ramifications of janet yellen's actions and her potential in action. finally, there is debate. jake tapperiver as contains mr. trump. this is "bloomberg surveillance ," live from our world headquarters in new york. it is wednesday, september 16. i'm tom keene. we have blown up the show with two major breaking stories. first, japan with a major breaking cut. brendan: i did not know what their debt to gdp ratio was. it is 231%. japan has always been a special place where that kind of dead load somehow is sustainable, and i think that is what is being called right now. anticipated, but we will go to tokyo in a moment. the other story is -- i have not had a miller in 22 years, but

they were every other beer i have drunk. these are two colossus. brendan: any sort of tasteless pills that you have drunk anywhere in the world is owned by one of these two brewers. ahead -- -- i'm going and miller, yeah. they're going to try to buy them. neara huge transaction, $100 billion. right now our top headlines. here is vonnie quinn on the fed. vonnie: federal reserve policymakers are beginning their two-day meeting today. by tomorrow afternoon they will decide whether to raise interest rates for the first time since 2006. goldman sachs tells bloomberg there would not be as a prize if the fed takes action. >> if things go badly, and things intensify from here, in that case there would be a reason to push it into 2016.

futures contracts show there is a 32% chance of a rate hike. ready -- as the leading republican candidates get ready to debate tonight, polls show the tide is turning for donald trump. he is up 13 percentage points in a month. none of the other 15 candidates is close. they will debate tonight on cnn. viewers will see two changes. carly fiorina is taking part, and the candidates will be allowed to challenge one another directly instead of just answering moderators' questions. fiat chrysler has reached a tentative agreement with united auto workers. they revealed little about the deal. they did say it eventually does away with the two-tiered wage structure.

more job cuts are on the way at hewlett-packard, which is preparing to split in two. aswill eliminate as many 34,000 more jobs. in november, hp will become two stand-alone businesses, one that focuses on hyatt-end technology and the other that sells personal computers. tom: for them out of their misery. brendan: print and drink. a lot of things to take care of. tom: i drink a lot of beer with c12 calculator. a lot to talk about with japan this morning. a shift from the aa level down to the a level. the quality is profound. this morning, ever so slightly with a weaker yen. in tokyo -- editor

brian, was this a surprise to mr. abe? brian: i think it is going to be a surprise. time is running out. for 2.5had abenomics years. demographics are ticking time bomb. tom: within the next stage of abenomics,-- of depreciation buttresses up against any rating downgrade, doesn't it? brian: that was a big part of the first half of abenomics. he says he is halfway through. of course, you have the big boj meeting coming up in october, and a lot of economists think we will see another round of easing. that will be the effort to push the yen down further. brendan: is there any sense in japan that a is ready to -- that abe is ready to deploy the

ofond and third levels abenomics? brian: he has talked about it. he has another two years in office, and he will focus on the economy and shift away from national security. we are still waiting to hear exactly what he is going to do, but it has to be deregulation and the tpp agreement, too. tom: brian, thank you so much. a downgrade for a major nation, japan. they are two major beer companies. smaller sab miller will be taken up by colossus anheuser-busch in best. matthew campbell is in london. he has never had a bud, never had a miller, but really this is about heineken. there are three players. explain to me how heineken fits into these meetings of these two

other companies. : really only two of them are in play when it comes mergers, and that is abi and sab. when people talk about consolidation, it really is abi and sab that they talk about. it looks like this deal is starting to come together. both of long-term for these companies, our margins under pressure as people move away from the basic pills that they sell? matt: one of the problems particularly in the western world, more people are treating wine, and sort of joe sixpack is sixpackg to pick up his of bud. he might be buying craft here. some of the assumptions of these mega brands are going down. vonnie: will we need to see

regulatory support from europe and the u.s.? how does this work? matt: this is going to be assuming a deal can be agreed, a very big antitrust challenge in the europe -- in europe and in the u.s.. people will be paying attention, the media will be paying attention. i think there will be an army of antitrust lawyers around this. tom: i agree. the regulators dive in and the lawyers are employed. to give you some perspective, in employees, sab miller, 65,000 employees. they have both been great in the stock market. sab miller for the last 10 ev up, up 14% per year, inb almost 20%. this is not dinosaurs mating. brendan: i am fascinated that

this is the way this part of the industry works this way -- you can buy budweiser, but it is marketed as prom a in brazil. it is the same swill everywhere. tom: you are just beaming. brendan: it is bad beer. tom: we need to go to two people who live on budweiser. it is upon us. janet yellin will do this, that, or the other thing. we will bring you separate coverage. kathleen hays and michael mckee with me. we have set us very smart people, one drinking miller, one drinking bud. drew matus is the u.s. economist at ubs. is at the same shop. bud or miller, which one? craft beer people at the table. julian? julian: bud.

someone drink's beer, not swill. what did it signal to see yields shift and a better tone yesterday afternoon? there ist signals that hope, that there is a bottoming process in the market, and in a lot of ways china may have been the first fed rate hike, and the surprise now over and we are transitioning into what the fed is or is not going to do. tom: i am thrilled that you are both with us. is janet yellen catching up with ubs? >> i think it is difficult to think of the fomc as a single person. it is a cluster of dots. -- not necessarily a cluster of dots, there are different views. but it is not as though there are two competing ideas. there are 17 competing ideas,

and they are all being talked about. we do not even know what the probability of a rate move is. vonnie, you said 32%. if you look at the 2-year note, it is higher than 32%. higher commercial rates -- there are all these different ways to look at what the probability is. because we are moving in a range, it is less certain. say 17 opinions, but the three top opinions carry more weight, right? stan fischer, janet yellen, and dudley? drew: i would say with the rest of them, there are people who are very well regarded. the question is, how much do financial conditions matter? that is the only question because they talked about the model driven. it was no model i know of that the fed would used that would say we are going through our natural rate of unemployment estimate. can you look at what

has happened and say markets have already had themselves inoculated against what is happening thursday? drew: if the fed does not go, there will be a response in markets, and that response will be something that would hurt the rest of the world, not help it. if we think about what it might do to currencies, anything that suggests -- if the fed makes a mistake and suggests we are not going along time, that is a problem for everyone else. emanuel mentioned that the two year yield is 2.8047. signaling optimism on a better american economy. coming up -- yes, we are counting down to the fed decision -- janet yellen decides

at 2 p.m. tomorrow -- we will be there. hays, michael mckee, at myself with some terrific guests to give you some measured perspectives. we will do that at 2:00 p.m. at the news conference and into the afternoon tomorrow. with drew matus and julian emanuel this morning, it is "bloomberg surveillance." stay with us. ♪

tom: it is decidedly an international today fed meeting. hong kong -- an international two-day fed meeting. hong kong will pay attention. looking at a better stock market in china this morning, coming off those recent lower set of lows. vonnie: standard & poor's has

caused japan's credit rating to be cut from -- to a minus from a plus. inflation will probably not change things for two to three years. the maker of budweiser believes it is miller time. sab miller says anheuser-busch inbev plans to make a takeover offer. inbev made says ab an approach but no offer is on the table. authorities say at least 12 people died in flash floods in a town off the utah arizona border. one is still missing. women and children were in two vehicles swept away by floodwaters. they lived in a community that -- thehome-based for a home base for a polygamist sect. those are top headlines. tom: thank you so much. the news flow is amazing. vonnie: just as we come on the

air every morning. tom: there is a discussion tonight? vonnie: republican candidates gathering tonight for the second debate in the 2016 season. phil mattingly, this is more of a head-to-head. how will this impact the front runners? most interesting about tonight's debate is you have two tears. to show people who have they can attack the front runner, donald trump, and people need to make an impression primarily on donors. you have seen top tier candidates drop into the low single digits. you are talking about scott walker, marco rubio, chris christie, and i am told from campaign aides they are getting phone calls from donors and supporters saying you need to show support -- you need to show -- we need tome

pay attention to how people go after donald trump and how donald trump response. that will be the other side story. put fourcan we candidates to rest after the debate? will anyone make it out of the undercard? phil: no. anything is possible. carly fiorina proved that if you have a head and shoulders above anybody else performance in the undercard, you can move up. she is in third place in a poll that came out an hour ago. she was in local scene digits -- she was in low single digits. as we saw with rick perry, we are getting to the point now where the money starts running out and supporters need somebody else to go to. the idea that someone will catch fire, i think it is losing luster. the reaganat library, i do not know if you have seen kathleen park. there is a wonderful op-ed from

"the washington post," wonderful treatment by kathleen parker. there is a little bit of romance there from ms. parker, phil mattingly. where will jake tapper find the romance tonight? phil: i do not know that jake is going to look for the romance. about tonight's moderators. this is why i think a lot of us are excited about this debate. you have three of the best questioners, people with respect, with deep knowledge that are prepared to go after people not just on politics and of thefireworks bombastic donald trump attacks, but actually on policy. that is what you want to hear.

brendan: how often do you expect to hear the words "ronald reagan" at the ronald reagan library on the stage tonight? has: i think john kasich already come out yesterday and made multiple kind -- made multiple comments. if you do not mention michael mention- if you do not ronald reagan in every sentence, i think your donors are angry and everybody is angry. there will be no shortage of can toents -- of no comparison oneself and ronald reagan. mattingly, thank you so much. we will be watching you all day for updates. do not miss a special one-hour "with all due respect" from the reagan library at 5:00 p.m. eastern time. this is "bloomberg surveillance ," on bloomberg television,

streaming on your tablet, your phone, and bloomberg.com. ♪

will bek carney watching washington, particularly at 2 p.m. tomorrow. thelinked last month on bank of england saying no flesh inflation, is no site to be seen. trend toward giving kids laptops and hoping it is going to work -- the general problem is that teachers are not very adept at using technology themselves. like most of us, they picked up the skills as they went along and are no better at students at coming up with productive ways to use computers.

both the kids and their teachers are wondering in the dark. i covered this four or five years ago where every country was coming up with a free laptop program. the formula always seemed a little suspect, which is child plus laptop plus fairy dust equals success. a report by the o's ecd -- by the oecd shows that it does not really help and in some cases it does harm. tom: drew matus is with us from ubs, and importantly, he had journalistic experience before and did not use a computer. at thesenior beer editor colby echo. "the colby echo." computers do not do it. the computers -- you guys are smart math guys, finance guys. computers are not a substitute

for textbooks. the kids come home and they use the ipad and i know that nothing happened at school. they did not learn anything. vonnie: it needs to be taught somehow, whether by computer or -- way, it is the newfangled in my opinion, of showing movies in class. julian: there is no substitute for human interaction. one of the things that we absolutely know is that there is in. evidence that students, if you take notes by hand, your attention skyrockets, versus typing notes on the computer. drew: those are the annoying people, the business students that sit behind you and type

very loudly. is there evidence that technology is not helping productivity? where computers could come in handy is that kids are not differentiated enough. you have everyone being taught through this medium, and you are you -- you are losing kids on the bottom end and the top end. so kids are bored. tom: very good, drew matus with us from ubs. this morning, vincent reinhart will join us in the 8:00 hour. good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." a nice long day for me. really looking forward to a conversation with ray dalio, tonight at 6:00 p.m.

this is usually anticipated -- michael mckee and myself with ray dalio. we will speak of debt, of productivity. and most important way, ray dalio willett dress tonight the risk parity debate. this is a crucial debate. really looking forward to that. vonnie: we are also looking forward to the fed meeting, the fed not having raised interest rates since 2006. the question is whether policymakers will keep waiting for the fed's open market committee. tomorrow afternoon we will find out if rates will go higher. our financial markets ready? we asked the chief economist at goldman sachs. >> an additional argument for why they are not going to go, i think there will be some concern that the market is not prepared for it. we have already had a lot of financial market volatility. avarice the risk of an market reaction. vonnie: a new survey shows the

tide turning donald trump's way republicaning presidential candidates get ready to debate tonight. 39% of republican voters think trump is the party's best shot of winning the white house. he is turning off latinos. event yesterday, joe biden says that message will eventually fall flat. two trump and the stuff you are hearing on the other team, this is not just about democrat-republican, it is about a sick message. this message has been tried on america many times before. we always, always, always overcome it. candidates will debate tonight on cnn. viewers will see two changes on the first debate. carly fiorina is taking part,

and the candidates will be allowed to challenge each other directly. it is a deal that would bring together the two biggest year makers in the world. hasuser busch inbev proposed a takeover of sab miller. no offers on the table yet. sab miller is up as much as 23%. apple's ceo, tim cook, is talking about his decision to come out as gay. cbs' "late show with stephen colbert," and said he had a tremendous responsibility to do it. tim cook: it became so clear to me that kids were being bullied in school, discriminated against, and blamed by their own parents. i needed to do something. vonnie: he also defended his predecessor, steve jobs, in the wake of negative portrayals in books and movies. he said the steve jobs he knew

was an amazing human being. brendan: i need to bring this up. we have a lot of viewers who pay close attention to the beer debate we were having. mike mcdonough is the chief economist for bloomberg television's. televisionmberg and -- for bloomberg intelligence. he said it is impressive that sameiser can maintain the taste and consistency across the world. valuable analysis from bloomberg intelligence. this is a big move given the volume of trading. julian emanuel is on the desk from ubs. if we are going to worry about liquidity in the treasury's market, today would be the day to worry about it. should we be worried? julian: in the bigger picture, liquidity has been withdrawn as a function of post-financial

crisis landscape, but that is also a function of markets becoming more volatile. normal in front of a decision like the fed to do with less liquidity like we had yesterday. brendan: drew matus, what about in corporate debt? this is something broker-dealers have been sounding the alarm on for some time. liquidity is a lot lower. i think we have seen the post retail sales report last october, it did not look good. the fed has been trying to figure out why that has been happening. i do not think they have come up with an answer. it probably makes them nervous, but it is not going to be the decisive factor. tom: i have never seen navelgazing like this before. with the two year yesterday, we go up 2.80, we get back to where

we were in 2011, 2012. they care belief that what the markets think? is a convenient excuse for why it might not go tomorrow. it is a close call. i think the economic conditions have been met. we are through from where the fed thought we would be, we are below the natural rate. inflation is about where we thought it would be year-end. it is just not really low. tom: i want you to frame, drew matus, and optimistic house versus what london heard from jane had to us -- from jan hot cs. betweenthe distinction an optimistic house and a more

cautious house as we go to this usting? drew: some of believe the economy will return to working the way it used to. that is not to say that the longer-term rate and the economy makes sense the way it used to, but once things begin to work again, the economy will find its own footing. theink this boils down to fact that at ubs we think zero rates are part of the problem right now. if you wonder why the economy cannot get off this rut that we rut, it is 2.5%, 3% because we are at zero. brendan: we have been talking all morning about the perdition the terminal makes based on fed , and right now they are at 32%. what do you think of the argument that larry summers made yesterday, which is that the fed has moved in the past when the confidence is only at 70%. drew: i have not heard any fed member tell me what the

probability is as we go through tomorrow. are going to get to a 37.5% or 37 .5-basis point hit rate on the target. 32.5if you only get the between reserves and where you can get the rate up to? there is the reason that -- there is a reason the fed is moving in a range. they do not think they can hold the target otherwise. if they could do a point estimate, they would. vonnie: what about oil companies that have been issuing a lot of debt, like glenn core, for example? do youre you floating or go into a fixed rate product? there are all these kinds of variables. i think the u.s. economy is probably less exposed to a rate hike now than it ever has been in its history, in terms of negative versus positive changes.

what is the bid right now? how in the game are people, or is everybody off on the sidelines? julian: people are very hedged. people are skeptical. to the upside, absolutely. there is a lot of psychological damage that has been done over the last month. there is really a bolt from the blue. what do you list to make the market move higher? julian: it will be a clue as to how the next six months are going to proceed. tom: julian emanuel and drew matus with us. brendan: we know that tim cook's apple has a lot of cash. what about the rest of the s&p 500? that is the subject of today's "single best chart." good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." futures negative. qualityw, a higher single best chart. it is beer free. here is brendan greeley. brendan: we do not know what will happen after 2:00 tomorrow,

but we know that it helps to prepare war chests. we just lifted this straight from julian emanuel at ubs. this is cash balance as a percent of assets. you have the s&p 500 baseline in yellow at the bottom. financials are higher in blue text. julian, i read your note. rule of 15.ugh the julian: the fed is changing the way investors are going to think about cash on balance sheets. if you think about it, since the start of the financial crisis, at a 0% interest rate, cash has had no value. in a more volatile environment, cash also has value. for us, we like those sectors, as you mentioned -- tech, health care, financials -- that have lots of cash, in this case 15% as a percentage of assets. of cash,so the old use

putting it in a coffee can as a rainy day fund? julian: it is we are seeing if this morning. we are seeing m&a announced in a volatile environment because companies can afford to be opportunistic. vonnie: are companies also waiting to see the whites of the eyes of inflation before investing? julian: to a certain extent, they are. drew and i have talked about this a lot. and easier decision -- could have been buyback and m&a as a use of cash? as interest rates rise, we expect that psychology to turn as well. brendan: the outlier is really tech stocks. it makes me wonder -- way above 20% there, the white at the top -- that is not prudent use of a rainy day fund. that is not quite sure where to invest it and hold it abroad, right? julian: exactly. that is lots and lots of offshore cash, which is why the m&a phenomenon has not in just a

u.s. phenomenon. we expect more" or m&a as we look ahead to 2016. vonnie: what were the companies below the white line? julian: the bevy of consumer type companies, people whose businesses are less volatile, so they can use cash differently. tom: drew matus, in economic textbooks, what julian's talk me about is chapter 24, which nobody gets too. -- what julian is talking about is chapter 24, which nobody gets too. all the gains are going to corporations building cash -- not apple, but many other corporations -- and yet the wage gains are not there. are we so there as we go into this fed meeting? drew: one sign is that productivity is moving up. over time, that will be to what we call good wage gains. people are being rewarded for

using better workers, and that is usually good for consumers and for longer-term growth prospects. the other factor is that we have not had a tight labor market for quite some time. we forget how rapidly the unemployment rate dropped over the last six months. we are just read aging -- reaching where the fed was. "slack" -- was that invoke 12 months ago? zero measuring it in a rate environments -- people want to do buybacks and dividends and stuff like that because that is how you invest in a low rate environment. you try to shorten your duration. you lessen your duration when there is growth prospect brendan: when rates are moving higher. you say that productivity moves up -- what about a physical reverent hesitation of what happens with productivity and wages?

i could not call the chart up fast enough. this is wages remaining flat. how can we say in the future that this relationship will start moving together again? about au are talking very long-term relationship versus what tends to be something that moves over a shorter period of time. i have been calling the great financial crisis the dummy variable environment. if you build a model of the u.s. economy that includes the great financial crisis, you are going to be wrong. vonnie: the dummy variable environment? drew: instead, we will say that we cannot get the variable to work unless we put in a dummy variable. brendan: everything is just going to read -- here is what is --pening -- question mark and here it is happening again. --nie: a change of scenery "top photos."

gopro, after two years of being launched, a high-altitude weather balloon. it was launched near the grand canyon in 2013 and captured amazing footage, but it was lost after the launch. in arizona hiker found it. -- in arizona hiker found it. ablean: nobody used to be to do this part we are jaded by this because we have seen a lot of this since then, but that was just two years ago. nasa in 1974 could do the same thing. it will have to update. highertwo top photo -- wire artist kane peterson walked a tightrope at the eureka sky deck in melbourne. walk evert tightrope

a in the southern hemisphere. he walked between the two twin towers. the twin towers were still above us. can i say that those photos are so filtered that i almost say to myself psychologically, can you trust them? i am sure they are real, but we are so used to filtered fuld -- to filtered photos. brendan: i have a hard time made a hard time imagining how it will measure up to the documentary about that walk, which is extraordinary. vonnie: number one top photo, yesterday, the 75th anniversary of the battle of britain. there was a flyby with hurricane and spitfire planes. leader jeremy corbyn -- new labor leader jeremy corbyn was criticized for not using the

national anthem during the service and is accused of stealing food from veterans. he met with prime minister david cameron during the ceremony. and prince harry celebrated his 31st birthday at the battle of written flyby. -- at the battle of britain flyby. he gave up his seat to a veteran who took part in it. tom: tonight at 6:00 p.m., "surveillance prime time," myself and michael mckee with ray dalio. will speak of the debt of the world, and also ray dalio as well on the risk parity controversy. of global wall street. stay with us. with drew matus and julian emanuel, it is "bloomberg surveillance."

tom: good morning, everyone. foreign-exchange will move the deepest market of the global system. off the fed meeting at 2:00 p.m. a modestly weaker yen. the renminbi quiet, the

brazilian real cannot figure out what to do. but clearly a week or track -- the clearly a weaker track. here is vonnie quinn. vonnie: thousands of migrants are stranded on the serbian side of the border with hungary. the refugees are camping on a main highway that hungary closed yesterday. some are trying to sneak through the new razor wire fence, but those caught will be prosecuted. as are aimed at stopping migrants. target wants employees to shape up. adding activity trackers to improve worker fitness and reduce health care costs. tom: very good. the great what if at this critical juncture, the fed chairman is always confronted with this policy versus care for the global economy. intrudes.ew mediocre

part of the diversions between a glass half-full america and a more than parched emerging markets. what will be the market reaction at 12: 01 tomorrow? stan fischer plays an important part. you said earlier -- how does vice chairman fisher fit in the calculus that janet yellen faces? interesting thing is that janet yellen and stan fischer are not exactly in the same camp as to where the fed should moves. think stanople fischer is the one person who cares more about the global economy, but then when everyone was saying this will keep the fed from moving, the global economy, he said not so fast. he is a more complex individual than people give him credit for. he not so reflexive in thinking the rest of the world is moving,

so we have to. tom: he has been delivered. -- he has been delivered brazil ,arnage, quadratic movements and australian government shift as well. if you see the news flow -- drew: for every central bank that does not want us to move, there is a central bank that wants us to move. i do not know how they way the opposing central banks globally on watch it happen. an environment that is growing as fast as we are, the unemployment as low as it is, the interest rate that is offside on a global basis. brendan: what if we hold a rate hike and nobody comes? anybody who is holding dollar denominated debt of brazilian debt right now knows that it is then october. if not october, then december. why would this make a difference? drew: the argument for not going is the same argument for not

going three months from now. it is going to be the same argument for not going a year from now if we are still sitting at zero. there is always someone you are going to disrupt and someone you are going to upset. vonnie: not necessarily. we just had a couple weeks of heavy turmoil. drew: but what caused the heavy turmoil? you could argue it is because we are approaching a fed decision. tom: why can't they go one and done. buiter is adamant we should not do that. emanuel, that we should do this because it is what drew matus says come and we are going to sit here. it just does not work. it is not the kind of confidence inspiring type of activity, and it sends the wrong message, which clearly, given the economic data, is not the actual message in the u.s. tom: we could go on for another

hour. julian emanuel, thank you so much. drew, as always, thank you. we have much more for you in the next hour as we look to the fed meeting tomorrow. stay with us. "bloomberg surveillance ♪." .

is upon us,er 17

the fed countdown begins. we will not put up a countdown clock we will look at the ramifications of janet yellen's actions and particular in action. should brazil, china, and indonesia matter to chair yellen. there is a debate, jeb must deliver as jake cap or contains mr. trump. this is "bloomberg surveillance." live from new york. exceptional busy. joining me is brendan greeley and bonnie she does not drink guinness quinn. a huge potential accommodation of two successful companies. brendan: margins are decreases on the basic pills they sell. what we should be waiting for is regulatory approvals in several different countries. vonnie: several different continents. tom: we do not have a working

number on a potential price. this is way out past what mr. buffett did for the brazilians and heinz ketchup. vonnie: we could be talking about a $100 billion deal. tom: let's get to top headlines. vonnie: policymakers begin their beating today, tomorrow afternoon they will announce whether interest rates will be at raised. e.g. because that goldman sachs tells us he would not be surprised if the fed does not take action. financial conditions intensify. case, it will be a reason to push it to 2016, not my baseline but not a crazy outlier scenario. vonnie: more than half of the economist project the fed will leave rates unchanged. the republican candidates get ready to debate tonight, a survey shows the tide turning toward donald trump. a cbs poll shows 39% of

republican voters think he is the best chance to win the white house. up 13% in a month. none of the other 15 candidates is close. the top 11 candidates will debate tonight on cnn, viewers will see two changes on the first debate, carly fiorina is taking part and the candidates will be allowed to challenge one another directly instead of just answering questions. standard & poor's has cut japan's credit rating, they were , s&prom aa minus to a plus says the strategy to revise the economy probably will not change things for two to three years. a agreementr gets with united auto workers, they celebrated last night but revealed little about terms, they said it will eventually end the wage structure. the union will seek similar agreements with ford and general motors. more job cuts at hewlett-packard

as the company is ready to split into, it says it will eliminate 33,000 jobs and become to businesses in november. one dealing and high-end technology and the other in arsenal computers and printers. -- personal computers and printers. tom: is that additional layoffs and i best teachers, sales of businesses from what we have seen previously. only one number matters. a two-year yield, the 10 year 2.28% and the two-year a .8067%, extra ordinary to signal the meeting. it is the most important fed meeting cents time began. with the senior vice president of the schwab center and carl riccadonna is with us. we agree in the grand scheme of

things, maybe a decision does not matter but it does, why are we so wound up about this meeting versus a council of people like you who say look at the further trajectory? carl: because it can be significant implications if they make a policy mistake, arguably the most important central bank in the world and if they stumble it has global implications. tom: how do they stumble? tol: if they miscommunicated the market than the market expects a more aggressive send than what janet yellen has planned here that has applications into financial conditions and into the currency markets. this is the key thing to watch, in march when people were expecting the fed to go, we saw a strong dollar and janet yellen blinked and backed away. we are seeing the same thing if not more so in the current environment and she will save the dollar and other financial

instruments are tightening financial conditions, therefore, we do not need to go quite yet, the economy is doing well but we have a lot of uncertain -- increased uncertainty given the events in china and the turmoil over the past few weeks and for that reason let's hold off. brendan: you say people like carl riccadonna are relaxed but you have been having your own second thoughts. last december, we adopted the view that the fed would go in september, that was the lunatic fringe because most folks were expecting a march or june rate increase, so we thought we were still on target for september until the china evaluation which boiled financial markets. we're highlighting risks that if this does not settle down the fed will air on the side of caution and it has not settled down and for that reason we think she will hold off until october assuming everything is ok.

if we see more disruption and pullback in things like business surveys and consumer sentiment, she will wait longer. tom: where is the normal two year yield? well over 1%, right? 1.5%, youg inflation, would have a two-year yield a little above that. tom: why aren't we there? >> we have gotten close. maybe 30 basis points not that long ago now left to 80 very quickly i think the market is moving in the direction, discounting tighter fed policy, we are just not there yet, we have had negative real rates for a long time so the market is starting to move. tom: is the great distortion over with this meeting? carl: not yet and what i am concerned about, we had the cpi out today and there is a real risk that core inflation could

backfire over the next couple of months given the currency market developments and a decline in energy prices. we saw it in the courre pc. i am not sure if it is today but in the next few months it is coming as the currency impacts trickled to consumer shells. -- shells. the fed has already resolved itself. they have seen enough evidence of pullback, consumer evidence, the philly fed manufacturing survey tomorrow, indications of sentiment in the economy, not the best at the only one they have. tom: kathy, are you on the same ?age with liz and saunders we were on the september camp for a long time and after the situation developed we said it is less likely that the fed will go. i would not take it off the

table. tom: very good. there is history being made, particularly in the united kingdom, to the house of commons, mr. corbyn speaks, let's listen. >> more than 1000 question on thisredits, all says heartfelt question, why is the government taking tax credits away from families? we need this money to survive so our children and do not suffer. paying rent and tax on low income does not leave you much. tax credits play a vital role and more is needed to stop us having to become reliant on food banks to survive. what we need is a country where work generally pays and that is our what our proposals do reform welfare, but at the same time bring in a national living wage which will mean anyone on

the lowest rate of pay will get a 20 pound a week pay raise next year. that is why the figures show a family -- i thought this was the new question time. gordon, cameron and mr. it, are -- corbyn going at you wish this would happen in washington. brendan: we went into an entity part of that debate, pointing out what cameron has done, corbyn is hoping to drag the country left, it is already happened, david cameron, his answer was what do we do about tax credits for low-income families, already instituting a living wage is his answer. he is looking -- stepping into it and saying here we are tom:. this moment comes in the u.k. after a horrific day for mr. gorman. every -- mr. corbyn. vonnie: they said that he was

stealing veterans food. at the anniversary that was meant for other people. tom: let's listen again. >> been accommodated by 26% of their losses by the so-called national living wage that the government has introduced. claire a question from who says, how is changing the thresholds to entitlement for tax credits going to help hard-working people or families? history is being made, stay with us, "bloomberg surveillance." ♪

♪ tom: it has been an extra ordinary day, starting with the realization that carl riccadonna thinks blue moon is a craft beer. help me, brendan. he does not realize it is made by who? brendan: -- tom: what ever it is. brendan: as soon as you like a craft beer somebody will buy it. best this from my hometown in st. mary's, pennsylvania. tom: i thought you were going to

say rolling rock. matthew campbell, the elite snob, has never had a rolling rock. this is a lot of fun but serious , billions and billions of dollars. how do noncompetitive is the beer business if there are two major players, why cannot everybody be happy? >> i have had a rolling rock on more than one occasion. very complex deal to get done, regulators will be crawling all over this one. the beer business is very consolidated, this would make it much more consolidated, uniting the two real giants. this is christmas come early if you are in the antitrust is this because a big fat target. brendan: when you look at the size of these companies, their massive portfolios in the aneloping world, ab inbev of

brazil, kingfisher in india, what are the growth prospects? matt: that is where all the action is, sab miller, sab stands for south african breweries, has had a strong business in south africa, in the u.s. and europe there is more wine and craft beer which these guys do not control and a lot of people are dragging less. the growth is in places like sub-saharan africa, in asia, latin america, that is what these deals are about, global, global scale. brendan: there has been a dance over the large breweries looking at each other, do we expect distillers to get in on this? question. is a big diageo could get involved in this realignment of the drinks industry, so far we have not seen evidence. if we do have a large-scale consolidation, it is a positive

-- it is possible. tom: thank you so much, on this transaction that will have scrutiny. come up tonight, you can buy rolling rock, ray dalio will join us at 6:00 p.m., global wall street anticipates an important conversation with ray dalio about risk parity trading at the on the greater economy and the depth of our world. ♪

tom: good morning. carl riccadonna moving the market, the two-year yield goes from .80 28.81 for a higher yield tear. we begin with top headlines. vonnie: with the clock ticking toward a government shutdown, president obama will join the budget debate today, calling for ending a tax loophole that benefits hedge fund managers.

federal agencies run out of money two weeks from today, agreement on a new budget is snagged on many issues including defunding planned parenthood. the house has only five workdays left in washington after today is month. in floodingll is 16 on the utah-arizona border, one person is still missing. 12 died high water engulfed two vans, 10 of the victims were children. they lived in a community where a polygamist sect is based, the same flood killed four others in a nearby park. target is offering its workers a high-tech way to get in shape, their employees can get fitbit activity trackers, the goal is to improve workers fitness and lower health care costs. those are the top headlines. tom: we are considering putting fitbit's on everyone. brendan: we do not move, we sit here. when the cameras turn off, we stay here at our terminals.

unfitb could call them its. brendan: my wellness program is fewer hours. tonight, on stage at the reagan library, phil mattingly will not be on stage. he is out in front of the reagan library, summoning the ghost of ronald reagan to tell them what will happen on stage tonight when 10 plus one republicans explain why they should be president, can anything happen that will unseat the dynamic of donald trump and ben carson? tonight is on ben carson, donald trump is still the leader by far but ben carson has separated himself from the next tier of candidates. it is a two-person race based on polling.

donald trump is still solid. ben carson at 23%, last month he was at 6%. that is a huge gain over a month. when you get in carson in a situation like this where he is off his tongue speech he is away from his traditional audience -- stop speech and away from his traditional audience, this could shift the dynamic in his favor if he is competent and presidential, has leadership skills, but also in a bad way for him if he cannot handle tough questions. brendan: ben carson in the last debate, it sounded like a lot of talk whistles for the republican right, talked about solomon ski, nothing that comes up in a national conversation, do we understand him? spent twoy enough, i and a half weeks with ben carson before he launched in november, i spent time with him over the last couple of weeks. he is a fascinating guy and what

people connected is is bio, a presidential medal of freedom winner, a neurosurgeon, but he connects on a basic level, particularly with evangelicals. brendan: phil mattingly up at 3:00 a.m., he needs to work fewer hours. we will go to washington where the parties looking at donald trump and wondering what happened. a republican strategist joins us. and what bar on capitol hill rights now our republican party members meeting to try and figure out how to manage the trunk phenomenon -- trump phenomenon? >> no one expected him to gain in the polls as fast as he has and it is a sign americans are fed up, they are going for outsiders on the left and right, donald trump and ben carson leading the polls and bernie sanders on the left doing well. it is clear that this is an outside washington game and it will be up to the candidates to

try to punch these other candidates beyond donald trump and ben carson, to punch through and try to connect with voters and say, i am outside of washington also, i do not like the establishment, i am trying to change things in washington. brendan: you have been talking about positioning, cultural appeal, let's talk about policy, how do guys like you handle the fact that donald trump has been widely on republican on a couple of policy issues, particularly taxes? >> he was a hillary clinton supporter in 2008, policy wise he supported a lot of left-wing things. that blows my mind that he can capture the majority of -- or the lead of republican support. i think americans like reality tv and donald trump has taken over the debates as a reality tv star. a guy who has millions of viewers glued to everything he

does. last night he is on giving a speech on a-- stump battleship and has week him.indale introducing th jeb bush and scott walker have to figure out a way to deal with him and to score points to show policythey are not just but they can humanize themselves and connect, get outside the talking points, yet appeal to voters. vonnie: what will have to happen for one of them to rediscover themselves completely and ruin their chances of getting more donors? >> for somebody like scott walker or chris christie, they have to get aggressive. they have to get aggressive and take on donald trump, and showcase some policies they are for. you have jeb bush unveiling cyber security -- brendan: i have to jump in here

like a debate moderator. we have to go to break. don't miss a one-hour special with all due respect on the debate tonight at the reagan library. ♪

tom: good morning, everyone and thank you for being with us. today coverage. to our top headlines. vonnie: a day away from finding out if interest rates will rise for the first time in nine years, the federal reserve policymakers start two days of meetings today.

tomorrow afternoon they will announce their decision on rates. we asked the chief economist at goldman sachs if the government is ready for higher rates. why they aret for not going to go because i think there would be concerned that the market is not prepared. we have already had a lot of volatility. there is a risk of an adverse market reaction. vonnie: more than half if economist polled say the fed will stand pat. a new survey shows the tide turning donald trump's way. as the debate is tonight. a cbs new york times poll shows 30% of republican voters think donald trump is the best chance for winning the white house. he is searching even know his immigration stance is turning off latinos. speaking at a hispanic heritage event, joe biden says that message will fail. vice presidenthe is biden: thatf

you are hearing on the other message is about a sick . this message has been tried on america many times. we always, always, always, always overcome it. vonnie: the top 11 republicans will debate tonight on cnn from the reagan library in california. we are following a developing story, a huge deal brewing in the beer business, it would bring together the world's two biggest brewers, anheuser-busch sabinbev has approached miller, and it would control half of the industry profits. amazon founder is ready to launch a new business, literally, hysteric -- startup blue origin will invest $200 million to watch rockets from cape canaveral in florida. he expects the lodges to start later this decade. they say the investment will create 330 jobs.

tom: does every rich guy want to start a rocket company? brendan: that unveiling was amazing, he was like, "behold, i am a millionaire, behold my mighty machine." tom: breaking news. federal express missing slightly . they cut their forecast. an important barometer. carl riccadonna, a real indicator on american spirit, is the recent data dampening the optimism? carl: if we look at specifically a financial conditions, that is what is giving the fed pause, the deterioration in late august, financial conditions have tightened to the point where they were in each episode prior to the last two recessions. this is troubling. since then, financial conditions have eased off but the fed is

waiting a little bit longer and that means they eases before they-, the ease by removing future rate increases, 25 basis points across the board, out of this year, next year and the year after. tom: we will show the reality for janet yellen. this is to a 47 measurements of inflations. the red's core cpi under 2%. the cleveland consumer price index inflation which is always elevated over the core number. kathy jones with us, which inflation index do you use and which one should janet yellen be aware of? .athy: the fed uses the pce becausehe cleveland they do not throw things out, they throw things -- they throw at the outliner and it is a good

reading. carl made a good point about falling import prices, they have been following -- falling at a double-digit pace, not just energy. that may work its way into this number. tom: this brings up the international ramification, challenges drives the relation and disinflation towards us. where is inflation when you see how brazil or china drive lower inflation towards us? carl: with the chinese slowdown we have a drop in commodity prices and energy prices falling. they have an impact on the core. import prices are falling at the fastest pace since the end of the recession. tom: does that give janet yellen cover? carl: yes, it is hard to justify tightening policy when core inflation -- the vector is pointing down. tom: let me give you a data check, equities, bonds, currencies, commodities, a 10

year yield 2.28% and oil elevated, elevated yesterday over inventory dynamics in the united states. futures going nowhere, negative two. is "bloomberg surveillance." vonnie: the new leader of the labour party has been facing david cameron in parliament for the first time. pulse joins ushe from london. what did we learn from whether jeremy corbyn will be more moderate than his reputation out of these questions? foreople were hoping whether he was more moderate with his left, hard-left ideas and whether he would have more ooomph when questioning the trimester.

plan, het go to decided to ask the people to put questions to the prime ministers and said of himself. tom: brendan greeley and i noticed that while prime minister cameron looks like a banker, like somebody from wasle row, and mr. corbyn professorial. we do not look like this on the house of commons floor? brendan: you generally do not look like that when you are asking questions in question time. an interesting part of the debate earlier, jeremy corbyn said how can you possibly remove tax credits for poor families? the prime minister said, we will introduce a living wage, so i do not understand what you are asking, i thought this was question time, our we are ready watching david camera take the center that has been abandoned by labor?

>> i think we are, david cameron was aggressive over the week and as soon as we found that jeremy corbyn was the new labor leader, he tweeted out that this is a threat to national security. david cameron may relish this role but the problem is this country needs an opposition, a strong opposition because we are facing a eu referendum, the u.k. will vote on whether to stay within the eu or not, if you do not have a strong opposition, this is what the questions are so important. you risk david cameron, being may be too bold and not taking things seriously enough and a serious risk that the citizens will eventually decide to leave the eu, especially if jeremy corbyn is not only lukewarm to europe but will actually vote for a break. brendan: tom wants to know, who is david cameron's taylor? >> i have no idea but i will look it up, we can ask him. brendan: that is what question time is for.

>> jeremy corbyn missed an opportunity to ask where he got his suits. tom: we say good morning to mohamed el-erian watching in his world. he likes the coverage we are doing on the united kingdom. it is a pageantry in the united kingdom, but i would suggest that governor carney is way out front of janet yellen the other , saying there is no inflation, is that what we will see tomorrow at 2:00 p.m.? carl: we have to focus on the inflation message on it if we look back to the meeting in july the fed said we are where we need to be on the labor front. is causingtion that consternation among policy members, they thought we were moving in the right direction but did not have confidence and i did not see anything that happened between july and now that will increase confidence. tom: kathy, do you see new any indication that the fed will get out in front of what mr. lacher and others worry about?

but i thinknot, there is a possibility day hike rates and offer a dovish message, try to have it both ways, 25 basis points that lower the trajectory. that would not be the worst outcome, they need to counter mound that type with a forward easing. we are talking about communications. how do you grade communications from the fed? -.thy: i give them a b or b there are a lot of mixed messages because they talk all the time and i think the market it's unclear. tom: our clarity is the two-year yield speaking yesterday, new highs in recent years on the two-year yield, that brings us to 2:00 p.m. tomorrow, we will have a discussion of a fed attempting to decide, kathy

michael mckee with a wonderful set of guest, alan krueger set to join us, the fed decides tomorrow at 2:00 p.m. stay with us. ♪

of you thisome all

morning on economics, finance, investment and international relations, a busy bloomberg surveillance. there are equities moving. here is the vonnie quinn. you have to move your feet. brendan: are we getting this, of tom exercising? do you want down lexington avenue with walking sticks? tom: you should see me. brendan: tom does a yoga called downward facing martini. wille: fitbit, target offer fitbit activity trackers to 335,000 u.s. employees. he deal is one of fitbit's largest corporate account and is affecting the stocks part of it -- positively. tom: nobody at this desk is a fitbit. kathy: i got one for christmas

but i have yet to activate it. brendan: it is an aspirational purchase, not a functional purchase. i cannot act -- considered corporate accounts, in your book can be introduced at a curriculum at a college you sell it forever. vonnie: what stops you from putting it on your dog? bring down premiums for employers, the idea is -- tom: when i buy you the hermes watch or the apple watch, the brown one am a will will use the apple watch as your fitbit surrogate? vonnie: i use whatever technology on top of that. brendan: i agree, what is to prevent, already there has to be a cottage industry, somebody building this, a fitbit shaker you put on your desk. make it look like it is going for a walk. down afterex shares

reporting earnings that trailed under the forecast by $.20. analysts were looking for fedex to do that, shares down. tom: phenomenal gdp, carl riccadonna, where is our analysts spirit -- animal spirit? carl: it has been pulling back, can's -- consumer sentiment that weight low. dylan bauder saying his main scenario for 2016 is fedex is global, that brings in the global animal spirit. carl: i do not think the u.s. is flowing to the point where we could see a global recession, so the odds favor global growth but slower global growth as china grapples with this load of. vonnie: -- slow down. vonnie: molson coors shares surging on reports ab inbev has miller.ffer to sab

sending heineken of an course up -- coors up. because theyoup own a little bit of sab miller. why are you smiling? -- coming upr later, vincent reinhart on his federal reserve, stay with us. ♪

tom: good morning. let's get to our top headlines. vonnie: more than 800 california homes in ashes, destroyed by wildfires, they have forced at least 24,000 people from their homes, the biggest blaze 100 miles north of san francisco is 30% contained. firefighters could get help as rain is in the forecast. thousands of migrants stranded on the serbian side of the border with hungary, the refugees are camping on a main highway, hungary closed yesterday. some are snaking through the fence but officials say those caught will be prosecuted under new laws aimed at stopping

migrants. sotheby's says a painting auction in november may fetch up to $16 million. we work to fix boots on a gray itface, sotheby's is selling for a los angeles collectors. tom: this is an important conversation as we look to the fed. a discussion on monetary policy is a little -- of little value to retirees living within the great distortion, they want to clip coupons, that is a phrase from another time am a except there is nothing to clip, yields and real yields, carl riccadonna is with bloomberg intelligence. we are honored to bring you kathy jones, of charles schwab. focusing on bonds. this chart on bloomberg radio plus of the bet on disinflation out five years and five years out from that.

two bill gross's point, retirees do not get a break for five or 10 years, do you agree? i talked to tough, retirees every day and trying to find income without taking a tremendous amount of risk, either duration risk or credit risk, top. tom: has that led to a bubble which janet yellen has to manage tomorrow? kathy: it has led to a migration out of riskier assets -- bonds into riskier assets like high yields. they do not give the diversification. it is a risk. one we have been highlighting for quite some time. brendan: you have cautioned against getting too soon into high-yield debt or emerging-market debt, i have seen articles about people deciding to go back into equities in brazil. what will have to happen?

what were you looking for to get back into emerging-market debt? kathy: there is a lot that has to happen. we have to see the currency stabilize. my group covers currencies and we are nowhere close to having that settle down. tom: you mean the u.s. dollar stabilize? versus thecially brazilian reality, they are under pressure and deteriorating fundamentals. brendan: brazil is its own special problem. kathy: you look at emerging markets, even mexico, which is more stable, the concerns he is under a lot of pressure, it is not 1997, but the mechanism for which -- by which these economies adjust is the currency market. --ndan: tom: within this, switching

gears from retirees to this currency question, where is the dollar for janet yellen, is it the strong dollar or a dollar that has recovered? carl: an extremely strong dollar, if we look at the index relevant to the macroeconomy -- and decade -- 10 year high that has real implications, that is why the manufacturing sector year to date has grown 1/10 of 1%. tom: two ken rogoff's statement, how can we raise rates into that? carl: they cannot. the move in the dollar is giving the fed pause and rightfully so, people look at this as an export story, it is not, domestic industry has been flooded i keep imports and u.s. workers not -- complaining about not getting raises, 16% more expensive than one year ago.

tom: 2:00 p.m. tomorrow, set up for the confused, while carl riccadonna says they cannot in so many others are adding that they must. carl: there is no inflation so the fed does not have the urgency to go, they could tiptoe away from a crisis policy in the future but you do not do that with heightened uncertainty. vonnie: why does there need to be urgency? carl: there is no urgency. they want to get off of the zero balance, that was a goal for this year. vonnie: the fed has excuses to not go? carl: exactly, there is uncertainty, inflation is low and potentially falling further and that is a big concern for policymakers, they do not want to grade deflation to get off the zero balance. brendan: i am going to indulge in an analysis of what you're saying, you keep saying janet yellen has cover, and that says

to meet you believe on some level she has always wanted to not hike, always wanted to stay where she is for a wild and is looking for some justification. holocene is a dovish maker, one of the strongest forecasting track records at the fed, she probably wants to move away from a crisis policy of zero but does not want to do it foolishly or aggressively. kathy: i agree. do the members of the fed believe the old models work or not? the ones that want to hike are the ones that say unemployment is so low we will see wage gains, we have been saying that for years and it has not happened. there are members of -- who believe that model will work. carl: they said that is 6.5% employment, 6% of climate -- unemployment. tom: if you're a you want to minimize your maximum worst outcome. what janetfrom

yellen does want to do but what does she not want to do? july in the minutes of the meeting, the staff advised that the balance of risk was tilted toward the downside because the fed would have limited options to upset a weaker economy. that argues wait longer and let the economy overheat. it is not a balance risk. we are not running hot. brendan: we should be. vonnie: what is the first thing you tell a client that cause you? kathy: if they raise rates you by the long and. -- end. tom: how do you respond to gary shilling's call for lower yields, substantially lower oil prices and a general dampening of economic output, is he onto something as an outlier? the economy is struggling

at a slow pace and that means there is not a great need to restrict monetary policy. tom: fascinating. carl: financial conditions have already tightened policy by 100 basis points. they are doing lifting for the fed. tom: absolutely great. brendan: my agenda is, it is hard to think there could be anything else, watching the fed we do not know what will happen, we are waiting for tomorrow's announcement and i will be sitting here at the terminal watching fed fund futures and how they are interpreted, right now -- we do not have them up. data, thee cpi inflation data out at a: 30, -- we should see weakening in terms of ablation. controversy today,

michael mckee and me tonight at 6:00 p.m., ray dalio and michael mckee, we was big of debt and economic. michael mckee, as you and i get more -- get ready for more surveillance, risk parity written up in the wall street journal and the ft. >> it is his concept of how you invest, managing to lay off the risk of one asset class against the other, did not work in the last couple of months and has raised controversy because some people say the volatility it caused led to a lot of the volatility in the markets. you probably woke up to read ray dalio's defenses and we will talk to him about that. he is one of the few people i have talked to this week who is not concerned about the fed because he has his own model, we will talk to him about that. this.e will continue with thank you carl and kathy for

coming in. with important perspectives on retirees. stay with us. this morning and our coverage tomorrow afternoon at 2:00 p.m. on the fed. stay with us. ♪

michael: good morning. it is 8:00 on wall street and we are on full fed watch. surveying the landscape ahead today. i'm michael mckee along with tom keene. global markets this morning are risked on while investors in america are sort of curled up under the bed right now. rallyer dramatic late pushes the shanghai composite 5% today. then s&p, after the markets notch. cut japan a no real reaction in the end. it brings the s&p into line. europe follows asia up date at 1.5%.oxx 600, higher by the dax is up .7%. is 1% higher. the first prime mr.'s question,

featuring a new labor leader, that should be interesting. u.s. futures, on the other hand, nothing today. on said, futures are unchanged. six points higher, although at thanpoint, that is less .1%. the nasdaq is three points higher. yesterday, a big move in, bond yields sustain with a 10 year note yield at 2.8%. the five-year is at 1.6 to the two-year is trading at 80 basis points, close to four year or five-year highs. what is that telling us? the two-day meeting does get with the latest forecasts. an updated plot with the decision. have full coverage and everything you need to know here on bloomberg radio and tv. republicans hold their second debate tonight.

there are two debates. the theme of the night no doubt will be everything that is wrong with the donald. and two big corporate deals today, the first between fiat chrysler and autoworkers. no details until members see and vote on it. addresses thet it rising cost of health care and does away with a weight structure, which could be important down the line. it will make an offer for s&p miller, which will bring the makers,two biggest beer controlling about half of the broom maker passes profit. shares of both companies are soaring. up as much as 23%. tom keene, you have cracked one open to celebrate? i think they will be the only beer company left in new york. [laughter] i will sit down here while you

keep going. michael: we will talk to matt campbell chief business correspondent for bloomberg news joining us from london. the first thing that comes to mind when you see this is, how in the world are regulators going to let this happen? matt: this will present a tough target. it is a consumer brand, something there will be a big spotlight on and whenever you have two companies in any industry that are the largest in that sector combining, it is a big antitrust problem in a consolidated industry that gets a lot of attention, it is an even bigger problem. why target such a big acquisition? yorkas got his upstate new still for sale. matt: this is about ansolidating in what is not fast-growing industry. people are drinking less and

when they are, they drink more wine. independent craft beers, and there has been an absolute explosion in the last few years. being bigger, and being able to survive in this environment. both of these companies were created by combining a lot of different brewers. do they find that helps or do people say, it is all the same beer? matt: that is a good question. some are voting with their feet going with more independent beers, which are made locally. some then get up by these big guys. there is a lot of gross to be found in sub-saharan africa, asia, and that is what this is all about, having a world spanning scale lsu to take advantage of the growth. the growth is not happening in places like north america. ,ichael: the deal was confirmed

but no details of the offer and as far as we know, they have not yet made a formal offer. the price is getting driven up. >> that is correct. what happens in the u.k. something is out there, so to speak, you have 28 days to make a formal offer. that clock has not started. as you can imagine, they are working very hard on putting together an offer with antitrust elements, equity cash, that they can take. campbell, thank you for joining us this morning from london. tom, you made an offer not long about eight to $10 for a sixpack. was that accepted? it was not.

this was fascinating to me because so often we talk about giant mergers of dinosaurs. these are decidedly not dinosaurs. they make a lot of money for shareholders and have great dividend growth and great free cash flow. this is a really interesting combination with slower global gdp. structural changes within the industry. it is not just sab. up 13% on the day. tom: we say good morning as we begin two days of fun coverage. michael mckee is the only one i know who can get excited about charts coming. we will do that at 2:00 p.m. tomorrow. rao to changes can impact your business. see how the experts can help you navigate these complexities. find out more online.

we thank all of you for joining us on bloomberg television and bloomberg radio. we are working with charles. we are thrilled that you are here. it is perfect timing. is there enough of a global mess to imply future stronger dollar, which gives janet yellen cover to delay? is that the deciding point for chair yellen tomorrow at 2:00 p.m. >> the fed has not been in the driving seat for a long time. you are right that the weak global growth almost anywhere outside the u.s. economy does the u.s. dollars going further and further up. the future of fed interest rates would be determined by that

causinghan fed action inflows into the u.s. economy and affecting the dollar. michael: if the fed is not in the drivers seat, who is? ?he market if that is the case, what do you have a central bank for? diana: we live in a global world that is fairly integrated. desire to time, the save excessively in the big , china, japan, and northern europe, has been the pushing down globally. in some ways even before the financial crisis in the u.s., to refuse all this money flooding in. tom: mike, i want to go to you on this. incrediblys up an important point. a new global and financial and

monetary world here they are not working in a vacuum like arthur burns. michael: a lot of people have made that point in arguing the fed should be on hold their it saying you will mess up the rest of world if you raise interest rates. harded has been pushing back on that saying the mandate is to make monetary policy for the united states. so yes, they have a global impact. but can the rest of the world fairly ask them to put aside the best interest of the united states? diana: no, i was making a different point. the fed should be asking, related to the domestic economy acting entirely just looking at where the domestic economy in the u.s. -- it should have raised interest rates by now. developments

elsewhere in the world are going to drive its hand and in fact, to bed decision is going much less important for the u.s. economy for the rest of the world than other fundamental changes, in particular in china and japan. or we are thrilled to have you here as we go to our coverage. 2:00 p.m. tomorrow. futures are negative. without question, the number on the screen, the two year yield, .8027 with the surge yesterday. look backield as we any number of years. ♪

tom: good morning, everyone. welcome back. julie hyman joins us for a chat about oil. julie: we're looking at oil prices per oils are on the rise for a second day after an onyx acted drawdown and an increase in u.s. gasoline prices. reporting a 3 million barrel drop last week.

and of course we have got oil inventories from the government today. joining me from the cme out in chicago, yesterday, we had the eia report today. do you think we'll have a similar trajectory in terms of inventories? >> the number yesterday was out of the ballpark, well outside of in range analysts expect terms of a drawdown in supply. i think we will see more today, tomorrow,into the fed it will be fairly muted. near-term pressure, over the next few days and a week, into the outside, it is often so we see what happens with the fed tomorrow. notwithstanding,

even if you see a drawdown in inventories, we still have inventories running 100 million barrels above where they are seasonally at this level. you if you get a drawdown, have got a lot of inventory to work for. it.o question about the theme is, maybe the marketplace, the landscape has changed a little bit, where the drawdown's now will increase a and supply will be dwindling a bit. that is what the short-term marketplace in oil is telling us. julie: what he think -- the upside in the short term? there are still many funds out there that really still have -- even though we saw oil drop below and we had a massive lion coming in, if we do get some

rate tomorrow, it means a stronger dollar, higher oil prices. they will come in longer even more to cover their shorts. at 10:30 newes out york time. up later, vince reinhardt at 8:30 eastern. ♪

tom: good morning, everyone. joining us live in the studio right now for the morning call for the breaking news desk, here is bill maloney. morning, tom. u.s. futures point toward a quiet open. cpi is .1%. 10:00, 61.

at 10:30, energy numbers. a busy day in deal moves. in talks to require john malone at stars. in premarket trade, higher by 14%. shares gained 6%. a 27% stake in sc miller. morning, earnings this the fed cut forecasts for the year. shares are down 3% in the market. key upgrades and downgrades in this morning. raced over at j.p. morgan, and finally, oracle raced to buy at neutral at suntrust. tom: thanks so much. live breaking news, you can hear it.

over theo to squat go terminal. down futures negative six. michael: i just got a note from diana choyleva's personal assistant back in london wondering where she has to achieve is hiding here in the studio. head of research for lumbar street. your phone is ringing off the hook. everyone wants to know what i do what they, the fed, do they do. what are you telling people who are clamoring for clarity? i am telling is actually, we are at a crossroads and two parts ahead have nothing to do with the idea of secular stagnation. it will either be down the route of another crisis, or, a more promising deflationary room scenario. in this world, as we discussed earlier, what the fed does is of lesser importance than what china and japan in particular

do. how fast the dollar does -- goes up will actually determine which path we are taking. highly unlikely in our view that the fed will raise interest rates tomorrow. it would be uncharacteristically brave of them to do that given international turmoil. they could do with that for a long time in fact, but, they are likely to have the first hike i the end of this year. the pass a future interest rate increases in the u.s. would be determined by economic, financial, and critical developments elsewhere in the world. fascinatingt is because of course, it is october 17 for the next gdp report. on that, the world will turn? diana: chinese gdp growth has

already averaged just between 4% and 5% last year and so far this year. it does not look like it will accelerate further. but the important point to make here is unless the chinese situation turns into a crisis, a deflationary china is good news for america. it gives real income in the hands of the consumer and if they stop doing wasteful investment, it allows a more profitable investment here. tom: we see someone like citigroup catching up, moving from a 50-50 scenario global recession to a main scenario for next year. are you suggesting that at this meeting at 2:00 p.m. tomorrow, this fed is working in global recession? are we in it right now? diana: no.

i do not agree. a client actually asked me about that yesterday as well. have --oment, we do not you know ahead of the global financial crisis, we had a high conviction call that the global financial crisis will happen. we do not have the same high conviction call that we are down the route of another global recession and a crisis. on the contrary, there is a assibility, and we attached fairly high probability, going down the route of the deflationary boom, which be volatile and messy, but in that scenario, the u.s. does the best relative to the rest of the world, certainly in that adjustment. anyael: will there be clarity soon for investors? what do i do if i'm an investor tomorrow afternoon? clarity,ere will be

actually. for the remainder of this year and probably the first half of of likely a range outcomes will materialize that actually will determine the path for the global economy for the next five to 10 years. you attach a lot of importance on the fed meeting. i can understand and sympathize with that. coming up tomorrow. it is important. but i think other very important markets to watch out for, trying , it isre out which route first of all, what actually happens with the imf decision of whether they include the chinese currency in their currency basket or not. that is the key split in the road here the other forgotten economy that would be fundamental is japan. tom: we see that today. diane, thank you so much. london, sheva in

joins us in our studio. yield, 0.8 027. that is extraordinary. nicely up, a higher yield from a day ago. ♪

vonnie: here are your top headlines. let's get straight to them. policymakers beginning their crucial two-day meeting today and by tomorrow afternoon, they will have decided whether to raise interest rates for the first time since 2006.

the chief economist for goldman sachs tells bloomberg he would not be surprised if the fed doesn't take action. >> financial conditions spill over and intensify from here. in that case, i think that would be a reason to push it to 2016. it is not my baseline but it is in -- not a crazy and outlier scenario. vonnie: a 32% chance of a rate hike. the talk of a deal that would bring together the world posse tita's biggest year makers. approaching miller about a takeover. there is no offer on the table so far. a takeover would create a company that controls about half of the year industries profits. shares are up about an -- 23% in london. shares of fedex are following this morning in the premarket. the operator posted quarterly earnings that missed estimates. also cut its full-year

forecast. the company says there is weaker demand for shipments that moved by truck. for a data check. fedex is down more than 3%. taking a look at the dow, futures in general, they are unchanged right now. the s&p and futures down about .1%. ♪ welcome back to die michael mckee along with tom keene. economic indicators are brought to you by commonwealth financial network. ranked highest in independent advisor satisfaction among investment firms four times in a row. influences the fed debate? >> good morning to or the consumer price index tracks the cost of living. down .1%, in line with wall street forecast. up .1%. food and energy also in line with the forecast.

year over year, the -- just over .2%. both numbers are well below the fed target. one number i want to tell you about quickly, mortgage applications last week were down 7%. let's go back to new york. tom: what a most interesting moment this is for finance and investment. anyael mckee and i with number of good people to speak with her vincent reinhart, working in research and running research for all of the fed with a gentleman named alan greenspan working for morgan stanley. speak it is wonderful to to you. let me go to the money question, if you will. tothere enough inflation make janet yellen act?

>> no. we just heard the federal reserve is well before -- well below its goal. terms of hourly earnings and wages, we do not see that building. the external dimension is such that import prices are going down and as long as the dollar is appreciating, there is not a lot of pressure on the fed to act. tom: explain the why and the what in this debate. there are people who say, let's go raise rates now and there are people like carl saying, no, as you just said. what is the thing that divides those two camps? of the is the end summer. the way to think about it is, the first day at summer camp when you bring the kids out to the end of the dock and you tell them it will be really nice ones there in the lake, some jump right in. some of them just put their toes in the water. some of them stand there and

shiver. now.is them right they understand. they would like a positive funds rate, because they're nervous about being zero. they still want to be accommodated, but they can do that by raising rates gradually. it is just that the first time is really hard. it is historically hard. so the issue is, what is the shock of hitting the water? were convinced that market participants understood they would keep policy, needed for a long time, but not at a zero interest rate, they would be willing to tighten tomorrow. if they are not sure that market participants understand that they are worried about the shock -- tom: let me interrupt you. yields have come in, fractionally but nevertheless, lower yields in gold of nine dollars as well. , butuch of a reaction

every little bit here seems to be important. you were in charge of helping to put together the briefing book for members of the fed as they go into their meeting. you basically set out different options. here are the things you could do. argumente writing the for moving now, what would it be? >> it is pretty straightforward. the argument for moving is at the unemployment rate is in the most people's reasonable , thatte of unemployment there would be inflation pressures emerging if the rate marketes to fall, that participants are mostly prepared for the policy action, and that you want to keep in place and expectation. michael: what about for staying on hold? >> that is also easy. the dollar is appreciating. it has generally tightened.

markets in some sense have done a lot of the work for you, even as market participants do not expect policy action and that you are particularly concerned about the response of first policy actions. tom: how does the fed synthesize the fact that there are two americas. there is a booming america doing really well and a body of the theess political debate and cnn debate tonight, it feels disenfranchised, we see what jeremy in the united kingdom and such. do america's dialogue ever fit in that table at the building? >> the first thing you have to do is end the -- empathize. stable prices, that is general macro economical and issues about income inequality, the labor's share of income, serious macro concerns, serious issues

for the political economy. i do not know what level of the federal funds rate makes the income more equal. guts to a headline job of trying to deliver the best you can. it is an argument for testing where the national rate is. an argument for going a little longer in terms of policy accommodation, as well as inflation is well-maintained. tom: we will come back with mr. reinhardt here in mike mckee, kroll is putting on the really in charge showing that huge distinction between higher service sector inflation and lower, almost goods deflation. talk about two americas. part of it is service versus goods. energy is down 2%. that was a huge influence. the fed is trying to look past

that. what they do.ee 2:00 p.m. tomorrow afternoon. television radio worldwide with an extensive length of broadcast based on what we see from the fed. futures, negative one. vonnie: i am vonnie quinn. today, i have a morning must listen. this morning, we spoke with --of ubs. they talk about the model driven, but no model i know of the fed would use that says, we are going through our rate of unemployment estimate and yet it will not pick up. vonnie: brendan, that seems to thene of the real things strange and the two size from each other, if you like. the one that says financial conditions are doing the work for the fed and those who say they are absolutely not.

model that iaid no know of. a lot of the models we know of do not work right now. they are not appropriate right now. there are two schools of thought on the modeling that we should be looking to. one is that the old ways should pick up again. the other way to look at this is the models we used to use, they broke during the recession. they're not fixable. the economy does not work that way anymore. that is the fight going on right now. exactly what he is talking about. later in the hour, he said productivity goes up. but that is not what is happening. we will not have the answers to these questions until well down the road. we will not know whether the economy returned a normal -- whether it is typical, what we only thought of as the national rate of unemployment. brendan: i have been working my way through a textbook recently to work things out. it was published in 2000 seven. i keep reading it and thinking,

that is deathly not true anymore. coming up, we will find out soon enough whether these models work. the fed decision tomorrow, special coverage at 2:00 p.m.. ♪

tom: good morning.

there is a lot moving this morning. here is vonnie with our morning movers. activity trackers to 335,000 u.s. employees. 335,000 -- ishael: as a company, it amazing. fitbit has been doing it quite recent they have clip on waste fitbit's five or six years ago. what i was surprised by is that corporate sales, the revenue is still only less than 10% of revenues. if you could lock in a corporation, that is a friend for life and it is part of the hr infrastructure. vonnie: it is almost like blackberry. once you get one big customer

like target, what is to prevent you from getting another? michael: i like the comparison to blackberry. it took forever to realize they could do secure things in an app on your phone. that may happen. fitbit has got six years of revenue until it happens. it had not occurred to me this would be a follow-on effect, the ability to track the health care , the digitization of health care data. the more they know about us. vonnie: that is why they are doing it. i want to move on to fedex. shares are down three markets. they reported earnings that failed. $.20 now. still in line with what analysts are looking for. it is a leading indicator of what will happen in the future. we look out of china and say, can we really trust the topline

gdp number and we look at the shipping coming out of shanghai. it is true for us as well. we look at other indicators, typically the ones we have seen last year. is a good look forward. who knows whether janet yellen is looking at that bit of data. fedex sayingurse, transports, people take their cues from the dow transports. london,re searching in saying they intend to make an offer for the dealmaker. a company that would control that half of the industries profits. soaring even though we do not have any details and we do not have a concrete offer, and the regulatory hurdles would extend, how many months? michael: they are tremendous but , it ist that they are up

an indicator there is no natural growth through these large brewers. vonnie: those are some of your top movers this morning. we will keep you updated on it all throughout the day. coming up, do not miss a one-hour special of "with all due respect. live from the reagan library at 5:00 p.m. eastern. this is "bloomberg surveillance. " ♪

tom: good morning. we welcome all of you, particularly bloomberg 1200 and boston. bloomberg surveillance brought to you by invesco. walter davis is available to answer your questions on alternative investing. submit your questions to invesco.com. vince, let me ask you the question. a lot of the economists saying,

wait for more data. can pushes against this. reinhardtss vince pushes against this pier 1 is wrong with getting off the zero bound and saying we will wait for more data? >> nothing. if they could make the funds rate more positive, they could. you could keep policy accommodative, you just do not have to be a zero. the problem is getting from here to there. policy action could have an outside market reaction. they worry about that. keep policyay to accommodative is to keep it at zero. michael: don't you risk just sitting there forever? seared in 1995,arket memory, the stock market took off and

the economy took off. we had a boom. is it much of of risk to move now? >> 1994 is incredibly evocative for a lot of reasons. one of them, you mentioned. the main point there is the federal reserve will only change policy if they think the economy is doing well. it is not necessarily detrimental. what to dosue is when you actually react. they have a problem. hard to explain reasons. it maybe be says something about economic efficiency. it is not conducive for creative destruction. there might be problems with being at zero, but they are hard to describe. central bankers love option out it. you do not like to say, we do not like zero anymore because

you immediately get three questions. why were you at zero so on, but would you do if the economy was over, and why were central bankers remaining a zero? like being at zero, but have a hard time explaining why. some have suggested that is one of the ways they get off the zero. story not like the going to zero to begin with. they generally have the property that the best policy is one that strong aseconomy possible. therefore, a lower for longer funds rate get the aggregate demand that makes it less likely me the economy slipping into recession. another issue here is the idea of nominal gdp. many have written about this.

federal reserve adapt? we know they can do short-term rates. the real economy go and boost animal spirit in any given nation? >> it is tough. the best example being japan where nominal gdp is at the level where it was in the mid-1990's. a perennial problem with monetary policy is you have to itk through markets and depends importantly on expectations. it is tough going against the against that sentiment. people look at inflation expectations. ands curved downward against signals, not the inflation people want. is that valid from where you said? it has moved up a

little bit in the last couple of days. that is the hard part. they do not like to look at the market based measures of inflation expectation. they like survey-based better. >> here is the dirty little secret of monetary policy. officials keep saying it is important to keep inflation expectations well anchored. if you ask them how they measure expectations, they shrug their shoulders. [laughter] the we have got to stop show. that is why mr. rinehart is on. what you just heard is the clearest statement i've heard on policy from anyone p ryan sorry to interrupt. please continue. >> if you're not exactly sure how to measure things, here is how. you look at market-based

measures, importantly including five-year. what it seems to come down to is, what you think is going to happen to the economy next. whether they move now or later is a function of what the forecast is going to be. that forecast is a function of what your model is. as someone who helped to put together the model at the federal reserve, what do you think of it? today's fed still model economy correctly? do notably not but i know anyone who does. the most important information tomorrow, the details of their forecast. dot an enormous fan of the chart. also, what did they think about the funds rate? growth?they think about

december or january, a second order issue relative to how much they think they will tighten in the long run. if they just disconnected markets right now, the long run .everses tom: tomorrow, we will throw that with it, michael mckee goes through what you will have to set up tomorrow. this is not just the simplicity of, janet yellen to this and that. they do notpose move. then you have got to look at a statement of october. they put out a press conference, are they talking about it being live? is there a hawkish warning? in either case, if they raise or do not, you get the plots and you have got to figure out what movement there is in those and you get economic projections.

if they do move, how much did are they doingow it? there are details that will need to be explained as well. is maybe one of the most complicated fed decisions for them to announce that we have seen. vince: no question about it. there will be two statement spirit we learned in the last minutes, going forward when they announced policy action, they will also announce how they will raise. i.e., how the fed will go about executing what they want to do. there is an enormous number of moving parts. in terms of the policy part, it is a whole kit of information about the current and expected future path for interest rate and on the implementation side, it is, are they going to do it by exclusively raising rates a pay on reserves or will they drain reserves on a temporary basis? -- a lot of

details. when you have a bounce sheet, you do things that a big size. michael: very quickly, if the fed does move, we know what they say the exit strategy is, would you say it works? vince: nope it you cannot raise the funds rate by raising the interest rate on reserves. repos and large term deposits. michael: does that screw up the markets? vince: it will be tricky. it will change intermediation flows. the lady think about it is the central bank intermediates overnight liquidity. they will intermediate going around dealing directly with banks and nonbanks. tom: grilled to have you on here -- thrilled to have you on here.

we do not know tomorrow where we will be. we will start at 2:00 a.m.. kathy hayes, michael mckee, and myself. stay with us. another hour of bloomberg surveillance. ♪

tom: good morning. two days before a fed meeting, they start today. we are china to get you smart conversation on the economics and market adjustments around the fed meeting. michael mckee and tom keene from radio studios in new york. we welcome all of you. we have got an important conversation coming up. very controversial research notes. let's look at what the deep it -- the market is doing, foreign exchange. .81 earlier this morning. brought to you by interactive brokers, winner of the 2015 award for the best retail trading platform. visit online. nowhere.he 11269 goes

the yanis weaker on the rating .ut in japan big news out of japan. weaker yen. the real news to me is what has not happened in the emerging market. brazilian actually at a bid the last couple of days you wonder the level of intervention there by the central bank with the .hallenges mike mckee, three point 85 mexican peso distant from 17, stronger in the last few days as well. mike, this is fun. michael: this is great. yale university is going to receive a coupon payment on monday, on a dutch water in 1648. bond issued and $163. the authority issued the bond in

1648. they are still making payments. tom: i just finished a book on this area. the tensions between the dutch and the english, the number one thing i learned in the book was traffic back and forth across the atlantic from yell, from boston, from new haven, and from new york, it is much greater. they got on the delta shuttle in the 17th century just like we did. but it was normal for an institution like yell -- like yale. surveillance back then was awesome. for those of you who point out yell did not exist when the bond was issued, yell ought the bond in 2000 three as an artifact but apparently realized it was still a paying ed the watert

authority and said, yes, we will be happy to pay you a check. we will bring in nick now, the chief margaret -- market strategist for converge ex. you have listed great stuff p or market reaction to what the fed will do, which i guess is question number one. the point you made earlier this week is the fed rips off the band-aid. we get beyond this and then the markets have to start worrying about things like earnings and what they will look like going forward. that will be influenced by what the fed does. >> absolutely. the challenges we will get past the fed news one way or the other and then we will focus on q3 earnings and q4 guidance and what analysts are thinking about for 2016. the news has not been great there. earnings have been down year-over-year and will be down for q3. the first hope is q4.

analysts already are bringing in numbers down both top and bottom ofe for the first quarter 2016. the market turmoil has in under confidence that we are going to have an earnings rebound in the year and that is where we see some volatility. you isat we like about you move all over the country, actually speaking to people out there. in your note, you say no one has real conviction. write, do the two of ?ou see >> i hosted a panel on friday oil prices, were people with 50 years experience said, i have no idea. it could be 20 and it could be 50. it is an automatic the uncertainty we are seeing. the question for the fed today, is it better that

they move or is it better that they sit and wait and try to get more clarity? >> our perspective is it is better to sit and wait. i understand the fed has promised a rate increase for the month and a probably should deliver. from the data, the answer is no. they should not. michael: are they going to get more clarity? people who tell you they do not know what is going on, what are the signposts they are looking for so they will know? >> investors tend to respond to price more than any other single -- whatever level the market chooses. they would love to see correlation climb. correlations are up 92%, way back. tom: what does that mean for mere mortals? low correlation diversification has no benefits. it creates more risk in the stock for folio.

with lower court nations, you get better effects. it is bad news. are you in the camp saying it has caused problems? tonight, we will talk, a special surveillance prime time 6:00 p.m. bloomberg radio and television. rate riskyou mitigation efforts? >> so far, it has not been bad. i would not categorize anything as a horror story. reps in mutual fund phone during the 1987 crash long before any of these topics came up. tom: i am trying to envision you in a flak jacket and a helmet working for dave smith years ago. let's continue on this. we promise we will speak to him about risk parity later in the hour.

we spoke yesterday and i thought he was uncommonly forward about addressing this debate. basically, leon cooperman and others in the journal today, written up by jp morgan a week ago, arguing that the strategies of derivatives to equalize bonds and equities as an overall strategy lead to a greater amplitude when things go down. he and others really pushed against the criticism. who is right? >> the short answer is that we do not know. thank you. i agree that we do not know. >> the longer it answer is how much market structure has changed in the past seven to 10 years with high-frequency trading and more trading venues, it is tied up in a lower amount of capital the banks used. tom: this is critical bringing

this back to the fed. and everybody's's desire to avoid corrections in bear markets, where i am frozen, mike is frozen, the are is frozen, running the camera for bloomberg television, janet yellen is frozen as well. , the is always the case seas of your next crisis are sewn. it is a matter of what pops up in what kind of fruit you get. michael: that was suggest 200 01, thatens, is even too slow for high-frequency traders, as soon as the headlines hit, we have no idea what will happen. we could have a flash crash, a big rally, but given all the algorithms out there and the way the market structure has changed, it is a most impossible to pick. is absolutely right. it is analogous to the stretch or youin the late august

have a lot of supply and demand coming to the market and the market is not able to handle it over the timeframe. michael: this is a funny thing. we have all been on trading newss when market moving comes out and basically a vacuum is created behind the price and somebody have to set that price. how do they do that? >> when it comes down to human investors, they have in their mind what level they want to buy and sell. they set up the game plan before the event occurs. there is no emotion when the event does occur. when they execute against the plan. how much can the equity markets drop? or rise? 300 points? >> absolutely. tom: 20 seconds. how late will michael mckee work tomorrow night? >> i would call home now and say that you will not be there. we are doing overtime and

we hope you do overtime with us tomorrow. mr. mckee will be in washington. on the last delta flight out of reagan tomorrow. bottom line is this is really something in the history of bloomberg on the economy and bloomberg surveillance. we hope you stay with us. we lose the hysteria or try to avoid the countdown clock. we do that somewhat here in the 1:00 and 12 noon hours. we assist you in your schedule but we will try to give you the best guest we can. alan krueger tomorrow. ♪

tom: good morning. michael mckee and tom keene. brendan is looking at equity markets. brendan: stock futures are little changed -- before the two-day meeting. there are individual stock names indicating some moves at the open. julie hyman is with us. what is moving? julie: beer. we have a potential deal saying

it intends to make an offer for miller. it has not yet done so yet, but it could be a unanimous one because we have seen an increase in shares. the market cap is north of $90 billion. this will be the largest deal ever done in the industry. the industry has already been very busy in terms of deals. a couple things have been driving the consolidation. people are drinking less, sort of cheap beer. if i may. is in craft growth beers, what little growth there is. julie: right. you have seen beer makers acquire craft rumors, but the volume is not enough to make a big difference. that is what is happening in the u.s. which haveg markets, been growing, you talked brazil and china, you know what is happening there, they have been slowing down. something like 30% of

the world passes beers between them at that point. we are not sure it would get regulatory approval. but that is not stopping the stats from rallying. there is interest in the sector. owns about 27% of miller, so those shares are up also. partnershipe the -- coors here in the united states. brendan: they have got a local beer in basically every country. if they're looking for a way to grow, this is the way to do it. that has been working well as the increase in populations, we do not know whether that will be the right one. julie: the company cut its

forecast. it is seeing a softer demand for shipments, less than truck road -- truck load. the client that their stuff in the same truck together. there was a big deal recently in the ltl also. for taking usyou through some of this morning's movers. we will check in again. a conversation at 6:00 p.m. eastern. you do not want to miss it. ♪

tom: bloomberg 11 30 in new york and all of you on bloomberg television worldwide. particularly, our japanese audience.

i got a wonderful e-mail from someone who said, you know robert of morgan stanley, please get it on in tokyo and with morgan stanley. just tied up with morgan stanley. >> japan will be one of the key factors driving the global economy. we just want to talk about super bowl bound. i do want to say we made every app to get robert on care to just burdened him with huge news out of japan. >> we will get him on has soon as we can and continue watching around the world. market strategist for convergent, round the world, everybody's's question here is overhanging the fed, starting with china. there are questions all about emerging markets and about europe, where it goes, a further

talk today from traditional qe. outdo you see that playing from affecting markets in the u.s.? sawt creates volatility we last month or the real challenge is how much can affect swing against the money flows of the rest of the planet? if every other central bank is pushing, can the federal reserve realistically do the opposite withoute interest rates other turmoil and other challenges to the u.s. economy? is strong, but 1994, you go back and look at the graft -- the grass and it is larger. nicholas: there is hope monetary policies will improve those economies. we are not see much of this yet.

tom: i look at the back-and-forth and what we all know is these are after-the-fact institutions. one of the most emotional interviews i ever did on the show is richard timberlake from the university of georgia. old.st've been 85 years a magisterial history of the federal reserve and he said look, in each instance, they act after the fact. nicholas: the underlying sentiment you express is correct. it is ultimately an academic institution founded by principles, one of which is you need to show the proof. tom: how do you respond to a critic, and you can pick any number of critics, ron paul is a harsh critic.

fact.ct after the nicholas: i take it in a different spirit. andink they take exception, i think rightly so, of such an important american institution not centrally democratic in nature. a philosopher king rather than a democracy. maybe it has to be that way or maybe the 2007 crisis in 1913 made it that way and we just continue to trend. i take their points in a different direction and say, is this right for our society? michael: what would the argument against it the? you have got to take that in the context of, what people on capitol hill would like to see the fed do. it is a tremendous question for you ultimately can have politicians running on monetary policy.

the.annot be democratic institution. the debate will ultimately be about how much the fed should markets, howtal much on its own internal projections and process. that will always be a constant rebalancing act. michael: if i asked you how much, you would say i do not really know? to the point of, we're better off not doing anything. nicholas: debating as an investor or a policymaker or as a politician. as an investor and someone who speaks to investors every day, my spirit is to let the system run the way it runs in and figure out what the next step will be. most of the investors feel the same way. do you see tom: revenue growth -- regarding cherry on? nicholas: no. the economic news is only so-so.

our expectations for q4 are probably too high. supportive, we will go down five to 6%. late october, i would call that more of a correction. tom: ok. thank you so much. moments ago,ing still no u.s. inflation pressure . we certainly saw that in the report this morning. michael, what are you looking at right now? athael: i am trying to look if there is a time of day tomorrow where we can panic. is there a moment where we can lose it? against thisly countdown clock. i think it is like sports, like espn. we do not do that. it has got value after 12 noon to remind you where you are as you get ready.

we will see, as people get ready for a most important meeting. michael mckee and tom keene, worldwide. this is bloomberg surveillance. stay with us, on television, on radio. ♪

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is comcast business. comcast business. built for business. brandon: let's take a look at some of your top headlines. inflation is staying below the level of the federal reserve thinks to cheaper gasoline. the first decline since january. fed policymakers will decide

whether to raise interest rates. migrants are being erected in hungary under new laws. officers today rounded up afghan refugees trying to reach hungry from syria. hungry just build a razor wire fence on the border. one has already been convicted. a new survey showing the tide drifting donald trump's way as he gets ready to debate tonight. a poll shows 39% of republican voters think trump is the party's best shot for winning the white house. those are your top headlines. here is vonnie quinn with a data check. vonnie: i want to point out s&p futures finished up barely higher. lesswith the dow futures, than .1% higher. a two-year yield. .786% now. waiting for the opening bell. let's get back now to tom and michael. good morning, everyone.

we say good morning to all of you worldwide and on the radio and on television. applause is granted at the new york stock exchange. at the nasdaq, the opening bell -- regulatory imagine transforming your business with sei global platform. seic.com/imagine. we thank them for getting our opening bell going. i have read and green on the screen. way down from that 50 angst we saw a week ago. 16,610 on the s&p 500. that two year, we will talk about that in a minute. about an hourgher

and a half ago. we need an equity window here. miller?you think bud or are you a bug i or miller got? >> my father was a bug guy. tom: my mother was miller. >> they should get together. tom: why would my mother drink miller highlight? anheuser-busch ends up 520% in early u.s. trading. they say they plan to take that -- make a takeover offer for its rival. tom: do you have a number on this transaction yet? i'm hesitant to go with 90? >> it all depends on where the stocks are in the market value associated with that. tom: but you have not seen a

publish number? >> we don't because we had not seen the terms of the deal. it will be weeks potentially before we do. we do know that miller was valued at 70's -- $76 billion. u.k. company's largest shareholder has about a 27% stake. they are up 2.2%. u.s. brewers are higher as well. cores up almost 11% in boston beer with a 1.3% gain. fedex down 1.3%. they trail the average analyst estimates by $.32 per share. fedex cut its fiscal year profit forecast because of slumping demand for some shipments carried by truck along with higher insurance costs. late yesterday we saw fedex shares pop up along with those united parcel service. ups down at the moment. hewlett-packard up.

they plan to eliminate as many as 33,000 jobs as it splits into two. most of the cuts will affect its new business technology arm. we have a deal in dental equipment that is not going over so well. dentsply international is down 2.7%. they agreed to by sirona dental systems. those shares also lower. 3.1% lower to be precise. you have monster beverage down 9/10 of 1%. they lost their top rating which cut the stock from outperform to buy. fitness trackers will be available to all targets, all 35,000 u.s. employees. bloomberg radio coast-to-coast. do i need a fitbit? >> no, you just need to get fit.

tom: does anyone use them once they buy them? >> i know a lot of people who say they like them. exercise more, eat less accomplish is the same thing. down.'t suggest that is -- dumb. that would be sacrilege. that was tracy. david was talking about was happening in the equity markets but when it's fascinating to watch is all of a sudden the bond market came alive. if it consciously because the fed was not going to do anything. but now the two-year note yield has gone 79 basis points. >> the interaction between the two is really interesting. we had a selloff in bonds and equity's rallying and in some people's eyes, specifically bank of america, they think this means markets are ready to take a potential rate hike on thursday. tom: did you see were that yield

should be without global recession and the impugning of disinflation into america? is is supposed to be at 1% right now? have you seen research? tracy: know, i haven't. tom: is a huge mystery right now. tracy: i know we have been talking about this a lot but the split in the market in terms of what the fed is a is not going to do tomorrow is phenomenal. even though we saw the movement yesterday, the futures market is only pricing in a 32% chance of a hike on thursday. that is up from 28%. still very small. economists are evenly split. although it seems like some people in the bond market are getting ready for a hike or trying to hedge the risk of a surprise hike, we still really have no idea what the fed is going to do on thursday. >> there are people who make the case that that is the reason the

fed should stand pat because they have not signaled. but it has not always been true that the fed felt the need to price the markets before they move. tracy: this is the other debate we are starting to get in the market. we spoke about larry summers saying there has never been a rate hike when the futures were not pricing in about 70% chance of a hike. people are starting to say wait a second, did the fed ever say it wanted to give markets this degree of comfort? did they say they wanted to lead markets and to this extent? people are starting to backtrack on that. there are still plenty of market participants that think the fed should be communicating its policies, specifically nick lawson at deutsche bank. onsays if we get a hike thursday, that is to policy changes from the fed. a change in interest rate regime

and a change in their communication regime. tom: mike mckee explained deutsche bank's place in this analysis. he has got a unique voice with a history of peter garber's work on a greater international economics. chiefer was the international economist at the fed for a while another long background in central banking. he thinks the fed should move. they are past their sell by date. tom: tracy, expand on this. how can there be to rate increases if there is only one? would say on peter's point there is a weird dynamic happening among investors right now. i was reading an investor survey where majority of investors think the fed should raise rates in the survey, but minority think they actually will. difficultis terrible situation for the fed where they see where asset prices are right

now. they are potentially divorced from reality. they see what is happening in the global economy and the trouble in emergence markets, and the ecb strong data in the u.s. that says they should maybe tighten. but they have to tighten all these things. that didn't think it through. we saw lloyd blankfein standing up saying he thinks on the basis of u.s. data defend should not hike. tom: i adore him. is there a beer here? hold on. michael is with us from bloomberg radio. i learned that blue moon is not a craft beer. yes.el: tom: blankfein is not an economist. ,. >> you got to wonder if the fed wishes it had never started talking so much. tom: we will talk to eli manning

to get his view on the fed. that was brilliant. tracy with bloomberg markets. leader of 36 points. , 21.82.

tom: good morning everyone.

a modest debate tonight. no doubt different of what we saw at fox tv. cnn doing it tonight. vonnie: what you are referring to is the republican presidential candidates gathering in cb valley -- simi valley. still, it's a very different debate. it's more of a head to head debate in the first one. how will that impact the front runner, trump and carson? >> what they are trying to do, unlike fox, is 10 a candidate against one another. ben carson and donald trump who represent the same type of politician but are totally different types of people. it will be very interesting if they can go up against one another. i was talking to the carson campaign folks. they made it clear he does not want to attack donald trump one-on-one.

donald trump has taken a few shots at them recently and you wonder if they can get them going against one another. >> for all the people not been carson or donald trump, the people they do not matter, are there any best practices in figure got had to insult either of them? they are tricky people to go up against. carson is leave him alone. you don't want to attack some of my carson whose favorables are 81% in new hampshire. if you leave him be and hope he comes down to earth as the weeks move on, with trump you have to be aggressive. he so it happened with carly finorina. she really shot up in the polls and is willing to take donald trump on. i think there is some concern at the walker camp. if you let him walk all over you , your donors and supporters willfully. -- will flee.

you will see a lot of people try to be aggressive. what is interesting is trump's response. debate where a potential new donors will be watching or any potential or gaffs that people would make to get the money? >> absolutely. you have people they give a lot of money to either scott walker or his super pac or marco rubio that are waiting for results. touted as the candidates they could really boost the gap between two sides of the republican party. it just has not shown yet. both have low single digits. you can throw chris christie into that as well. this is a huge moment more for the donors and anyone else right now because right now the summer is a dry season for raising money. you have a couple more weeks to raise before the reports are due.

rick perry proved what happens if you run out of money. you run out of a campaign. talking aboutgly the most important primary, the donor primary. he is at the reagan valley intel -- reagan library in california. is the second republican presidential debate that will be live from the reagan library at 5:00 p.m. eastern today. this is "bloomberg surveillance." good morning. ♪ ♪

♪ tom: good morning everyone. bloomberg television worldwide fired up about the meeting tomorrow. the fed will be doing that. we have got to get fired up and get to the fed meeting which is 6:00 p.m. tonight. rate alley-oop with us. -- ray dalio with us. we will talk about risk. he strategies. bloomberg surveillance brought to you by national reality. 30% on return on cash. guest with aound a

sane research note. >> karen valentine. river the old room 222 on television. tom: i was not allowed to watch television. >> tina martin adams is the start. -- star. you have a fair value estimate 2222, that 12 months puts you in the karen valentine camp. we are at right now at 1979. i'm not taking from this that a fed rate increase will be really awful for equities. karen: i think at this point a fair and great increase can be very positive for equity. it removes the uncertainty which is an plaguing the market for such a this year. we talked about a lot about china all summer. with this year started with was commodity price weakness and dollar strength and that a

certain -- certainly somewhat related to expectations for tighter fed policy. but we have gone back and forth as to whether or not they will tighten policy and that is an added pressure on stocks. if we get the first tightening over with, it will not likely to have economic impact on growth and he could offer the market some relief week as we know with certainty where fed policy is it we should have bit -- better visibility for the future. >> the brokers for the show are hoping the fed does not move because the math to talk about something for you and i to talk about. tom: i want to put this up over here. it's a white piece of paper. this is sanity. this is not mass hysteria. what it tells me is within the range of probability we will go 12.1%. ballet,elling me this the countdown clock and all the

rest of it is going to lead to double-digit equity gains. >> more than likely, yes. we've seen the markets follow earnings growth with a modest gp expense and -- expansion. we think things or recovered nicely in 2016. something we are forgetting about is the vast majority of earnings weakness this year is related to the 60% decline in oil prices. if oil prices just stop following which we think they will of the next 12 months, that is going to produce earnings growth the matter what. we will no longer have to drag. if you get a little bit of revenue acceleration on top of the lack of commodity price drag, the very easily get between eight and 12% earnings. >> danger going to get good comps, right? >> things start to look a lot better in 2016. tom: this is an important research note from stephen

stanley published moments ago. " i still believe the fomc will lift off tomorrow. mr. stanley on a detailed inflation analysis notices service sector away from residential. it is soft and his word but he stays -- this is important. he says the federal still persevere and raise rates." clearly the probability is not show that. >> that depends on what you are looking at. we were talking up -- talking about the feds fund trading. when you are modeling it, what are you using? we use our teams fast knowledge. they still think the fed will increase tomorrow. we are anticipating 25 basis

points to more than another 25 within the next month. tom: and that goes to the trajectory. if you are in equities, the fear of high-yield competing with equities. what a quaint idea that is. when did you last year that? high yield affecting equity. that is just not there? you could even go 75 basis points in the next six months. tom: can i rip up the script? where are you in consumer discretionary beer consumption? beer is a discretionary item. stable of ther a discretionary? gina: its death -- definitely a stable. tom: you learn something today. favorable are

consumer services where we get to see quite a bit of momentum in spending. but optimistic about just about every area of the consumer. the area i'm a bit concerned about our consumer companies that are highly leveraged to emerging-market conditions. china in particular. some names in the auto space. clear she cannot speak about individual stocks. let's follow up on china. how worried are you about what happens there and its impact on stocks year? gina: not terribly worried. the feta magnificent decline in china already. are max drawdown was 10% and we bounced pretty nicely off the decline. i'm worried about the potential financial market repercussions they could emanate out of china. for now, the policymakers seem to be finding some sign of stability or creating some reasonable stability in china. it remains to be seen.

in terms of the impact on economic growth, it is really knows it will. -- fairly negligible. china is less than 10% of profit alone. if we do have a chinese meltdown that spreads globally, starting to weigh on europe and japan and more on emerging markets, we have to be more concerned. for now it seems relatively contained. tim cook was making news. he is at the vanguard of the cash toward that is out there. you are very good at this, about thinking about the change behavior of executives. do you see a new executive use ofthat is codified cash british as part of your spreadsheet? part of what you guess? underappreciated trend shift has been going on for the last three years and it's

exhilarated use of leverage. even though companies have this incredible cash forward that is weighing on investor sentiment in making investors feel as though there is no potential future growth prospects, there has been a pretty significant acceleration and leverage. exhilaration and debt utilization. tom: what are they using that for? gina: at first it was for exclusively for dividend and share buyback. but they have been using it for m&a transaction. we've been seeing an m&a boom and a lot of that is funded by debt. you are having a tale of two worlds. an incredible cash toward the companies are also read leveraging through this cycle. tom: are we having fun? gina: i want you to remove or your economic colligan crime told me the red sox would be in first place. that's a good the economic

productions are as well. you. -- owewill oh you. tom: thank you kurt from my childhood. gina martin adams, thank you. michael: what we going to do tonight? o, we saidray dali we're not going to plan because these will change. boy has it changed with a vengeance. he has important things to say. michael: he has his own economic model and he will explain how he sees the world in light of that. tom: and then examples of that economic model. gina is asking how she sees us. tom: bloomberg radio and bloomberg television. you will seat at 6:00 p.m. tonight. and extensive conversation with ray dalio.

we will speak to him about risk parity. you're getting ready for 2:00 p.m. tomorrow. our special fed broadcast. . stay with us on television and adio "bloomberg surveillance."

♪ the "bloomberg market day." budweiser planning a bid for miller lite.

it would be the biggest acquisition ever in the brewing industry. sab shares are up more than 20% on the news. the fed meets for the first time in nine years. a rate hike is seriously in play. the decision hits the tape at 2:00 p.m. tomorrow. markets are flashing make signals about what they think janet yellen for the next. can been carson trump donald trump? 11 gop candidates take the stage tonight for it resident told of eight. but therump is teflon neurosurgeon is suddenly hot on his heels. ♪ matt: let's get right to a market check this morning. stocks are in the green. at least as far as the s&p