosting sentment here on wall street. time now for your top headlines. olivia: breaking news. economic data out right now. july penny home sales, they are out. hi, julie. julie: resaw rebounding pending home sales with an increase of half of one percent. that's less by half than what analysts had anticipated. still again represents a rebound from revised 1.7% drop. the prior month in june. it looks like overall we had

this climb in july in pending home sales for the sixth time over the past seven months. adding to the evidence of rebound -- of the rebound in real estate. in the housing market more generally. again, just to reiterate the number, an increase of half a percent following a decline of 1.7% in june. this sort of providing more full picture of the housing market. just checking quickly to see if we have any reaction in the markets to these numbers. doesn't look like it, per se, although certainly we have seen sensitivity relevant to economic data especially with the fed watching. olivia: it is a positive number. these contracts to purchase previously owned homes rising for the sixth time in seven months. thank you so much, julie hymen. now time for top stories. as i mentioned the u.s. economy grew faster in the secretary quarter than previously estimated. g.d.p. rose at an annual rate of

3.7%. the government's estimate last month was for 2.3%. there were bigger gains in consumer and business spending, but a record increase in inventories may be a sign that strong growth will be tough to sustain in the short run. chinese stocks have ended their five-gay plunge. the biggest route since 1996 came to a close with almost all of the gains in the last 45 minutes of trading today. it was up mother than 3% of the close. the shanghai composite gained 5%. bloomberg news is reporting that beijing intervened today to boost stocks. officials want markets to stabilize before a big parade on september 3. that will market the 70th anniversary of the end of world war ii. and greece -- grief stricken colleagues of two mrdverd tv station employees were back on air. they observed a moment of silence on air for their slain colleagues. tributes to reporter allison parker and cameraman adam ward and mourners showed up to pay

their respects. they were shot yesterday morning during a live broadcast. the woman parker was interviewing was also wounded. she's weeks ected to recover. the attacker was man who had worked as a reporter at the station. with an interview with wpvi in philadelphia, president obama said the violence again points to the need to new limits on guns. >> what we know is that the number of people who die from gun related incidents around this country dwarfs any death that is happen through terrorism. we are willing to spend trillions of dollars to prevent terrorist activities, but we haven't been able, so far at least, to impose some commonsense gun safety measures that could save some lives. olivia: the suspect took his own life but not before posting video of the murders that he took on social media. and u.n. monitors say iran is

also taking steps to follow its nuclear weapons deal with the west. new report says that iran cut its enriched uranium stockpile by 10%. iran's list of centrifuge equipment is consistent with its current needs. the accord would end sanctions against iran if it promises not to build nuclear weapons. ukraine's creditors will be taking a haircut. they have agreed to a restructuring deal after five months of talks. it includes a 20% write down of the face value of about $18 billion worth of europe bonds. the redemption date will be pushed bikeback by four years as well. the economy has been devastated by fighting with pro-russian separatists. wal-mart is giving customers a head start on holiday shopping. its launching its annual lay away program two weeks earlier than last year. shoppers can put their items on hold starting tomorrow. each item must goss $10 or more and all items held must be worth a total of $50 or more.

customers will have more time to pay for their items, 90 days, instead of the 6 o days given last year. and china has been known to produce fake watches, movies, fake designer purses. now there is a fake wall street bank. it is the goldman sachs leasing company right across the border from hong kong. the company uses the same chinese characters as the real goldman sachs and the english font on its website looks pretty close. the real goldman sachs is looking into the fake version. those are your top stories at this hour. still to come in the next hour of the bloomberg market day, ferrari is considering a leadership shake up change later in new york this fall which c.e.o. t marconi in the shot. donald trump says the funds don't pay their fair shares, when asked for plans to change that he was short on details. our interview coming up. how likely is the delay in the fed decision to raise rates.

we'll ask the kansas city president who joins us from jackson hole. u.s. stocks are up for a second day of stock gain amid a global market bounce after completing the worst six day plunge in four years. u.s. stocks are starting to head upwards, but global market stratgidge kathryn rooney vera says policymaking errors are still threats to the markets. she joins us from miami. kathryn, thank you so much for joining us this morning. let's start with the g.d.p. numbers out this morning. second quarter growth coming in at 3.7%. a lot better than the first estimate. do you think that this puts september back on the table for a rate hike? kathryn: definitely better economic numbers than we and the market had been expecting. however i think we will see deceleration the second half and i don't think this necessarily means the fed will hike in september. the feds will not. inflation expectations have collapsed over the past two

months. and i think that the fed is not ready quite yet. they think the time something not right to increase. i think it will come in december. the economic recovery is still ongoing. if we looked deeper into the data that was out this morning, you'll see there is a big inventory buildup. that's unlikely to be sustained in the second half. olivia: we saw a big rally yesterday on wall street. the dow up more than 600 points. up today now about 150 points. still down now year to date looking at about an 8% decline. do you think the selloff we have seen, is this a correction or start of a crash? kathryn: we published a piece on monday saying this is more likely a correction than a crash because it was precipitated not by an event but fear. we thought that actually something had to come to a decisive point as to whether the market was going to continue lower or go higher. we think that can come from two fronts. in the near form we have stan fisher this weekend talking about inflation.

so we have september 17 fomc. whether or not they hike we think that will bring certainty, some amount of certainty to the markets. as to the direction of fed policymaking. then you have china. china was obviously a big weight "on the markets" these past comes months. in the pipeline if we see chinese growth decelerate further is a big fiscal stimulus. i think that is something that chinese authorities will bring to the table. as i said on bloomberg and previously, i think there is a floor for the chinese under both economic growth and equity. i think they are moving in the direction of a more market based economy. but in that adjustment process, and as growth decelerates, they will step in to prop up growth. olivia: the recent stock drop was fear driven not event driven. what will it take to soothe the markets, to stabilize global equities? kathryn: clarity. volatility is still here. we need certainty on some

fronts. how hawkish or dubbish the fed. september 17 will be critical. if you look at the emerging market space, the feds' comments and accompanying language and accompanying terminal rate from the -- will be critical. if the fed hikes in december, if it does come to pass, they are going to have to accompany that decision with very deafish language and imply that rate hikes will be minimal and gradual. that could provide some support to what has otherwise been a really severely hit emerging market currency. olivia: if we stick with china for a second, what are you looking for from beijing to provide that floor that you mentioned that you think they are going to put in place? is that more intervening in the financial markets? bloomberg news is reporting that beijing stepped in today to buy large cap equities. monetary policy? fiscal stimulus? kathryn: we have seen everything.

we have seen a broadband width of chinese measures. i think the risk is that china perhaps, we see more terminal, more volatility as to chinese outlook, the market thinks that chinese authorities are incapability of -- incapable of avoiding that hard landing. we have seen direct purchases of equities. i think you could see all of that. what we saw on tuesday -- monday was the chinese coming with monetary stimulus with the market in that massive swing deemed insufficient. i think that more volatility in the cards. china is going to come with more fiscal stimulus. i think in a big quantity. olivea: more volatility in the cards. are you comfortable buying equities now? or do you want to hold off until things stabilize? kathryn: i think that you can find some very good valuation at the current levels. what has presented a lot of investors both retail from

coming in is the heightened volatility. i think you do need to see more stability for the markets to see a sustainable balance. as i mentioned at the beginning, i think this has been a correction. not saying it's over but you can find interesting value for the longer term. olivia: what are those pockets of value most interesting to you right now? u.s. equities? or are they meerninging market equities? kathryn: i think the big names that have been hit, staple, consumer discretionary, you'll see additional upside dividends payers. places of value where i think even in potential disappointment on the economic front in the second half will continue to see performance. consumer staples. high dividend payers and consumer discretion is where i would be. olivia: kathryn rooney vera thank you so much for joining us. still to come on the bloomberg market, we are just getting started. next up we'll talker if rar require, the company revving up its i.p.o. plans which include

replacing its c. can e.o. who is retiring. find out who the leading candidate is next. snet ♪

olivia: this is the bloomberg market day. stocks are rallying for the second day. but there's one sector not cooperating. julie hymen joins us. julie: some stocks in one sector, talking about a retell here today. we have a mixed picture. with tiffany out with earnings sharply in contrast to singet. tar heel of two -- tale of two jewelry companies. the company getting hit by surn can i. gets just over half its sales in the u.s. that means it gets just under half its sales from international sources.

it does hedge against currency but did not anticipate the strength of the u.s. dollar. if you looked at it in cost terms, testify any sales were up 7%. which is perhaps why the stock is not down more this morning. gnet. they get 13% of their sales outside the u.s. it's second quarter sales rose by 4.2%. earnings also were above what analysts had anticipated. this is one of the best performing stocks in the s&p 500 today as a result. i want to talk about dollar general, another stock that is feeling some heat today. dollar general came out with earnings that beat estimates. however did it not raise its forecast for the full year which leaves room. that seems to be the source of the decline. it also says it sees its comparable sales of the year closer to the lowerer end of its forecast of 3% to 3.5%.

we are seeing a drag down dollar tree. dollar tree, earnings next week on september 1. its shares down about 1%. olivia: thank you so much, julie. now a tech czech of your top headlines. oscar pistorius, will be in list priston for three more weeks. the decision to release him to house arrest was delayed by tempts. he's served 10 months for -- 10 months of his five-year sentence for the killing of his girlfriend. a decision on his parole will be made after a hearing in september. and the stronger dollar is weakening tiffany's results as jewelry was explaining. the luxury jeweler's second quarter profits missed analysts estimates. lowering the value of tiffany sales overseas. discouraging foreign tourists as well from buying from u.s. stores. and facebook is hoping to offer a service like siri. the company is testing a personal digital assistant. it would run inside its mobile messaging app. an attempt to match similar

services offered by apple, google, and microsoft. those are the top headlines at this hour. ferrari is considering appointing chairman sergio marconi after the c.e.o. after the current chief retires from the post in the coming months. this will all come ahead of the auto makers' initial public offering, which is currently targeted for october. tomaso me to discuss is aberhoff. thank you for joining us. explain to us why ferrari is going public now. >> good morning to you. er if rar require -- ferrari is going public because they need, cash to develop new models. they expect a high valuation, he expects ferrari to be valued at east $10 billion -- 10 billion euro. s, 10% is worth more than one billion euros. that's the reason for an i.p.o.

now. olivia: what would an i.p.o., pinoff of ferrari mean for fiat-chrysler? >> essentially it is spinning off ferrari for two reasons. first, giving freedom to ferrari to develop itself independently. then the controlling family of fiat cars will then control directly ferrari, which means if phi yacht finds the right spot for america, we know he's been ooking to merge with g.m.. en they won't lose control ver ferrari if they merge. essentially the question, ferrari is expected to boast the value before the spinoff. they are selling 10% now and he

said that's a high valation. -- remaining 80% iner if rar owner in ferrari next year. and after it gets real value, then the value will be reflected in fiat chrysler. olivia: already the c.e.o. of fiat chrysler and chairman of ferrari. he's notorious for working around the clock, never sleeps. doesn't he already have too many jobs? >> the guy's a bit busy. he's now c.e.o. for chrysler. he's already chairman of ferrari. chairman of the truck business which was spunoff from 2011. chairman of the swiss company s.g.s. and also independent director of philip morris. he has a lot of job. essentially he took charge of . rrari one year ago

he already has ferrari was one of his main job. people tell us from he's deeply involved in the development of the future of ferrari. it looks like he really care about ferrari and that's why probably he will get the job when the actual c.e.o. will retire probably in the coming months. olivia: one final question for the americans in our global audience. when are we going to get a ferrari s.u.v.? i know that's zachery lidge for many italians? >> never. never. that's what marchianno used to say. it will never be an s.u.v. you can buy a four door ferrari, which is a sort of see dan. and this is the closest ferrari that you'll see to an s.u.v. no plan for a ferrari s.u.v. olivia: thank you so much.

tommaso joining us from me lan. donald trump said hedge funds aren't paying enough in taxes. what are his plans to change all that? our interview with the donald next. ♪

olivia: donald trump is on the campaign trail at this hour. he's about to speak to business leaders in greenville, south carolina. last night, though, he spent a half-hour with bloomberg politics managing editors mark halprin. with all due respect they asked him if he agreed with hillary clinton's plan to close a loophole on carried interest and tax on ordinary income. take a listen. >> the interest, the carried interest is really a tremendous burden on the country. i have friends that -- and enemies, mostly enemies, but i am saying it for the good of the country. none of them are going to support me and i don't want their support. although i could get it if i want it. speaking of that, hillary clinton has many hedge fund people supporting her. in the end i would say that the hedge fund people make a lot of money.

pay very little tax. i'm about the middle class. i want the middle class to be thriving again. we are losing our middle class. >> change the tax code? >> i would change t i would simplify it. >> in this respect, you want to tax carried interest in the same way as ordinary income tax? >> i would take carried interest out and i would let people that are making hundreds of millions of dollars a year pay some tax because right now they are paying very little tax and i think it's outrageous. i want to lower tax force the middle class. i want to lower taxes for people making a lot of money that need incentives. >> that would affect not just hedge fund people that. would affect people in limited real estate partnerships which you -- you're proposing you would like to raise taxes on yourself. >> that's right. i'm ok with it. ready, willing -- you see my statements. i do very well. i don't mind paying taxes. the middle class is getting clobbered in this contry. the middle class built this country not the hedge fund guys. i know people in hedge funds. they pay almost nothing. and it's ridiculous, ok.

olivia: you can watch the full interview on bloomberg.com. as we head to the break we'll take a quick check on u.s. markets. stocks are rallying a second day after the s&p posted its biggest single day rally since 2011. the dow rise more than 600 points yesterday. the dow up currently about another 200 points. today's rally even picking up momentum. every single sector in the green. energy stocks up the most by about 3%. also quickly just want to show you what's happening on the treasury market. treasuries are falling for a third day today. one reason, another sign of stronger u.s. growth. second quarter g.d.p. coming in revising 3.7%. more "bloomberg markets" next. ♪

olivia: this is the bloomberg market day, i'm olivia sterns. top stories crossing the bloomberg terminal at this hour. migravents are flowing to parts of europe in record numbers. hungary detained 3,200 migrants

yesterday, 7 behind more than the day before. many come from syria. britain said it gained almost 330,000 people during the 12 months ending march 31. meanwhile, police in austria have found the partially deposed bodies of at least 20 migrants. they were piled into an abandon truck near the hungarian border. officials say the condition of the remains makes it difficult to establish an exact number of the dead. but they believe the body count could be as high as 50. and the president of greece has appointed the head of the supreme court to lead a caretaker government as the country moves one step closer to an early election. they will have the first female prime minister. they failed to find willing coalition partners to form a government t looks like elections will be held september 20. turning now to the u.s. economy. first time claims for jobless benefits fell to a three-week

low. weekly claims have stayed below 300,000 since the beginning of march. that's a level consistent with an improving labor market. president obama will be in new orleans today to celebrate the city's comeback from katrina. saturday will mark 10 years since the hurricane made landfall in louisiana. the president plans to meet with the city's mayor and speak in the city's lower ninth ward in neighborhoods still recovering from the storm's devastation. and one of baseball's best pitchers nearly paints another masterpiece. justin verlander fooled the anaheim angels for eight innings in california. but his no-hitter was broken up in the ninth inning with a double that was barely fair. the tigers won 5-0. it would have been verlander's third no-hitter. look at that. those are your top stories at this hour. the federal reserve is holding its annual retreat at jackson hole. we are there trying to get a read on what members of the fed might be thinking about what a wild seven days it has been for

global markets. mike joins us now from wyoming. mike, who have you had a chance to speak with,? tell me about this interview with esther george? mike: people are just coming into the conference today. it's been funny because the last couple of days all the stories and analysts we have had on bloomberg television have said well the market volatility calls into question whether or not the fed's going to be able to raise rates in september. now after the strong g.d.p. report, two days of rallies, they are saying it's back on. that was exactly what i esther r -- asked george about it. we talked about the idea of volatility and the fed. esther: should expect volatility from time to time. we are in a period of some uncertainty, questions about china. questions about global growth. so i think we should expect some volatility.

what it means for monetary policy i think is not yet clear. it's a complication. it's something we watch. i'm not ready to say it has some particular long-term effect. mike: the fed held off on tapering in the face of market volatility back in 2013. the argument at the time was the volatility had led to a tightening of financial conditions. do you see that scenario possibly playing out again? we have seen spread slide recently. esther: spreads have widened but the market came back today in the u.s. it's too soon to tell what it means. that, of course, markets operate in short-term, in short spurts. reacting. and i'd like to wait a little longer and understand what it might mean more generally for the economy. mike: if the market stabilize, september would still be a live option as far as you're concerned? esther: i think the fmoc has signaled every meeting will be a

live option. in between meetings we are always judging what shifts have occurred that would change our forecast. at this point for me i have not seen something that would change my own sense of how the economy's doing. mike: do you think the fed at this point may want to look at changing its reaction function to risk management? esther: that's a discussion the committee has to have. for me i have been saying for some time as i have seen the economy consistently grow, labor markets improved, i thought there was scope to consider rate increases before now. but we'll wait and see what the committee's thoughts are as we see what happens by september. mike: you had a number of prominent economists this week say maybe the market turmoil deserves an easing response from the fed. what would you think of that? would you see it as is esectionly a yellen put? wouldn't you take it that way if you were on wall street?

esther: i'm not on wall street and policymakers' job is to look to the long-term. i think that's why we have to be careful trying to read too much in. trying to decide today how we might react to that. i think that takes more time. we have time. we have until our september meeting to see how things look then. mike: a lot of people on wall street say a large portion of the blame for the global selloff rests with central banks because so much liquidity was pumped into asset markets. it inflated their prices too much. does that suggest to you it's better to get out now while you can? esther: i always had the sense from the various iterations of q.e. we undertook which were designed to support asset values, to boost asset values, that this could be a consequence. this could be one of the costs down the road. and so i think we have to be mindful of that. we have to think about that in terms of the timing of our policy.

mike: signaling and guidance, would a near term move, a september meeting move, impact markets and the economy by reinforcing confidence in the growth outlook the fed sees things as getting better, or might, if you held off, it suggests to people that the fed sees the economy getting worse? esther: we'll have to see what things look like at the time of the september meeting. my own view has been for some time that the economy is strong enough to begin that normalization process. i think that would be a sign of confidence. it would limit some of the uncertainty that i think is out there today. again, seeing where we are in september around those issues i think is very much going to be part of the discussion. the fed's credibility in the long-term will be determined by how effective policy is. and i can't prejudge fonings policy errors, things that might react. i think being clear about how we

see the economy, thinking about the long-term risk to sustainable growth, for me has argued that we should move sooner rather than later. the longer you wait, more complications can build up. mike: the longer you wait based on your forecast would that mean a steeper, faster tightening? esther: it could. it could mean that. the other thing is we have been at zero a long time. so i think it's reasonable to expect this idea of some volatility. i would like the opportunity to see how the economy responds and be in a position to know whether the path then is a more gradual and slower path as opposed to more rapid one. mike: you can talk esther george up at least someone who is willing to consider a rate move in september. we'll talk with a number of other fed officials tomorrow get their votes. olivia: thank you so much, michael, watch his full

interview on bloomberg.com. hope you get some type to spend at the cowboy bar. still ahead, up next, we'll continue the conversation about the fed's central role in the latest market stability. we'll be joined by jim grant of grant industry. don't go away. ♪

olivia: welcome back to the bloomberg market dafmente we are one hour into the trading session here in the u.s. it's time to get you caught up on the market action around the world. i want it start in asia. shanghai's deposit jumped more than 5% by the close today. with all the gains coming in the last 45 minutes of trading. according to people familiar with the matter the late day rally was sparked by chinese

government intervention. meanwhile, the collateral damage from china's turmoil continues to be felt in hong kong where initial public official are the world's worst performers so far this year. >> hong kong's i.p.o. market started 2015 with its trade market philosophy best start to a year in fundraising in at least a decade. with a notable upparticular. but it quickly went from first globally to worst. as china's $5 trillion set n analysts say the i.p.o. market will feel a lasting impact from the selloff. and that is a key risk to china's ambition to sell shares in big state enterprises by year's end. hong kong eatens competitiveness as fewer companies come here to list. olivia: zeb reporting from hong kong. mark is standing by in london.

mark: off yesterday's 1.75% stock european stocks are rallying. it's those indecease of the worst performing industry groups this month. the oil companies, the miners that are rallying today. thanks for that. the new york fed president his comments on u.s. interest rates. and of course rebounding stock market. don't forget, olivia, this index is still down by 10% since china devalued the ue juan. that equates to 1.2 trillion euros to lost value. this is the euroagainst the doll amplet falling for a third consecutive day. that's losses that equate to 3%. on monday, the eurorose to its highest since january, ending a four-day rally. that winning streak was the most since 2009. the euro seems to be a haven currency right now. it's got this new-found status as a haven curncy. it's moving inversely to the

stock 600 and the s&p 500 by the most in a decade. want to show you the bond market. in particular the spanish bond market. something spectacular happened in spain not just the fact that yields fell for the first time in six days. the economy, economically, rose 1% in the second quarter. that's the strongest rate of growth in eight years, julie. thanks to domestic tamar. the economy has now grown for eight straight quarters. how things change in spain. olivia: yeah. indeed. meanwhile, here in the u.s., speaking of things changing, we had a revision to last quarter's g.d.p., substantially higher, 3.7%, more than economists estimated. julie: that's helping to sustain a rally for the second straight day. all the major avenues on the back of the big gain yesterday are having their best two days since 2009. cumulatively. the rally over the past two sessions.

definitely notable on that basis. what's also notable is what has happened to the nasdaq in particular. look at michael bloomberg terminal, today the nasdaq had been the best performer percentagewise. it retained that measure. in addition it is positive once again on the year. it's the first of the major benchmarks to go positive again after the big drop. as you can plainly see we have not recouped all of the losses over the past few days. in terms of today's session, let's look at the groups in the s&p and where they are headed. again we are looking at a broad base rally today with energy leaving gains. materials and consumer discretionary also doing well. energy being propelled higher at least in part by oil prices. they are rebounding today as well with that g.d.p. number. there are hopes we'll see demand come back to some extend for oil. you can see big gain for oil prices up 6% having its best day since april 15. and we are seeing oil stocks rebound as well.

chesapeake energy, the worst year to day performer, down 65%. it's up about 10.5%. a patchy e.o.g. also rebound. olivia: thank you so much, julie hymen. what a wild ride it's been for global markets this past week. the fear index, which measures volatility in the u.s., it spiked 50% at one point earlier this week. nobody is certain exactly what the cause is. a lot of people pointed to china. others say perhaps the fed is partially to blame. jim grant joins me now on set. he points to the fed. jim, what role do you think the fed has played in the huge swoons we have seen in the markets? we tip will i think of the fed as a source of market calm. jim: that is what they would like us to think. the fed has so-called dual mandate. price stability and employment. in fact, the fed's functional mandate is that of arsonist and

fireman. through its well intended but manage and ons to manipulate, the fed creates those conditions that lead to financial turmoil. and as soon as the smoke begins rising from the marketplace, you hear the clanging of fire trucks and bill dudley is driving one of them, and they wheel up breathless and say we are here. we'll fix the fire we started. the fed -- one shouldn't dogma advertise, as i have just done. the fed is not 100% responsible for every action under the sun. the fed as constituted is a new institution in our financial lives. it is omnipresent if not omniscient. olivia: i'm glad you mentioned bill dudley. we actually had a press conference from the new york fed president yesterday. he was pretty adamant all the instability we have seen this past week the u.s. isn't to

blame. >> this is very different than the financial crisis. financial crisis was very much about us. subprime mortgage lending. securities. securitization of p securities that turned out to be highly toxic. that was about us. this isn't about us. this is about the governments abroad. what we have to assess is how those development abroad could ink ping on us. olivia: jim, bill says the selloff clearly isn't made in america. jim: one should tread more humbly. the fed was not the last set of people to understand what 2008 was all about, but they were near the last in line to get it. certainly they had no conception of what was happening before or during the events. a little less quick to draw that analogy. this is meant to be a global interconnected world. that is the permanently ecoing cliche. there is an element of truth in t we are kind of one

interconnected capital market. we are one especially one global idea on central banking. in my opinion the wrong idea. and that idea is we must have 2% measured inflation. we must manipulate interest rates rather than allow them to be set through prices. we must manage markets upward to create asset values that will stimulate spending. that is the mantra from the sentra bankers. that is a worldwide idea, wrong idea. i think that some of these ideas -- ideas ever so important in finance and the idea contrary to what mr. dudley suggested, these ideas are made in america. olivia: do you think that this is just the beginning, then, of a longer unwinding of mispriced assets? jim: yes. olivia: at what point is that going to, like during the crisis, is that going to bring down business and consumer sentiment as well? jim: to a degree. i think the context in which we view the events of the past,

week, two weeks, month is that something returning to normal rather than something abher yebt. financial monetary policy is abearant. what has been unusual is the ie -- ear restability of markets. -- eerie stability of markets. that's kind of the great snooze. ne must ask why markets are so seemingly happy to stagnate. i think this also gets back to monetary policy. when people expect the fed to be there, when that he expect zero percent rates to exist, stop reading the footnotes, stop reading the documents, security analysis falls into disuse. people tend to go for momentum theories of market action. they watch constantly and federal reserve and listen to

what it's saying. olivia: if the fed does hold off in september, how do they justify that with an economy that grew 3.7%? jim: the economy grew at than annual rate. but year over year grew 2.5% for a long time. nothing's really changed. the ratio of stock prices, business profits is at a high. olivia: let me ask you like this. supporters would say that by not raising rates, supporters of delaying action, would say that they will help calm the markets. they could perhaps help leave a little room for employment. jim: markets proverbly by forward-looking. by delaying all they'll do is get new set of speculations on when they might act or what conceivably might cause them to act. if they are not going to act now, like when? if they didn't act last year when the market was up last year a ton, right? why wouldn't -- when will they act? this will introduce more

uncertainty. more mispricing. olivia: when you think they are going to act? what's jim grant's prediction? jim: 20 -- olivia: i get t that's unfair. it it december most likely. jim: they said september last week. things do change. olivia: that's true. what are you listening for from jackson hole? jim: i am listening for the sound of the chairman of stanley fisher saying something about inflation. this is really interesting. olivia: that's to be on saturday. jim: what they say they need is a 2% per year devaluation in the purchasing power of the dollar. they say that. why do they say that? who want that is? olivia: because that's part of the fed mandate. jim: no, it's not. olivia: inflation target. jim: that's not something congress gave them. that came from the ever fertile

brains of the ph.d.s who run our monetary affairs. that's now -- it's back to these ideas being worldwide. this is the idea of the it% -- 2% inflation target is an american idea. it was a new zealand idea as well. it is truly the world's new dogma except when you think about it you're puzzled why it should be so. 2% a year off the value of the money you earn? is that inherently a good thing? to answer, no, it's not. olivia: thank you for giving the interview. jim grant, appreciate your time as aufments author and publisher of grant interest rate observer. still ahead on the bloomberg market, this weekend marks the 10-year deliver of hurricane katrina. in addition to the loss of life and property in the storm and damage done, the pit sithy's public services and infrastructure. don't want to go to break. i want to go to dave, my colleague, in new orleans. he's spent the last few days surveying the city's

reconstruction and joins us with more. david, i know that president obama will be down in new orleans. what's he going to find? how well has the city recovered from katrina? david: this afternoon he's going to speak in the building behind me. that's a new community center built here in the lower ninth ward. a an area devastated by hurricane katrina. he's going to look both at the past and future. what's been happening here. we took a look at a new hospital that just opened its doors a couple weeks back. a giant facility. it's bright and designed to be welcoming. 1%, $1.1 billion budget went toward buying art. there's a sculpture by dale on the first floor. >> each patient care tower has space for the family or patients to go outside to reflect, relax. david: dr. peter w. helped design the hospital to withstand future storms. >> that first floor is built four feet higher than katrina flood levels.

david: the medical facilities are above that. w if its chief medical officer and perhaps its proudest tour guide. while dr. w seems happy to shake hands, spent his career in new orleans as an e.r. doctor. one s is our major level trauma room. so within five minutes the decision can be made whether you need to go immediately to an operating room. the next level one trauma center is in houston. it will be in jackson, mississippi, or shreveport. david: this new medical center is positioned to compete with hospitals in those cities. he hopes it will attract patients across the south. >> the new university medical center stands in stark contrast to this. charity hospital which operated in this building for many decades. it flooded during hurricane katrina. was closed several weeks after. and it never reopened. charity was not a regional

powerhouse. it was a public hospital founded in the 18th century. dr. w disagrees with critics who say the new medical center, which is being run as a public-private partnership, will not be the same kind of safety net for people who call this city home. >> this hospital has never walked away from its mission. and that mission is to care for all patients. david: federal funds went a long way towards paying for this new facility. the reality, he says, there will be a lot less government money available in the fuhr. the university medical center needs to do a bert job than its predecessor attracting patients ith insurance who can pay. olivia: if there is another devastating storm in new orleans, what has u.m.c. done to make sure it doesn't become a retreat of katrina? new hospitals attracting biotech this far? david: as you mentioned most of the medical facilities are built on the second floor and above. that first floor is for patient

reception and conference. the windows are made to withstand gusts of 110 miles per hour. he really analogized this to the fortress. adding a caveat if there were another storm like katrina, it would be a medical facility that has so much power redundancy it could stay open unlike the charity hospital which closed after three weeks. olivia: thank you so much for joining us. david will be back with more throughout the bloomberg market day. still to come in the next hour of bloomberg market day, much more including another look at the global market rally. we are seeing a relief rally here on thursday. even chinese exwhich is finally closed in the green today. the dow up another 200 points right now. ♪ olivia:

it is 11:00 a.m. in new york city. pimm: welcome to the bloomberg market day. concerned about chinese economic growth.

how well are the automated money managers performing? mattolivia: will they or won't ? what the federal reserve will do next. pimm: brazil. investors have lost about a third of their money since the start of the year, but it is politics and scandal that might save rozelle. ♪ -- save brazil. ♪ olivia: good morning, everybody. i'm olivia sterns. pimm: i'm pimm fox. on the s&pearly 2% 500. the dow moves higher by 1.5%. the nasdaq