investors and we will hold our own meeting to give you details. matt: hewlett-packard needs to cut cost. they plan to cut jobs again that thousands again. we will talk about the big changes for the tech -- shrinking tech giant. pimm: we await president obama scheduled to speak at the business roundtable and washington, d.c. within the hour and we will take his speech and question and answer session. matt: i am matt miller. fox. i am pimm 90 minutes into the trading day, so let's take a look at markets right now. u.s. stocks, a little bit of a bid for stocks, the s&p 500 up three points and job -- downturns of 21 points and everyone waiting on the federal blizzard rate decision which

will be tomorrow could -- waiting on the federal reserve rate decision which will be tomorrow. matt: this morning, i logged in and saw a lot of selling going on. it turned around. pimm: now buying. matt: right around her and the price goes up, yields go down and you see them down across the curve, so people are buying bonds. pimm: particularly at the short and because more sensitive to any changes in interest rates. matt: if the fed were going to raise rates, you would see a selloff if you thought the effect was not going to or even lower cut rates, then you would see purchases. i thought it was interesting that you saw that turnaround the same time that lloyd blankfein, at an "wall street journal" breakfast meeting said he did not think the u.s. economy was in a position to bear interest rates, essentially saying, do not do it. pimm: yesterday, retail sales performed which made it a little more challenging to figure out what to do because the sales report was pretty good. matt: of course, inflation does

not exist. pimm: it is that 2%. -- itwe are watching intends to make an offer for sab miller which would bring together the world. together, they control over half the industry profits. it would be -- it seems almost heresy to put miller lite and bud light under the same roof. pimm: peroni? matt: [laughter] it is really because of beer that these too bad beer makers -- i don't want to say bad. pimm: i thought you were going to say because of the slow down in emerging markets economist, in latinally america. matt: that is also true. let's take a look at the bloomberg terminal. nine years since the federal reserve has raised interest rates and we find out tomorrow

at the central bank is ready to do it again. that policy makers have begun their two-day meeting. our markets prepared for rate hike? we asked the former chief economist at morgan stanley. were convinced that market participants understood that they were key policy accommodated for very long time but not at the zero interest willingen they would be to tighten tomorrow. if they are not sure that market for disciplines understand and they will worry about the shock. ceo lloyd blankfein says if it were up to him, he would not raise rates. he says economic data does not support the case were a rate hike. meanwhile, inflation is below the federal reserve -- well, well below the federal reserve's preferred target. 1%,umer prices fell 1/10 of thanks to less expensive decline, the first since january. one other thing from the inflation report, airfare fell in august for the second month in a row with prices down a

little more than 3%. airfare has dropped an average of 6% in the last year. pimm: ishares of fedex falling. operator of the largest cargo airline posted quarterly earnings that missed analyst estimates. companies say they are cutting their full-year forecast. we did hear from fedex cheap natural officer alan class. al and the remainder ofa fy 16, they are dependentn on: key external factors, including fuel prices and the pace of growth in the global economy, particularly in the u.s. industrial production. plan fedex also say they to hire about 55,000 workers for the holiday shopping season. that is slightly less than one year ago. corp.'surdoch's news diving deeper into web advertising. they are buying the platform on unruly and they will pay about $90 million, up to $86 million more unruly meet certain performance objectives. amc network is in talks to buy

stars, the program are controlled by billionaire john malone. the talks may not result in an acquisition although a combined negotiatearz could by the rates from pay-tv carriers. matt: they get $60 million for a painting that is being auctioned off in november. it comes from the blackboard chalk on ait takes gray surface and they are selling the painting on the half of the los angeles collector. people will pay -- pimm: don't go there. matt: people will pay for anything. how much did i say? $60 million. pimm: people won't even pay for expensive automobiles. matt: look -- you think this is worth more than a ferrari? pimm: beauty is in the eye of the beholder. matt: true. those are some of the top stories. wants tolett-packard

reduce annual expenses by $2 billion. you have the company plans to do this. president obama will be addressing the business roundtable in washington, d.c. we will bring about coverage of his speech and the following question and answer session. matt: plus, the public capital market is not the only sector concerned about the federal reserve's market decision. those stories and more. much more ahead on the bloomberg "market day," so stay with us for all of those. line -- oticed -- a matt: i don't understand why people would pay so much for something on campus. if it was good, then i would get it. but if it is scribbled on a chalkboard? pimm: shall we move on? matt: yes. meeting underway. traders say there is a 20% chance that the fed will hike rates, up from 26%.

that goldman sachs warned the financial market is not ready for a rate increase. matt: and the ceo, so he is getting on board. pimm: yes, he is. let's see if robert band that number, director of market strategy joining us, and stocks editor mike reagan. let's start with robert. what to make of these comments from goldman sachs? blankfein, chief executive, do not raise rates. robert: i don't think anybody has an idea, less alone the fed whether they should raise rates are not. going into this meeting, and there is ambiguity amongst participants as well as in the marketplace, what is also important it is not only the rate hike or not, but also the message -- is it going to be a hawkish or dovish forecast?

pimm: someone must be calling you and say, what do think they're going to do? i need to position the portfolio. robert: one thing we have been toking at is for the fed say, not this time but maybe in december which is the risk for another government shutdown. in 2013, ben bernanke decided not to take it in december but because of the risk of a government shutdown. pimm: is that going to happen tomorrow? robert: i think it is the risk and they will take that into consideration because the friction in congress has escalated the last weeks, meaning they may have the continuing evolution of maybe two months which will coincide with the next time that the debt ceiling will be breached and the u.s. government may go into technical default. you know those kinds of discussions have volatility and it is iffy. matt: what are the markets thinking about this? in 2011, they

have not gone since then. if they miss the boat again now, will they ever go? research read a lot of that says basically a rate increase is not the death star portable market in stocks. every situation is different and we had an interesting story by the rank and daddy burger on our team that looked at how this is different as far as the corporate profit cycle. it is very late in the cycle to start raising interest rates. they looked at some numbers from the david research that said of all the rate increases going back to world war ii, it has been averaging about 60% growth for the rate increase the year. that is not the case -- 16 percent growth for the rate increase in the year. that is not the case this time. it is kind of a very perilous time. pimm: earnings for the s&p 500 are shrinking or lower than they were in the past, right?

i get this rate increase, what does that tell us about the future corporate profits and stock prices? --e: window rate hike comes, historically, when the rate hike comes, it is growth of about 16%. what the research found out is that in the year afterward, is sliced to about 8% or so. this time, we go into the situation with much weaker earnings growth, so it could happen with the worst effect. matt: is it possible but fed may have just missed the cycle? increases?ny mike: i agree with the dilemma but the site is unethical because they said they were going to raise rates sometime in 2015 unless the world falls apart and if they don't do it, they will lose credibility. matt: but they are so data dependent. janet yellen would tell you their data dependent and they depend on the data. mike: aren't we all? matt: you can think it independent and race rates.

robert: they're looking at unemployment rate, so one of the two targets for the fed has been met. they can say, now it is time to raise rates and they want a lot less also going into the presidential election next year. -- theyn i summarize are saying they will most likely raise rates in december and not tomorrow. and you are saying that corporate profits are not doing well and this increase, 25 basis points -- go ahead. on the greatot printing. that said, i don't know how close a janet yellen monitors profit growth, if only may be asked an indication of where unemployment will go. pimm: the question i want to pose -- based on the performance, not of domestic economy that all of the upsets outside of the united states, is that influence the decision by the federal reserve? mike: it starts to affect

the u.s. economy, then it will definitely weigh heavily into the decision. as long as it stays offshore, so to speak, then the fed is reluctant to use that as the smoking gun to decide to raise rates or not. pimm: they take notes but imperial that much. some version of that. thank you so much. robert is the director of market strategist and bloomberg's own mike regan. tomorrow for live coverage of the federal reserve rate decision, a special report scheduled for 2:00 p.m. eastern followed by janet yellen's news conference at half past 2, 2 point -- 2:30 on bloomberg. matt: still ahead, hp wants to cut expenses right to billion dollars annually, so it is terming their payroll by 30,000 jobs. stay with us. ♪

pimm: this is the bloomberg "market day." -pimm fox. matt: with matt miller. we have breaking news. julie, we have been talking about the beer takeover. we get a response from miller. miller basically saying they are open to having these discussions. it does not sound like a formal offer has yet been made between the two companies, but it is said to be open to discussing this potential bid. they are said to have called the counterpart, so we are waiting for the next phase of the news if you will, because the formal offer has not yet been actually made, it is just a matter of these two companies potentially in talk.

we do know that if and when the offer is made, it will be the biggest deal ever made in the industry. already, the market cap of sab miller is over $93 billion, by any standard, not just in the beer industry, this would be a very large deal. let's talk about the players involved. sab miller shares are up, better than 20% and seeing a leg up further on the headlines just coming out but essentially not necessarily a huge surprise when i say b miller is open to having these talks. the combination between the two companies has been talked about for quite some time. sab miller a little bit up and a b has been trading higher. another player is also alt sab which owns about 27% of miller, so those shares have been higher. all of them appeared to beginning on this news. not only that, we have been watching coors because there was

talk about the implications for that company. sab miller and coors have a joint venture in the united states called miller coors. there has to be some kind of domestic church of that joint venture and there are questions about what this would mean regulatory wise. take a look in my bloomberg terminal. i was wondering about the market share for this potential deal. this is data from bloomberg intelligence. here is the global market share, first of all, for anheuser-busch, around 20% according to this. sab miller stands at around heineken's 9.7% and number three globally at 9.1%. quite high andis i want to look at north america because you are really talking about a dominant market share. already anheuser-busch, although the market share has declined to some extent, one of the drivers behind the deal, it is still at 45%. you combine that with sab miller

at 13% and more than half of the beer sales in the united states would be from a single company. at 50%, so not sure how it shakes out in the joint venture between the companies but you are talking -- 15%, so not sure how that checks out in the joint venture between the companies but you are seeing that solidified the dominant position. pimm: thank you very much. i want to just bring in matt campbell joining us from london. he is going to be able to talk a little bit about this because there is a timeframe involved as abev as sab miller and quoted outside the united states with a timeframe :00 taking that they had to make before or the formal offer for sab. you are noting the number of brands. they have in emerging markets. matt: we were looking at sab miller and it is a milk --

amazing, they actually have very good beers. they have some of my childhood favorites like mickey's, i don't know if you remember that? have been amazing amount of brands, matt campbell, and i'm going to the brand portfolio on the anheuser-busch website after into my birth date. also, a huge amount of brands. it is like every beer in the world that is not a microbrew and these two guys control. matt: that is right and the scale and scope of conception has been astonishing in the industry, basically in every country, 10 years or 15 years ago, to local breweries, three local breweries that may have been controlled by a family. the likes of abi and sab have come around emerald up all of those guys. warehouseda few guys somewhere in brooklyn brewing their own beer, the beer industry really is about these

huge players and these are the two biggest among them coming together to create pretty extraordinary amounts of market share, certainly in the u.s. pimm: how is the going to pay for this deal? matt: we don't know that yet. there have been no details at all released. it is certainly going to be a mix of cash and shares, that means and can always amount of financing needs to be raised. this allowed to be one of the largest financing packages ever, given the market value of sab miller. pimm: are we talking about $100 billion for a deal? the current market fire of sab miller is about 90 billion u.s. dollars if you go in debt, a bit more. there with a premium, you are well over $100 billion. so, yes, into the triple billion dollars. one of the biggest deals ever. pimm: describe sab miller portfolio and how that fits in with inbev. is there overlap? as they are, the

overlap is not that great, except in the u.s., as you mentioned. sab miller comes from africa, sab is south african breweries and currently based in london. however, a lot of the activities are in sub-saharan africa. they were tasting african beers, that is sort of where their soul is over they like to think it is. comes from brazil and has a large presence in the united states. when you look at key emerging markets, europe, the overlap is not that great. in the u.s., there is a big problem and for antitrust regulators it is a big red flag. matt: it seems there are other players involved. i'm going to the holder screens for each of the companies on my bloomberg terminal. millerowns 27% of sab and you also have noticed bank and blackrock involved. altria portion is a

left over from when philip morris spot miller brewery hoping they would get into consumer products. matt: they do have a wine is altria.all to you -- not only the holders are important for the stakeholders. there are joint ventures that have to be somehow unwound if the deal will be done. right.hat is exactly these companies have jb's all over the world. miller coors is the one probably you would be most a minor with which is coors and sab miller. it has been speculated i analysts and others that sab miller would probably have to exit that venture in order for this deal to get done. there are others on a smaller scale all over the world. this is just an enormous complex dealmaking and let's not forget enterap has not agreed to talks. there has been no proposal.

all we know is that avi wants to make the offer. pimm: the life very much matt ,ampbell -- thank you very much matt campbell. sab miller combining with inbev. and was came up this morning and said coors would probably take up the rest of the jb and move profit by 20%. and: and the stock up 13.5% we have much for coming up on the bloomberg "market day." ♪ pimm: live coverage of president obama who is addressing the

business roundtable and washington, d.c. let's listen in to the speech. president obama: the longest streak of job growth on record, the unemployment rate -- unemployment rate is lower than in seven years and more job openings right now than any time in our history. housing has bounced back and it is higher than it was before the recession. we have made in norm's strides in both traditional -- enormous strides in both traditional and clean energy sources, reducing our carbon emission and our education system is actually making significant process with significant gains in reducing .he dropout rate reading scores increasing, mathis scores increasing, and by the way, more than 60 million people have health insurance that did not have it before. people have health insurance that did not have it before. this project is testament to

american business, innovation, testament to the workers you employ. i will take a little credit, too. to her policy decisions. soon after he took office, we rescued our auto industry, worked to rebuild our economy on december foundation for growth. , in some cases, embraced austerity as an ideology without looking at the data and the facts. they try to cut their way out of recession and the results speak for themselves. america has come back from crisis faster than almost every other advanced nation on earth and at the time of significant global volatility and we remain the world's safest, smartest investor. of course, i will not be satisfied and we has a country should not be satisfied until more working families are feeling the recovery in their own lives. the fact is that what i have

called middle class economics has been good for business. it is corporate profits that have hit an all-time high and it's fully health care prices and plummeting energy costs have helped fewer bottom lines. manufacturing is growing at the fastest clip and about two decades. our work force is more educated than ever before and the stock market has more than doubled since 2009 in 2015 is on pace to be the year with the highest consumer confidence since 2004. and america's technological entrepreneurs have continued to thatincredible products are changing our lives rapidly. now, you would not know any of this if you listen to the folks who are seeking this office that i occupied. [laughter] in the good chamber -- in the

echo chamber, that is politics.al everything is dark and terrible. they do not seem to offer many solutions for disasters that they perceive, but they are quick to tell you who to blame. i'm here to say that there is nothing particularly patriotic or american about talking down america. especially when we stand as one of the few sources of economic strength in the world. right now, we have got the chance to build on progress that ishave made and that acknowledged worldwide. we have a chance to grow the economy even faster, create jobs even faster, lift people's incomes and prospects even faster. we just have to make some sensible choices, and i'm going to focus on one particular example. next fiscal year is almost upon us, which means that congress has about two weeks to pass a budget. if they don't, they will shut

down america's government for the second time in two years. democrats are ready to sit down and negotiate with republicans right now, today, as we speak. but it should be over legitimate questions of spending the revenue, not on related ideological issues. you recall that two years ago, the republicans shut down the government because they did not like obamacare. today, some are suggesting the government should be shut down because they do not like planned parenthood. sense and it is not good business. the notion that we play chicken with an $18 trillion economy and global markets that are already issuesh all because an around a woman's health provided that receives less than $.20 out of every thousand dollars in the federal budget, not good policy

making. the last time the republicans shut down the government, it costs our economy billions of dollars and consumer confidence plummeted. i do not think anybody here thinks that will be good for your business. i have always believed in what our first republican president, a guy from my home state named abraham lincoln believed, that to government -- that to government we should do together those things that we cannot do as well by ourselves. infrastructure projects, educating the best workforce in the world, investing in cutting-edge research and development so that businesses can take that research and take some risks to create new products and new services. rules for the market that encourages innovation and fair competition that creating a safety net that not only helps the most tolerable in

our society but freeze all of us to take risks and protect against life's uncertainties. and welcoming the striving immigrants that have been the source of continued renewal, economic vibrancy and dynamism in our economy. my hope is that congress aims higher than it just not shutting the government down. it is a good start, we would like them to achieve that. but we can do better. we can do some things to help the economy grow. after the last shutdown, both parties came together unwound -- and unwound on rational cuts to military readiness that is known as sequester. that agreement expires in two weeks. for those of you who are not steeped in federal budget terminology, it it -- they are

automatic topline cuts that do not discriminate, do not think through what are good waste,ents and what is and if we do not reverse the cuts that are in place currently, a lot of the drivers that your jobs depend on, infrastructure, education for our workforce, they are going to be reduced effectively at a time when other countries around the world are racing to get ahead of us. on the other hand, if congress does reverse some of these cuts, then our own budget office is -- office estimates it would at a half a million jobs to our economy and your alone. gdp. .4% to keep in mind that we can't afford it right now. -- can afford it right now. we have reduced the deficit by

two thirds. it is about 2.8% of gdp. we have reduced our deficit faster than some of those countries that pursued strict austerity policies and were not thinking about how to grow the economy. well-positioned without adding to the deficit. tookt to repeat, since i office we have cut the deficit by more than two thirds and the good news is we might the moving beyond some of the stale debates we have been having about spending and revenue over the past several years if what economists and people knowledgeable about the federal budget are listen to as opposed to being driven by short-term politics. people in both parties, including some of the leading republican candidates for president, had been putting out proposals, some i agree with and some i do not, i will give you one example. two leading candidates for the

republicans who have said we should view limiting the carried interest loophole. there is disagreement in this room about that. i will tell you that keeping this tax loophole, which leads welllks who are doing very paying lower rates than their in any way, is not improving our economy. on the other hand, if we close it we could double the number of workers in america's job-training programs. we could help another 4 million students afford college. .hese are sensible choices if you are running your business and you took a look at, you would make that decision. america should also. this is an example of how we can maintain fiscal responsibility while making the investment we need to grow.

the bottom line is this, seven years ago if we had listened to some politicians who said we can only cut our way to prosperity, the fact is we would be worse off today. if you listen to them now, we will be worse off tomorrow. i hope you will talk to your friends in congress, democrats and republicans, as congress flirts with another shutdown, remind them of what is at stake. we will have disagreements sometimes, i do not expect to get 100% of what i want in any conversation, including with my wife. but i do expect us to stay focused on why we are here. which is to help the american people and businesses like yours and your workers do better. that is our job, we are not supposed to be impeding progress we are supposed to be advancing progress. if our leaders can put common

sense over ideology and the good of the country before the good of the party, then we will do just fine. the perennial doom and gloom that is part of a presidential campaign, america is winning right now. america is great right now. we can do even better. the reason i am so confident about our future is not because of our government or the size of our gdp just gdp or military, but because -- the size of our gdp or military, but everybody i meet, regardless of station in life, race him a religion, the region a live in, they believed in a common creed that if people work hard, they should be able

to get ahead. i know that is what you believe. the values you try to instill in your companies. decency,s that that hard work, common sense will be reflected in washington it with that, let me take questions. i will start with randall. since he volunteered for what i'm sure is a thankless job. >> i know there are a lot of other questions. leader mcconnell was here earlier and he gave us a cause to exhale talking about the budget and seemed confident we would get to a place we would have a budget and in the context of that, he spoke about how split government can provide opportunities for getting big things done that might be hard to get done otherwise. he caused a head snapper when he gave you a very strong complement over --

president obama: my head is napping -- snapping,. >> trade promotion authority. --are very calm entry complementary of the work being done. you have the ability to get a trade deal done. to come back to congress, talk to us about your view of the opportunity to get the trade -- transpacific deal done. i am confident: we can get it done this year. should beministers meeting again sometimes in the next several weeks. they have the opportunity to close the deal, most chapters have been completed at this point. i am confident that it will in fact accomplish our central goal . which is to make sure we have a level playing field for american businesses and american workers in the fastest-growing region of

the world. there will be unprecedented protections for labor standards and environmental standards, but also for protection. , when anyaking sure company here makes an investment, they are not being disadvantaged, but are instead being treated like a mystic companies for commercial purposes. -- domestic companies for commercial purposes. we had 11 nations who represent the fastest-growing, most populist part of the world, biting into a high standards trade deal that allows us and your companies on a consistent basis to compete and the good news is that, with a lot of tough negotiating and a lot of pushing and pulling, and

occasionally i get called in to lob a call into one of my think we are i going to get this done. the key, once we close the negotiations and we have an pp through is to get t congress. i will return it -- mitch mcconnell worked very hard and creatively to get it done. thatould not assume because the authority was done, that we automatically will be able to get tpp done. the reason is, i will be honest with you, the politics around trade are tough. this even in the run-up to get -- getting tpa

authority, a lot of americans, when they think of trade, think of plants in their hometown shutting down and moving to american china and manufacturing and good paying jobs being lost. the argument i have made consistently to democrats has been that there may have been some mistakes made in past trade example,s in not, for having enforceable labor and environmental provisions that put american companies that are doing the right thing at a disadvantage. that there were not enough safeguards for intellectual property.

ownede abuses of state enterprises and subsidies that companies may have been involved with. that is the status quo now. if you want to correct those things, we have to raise the bar. i did not fully persuade all my democratic colleagues because the politics are tough. to take my case to the democratic caucus and to talk to my friends in organized labor and say we cannot look backwards, we have to look forward and have to compete in these areas. the concern politically is that, within the republican party, some of the same impulses that reform,-immigration some of the same impulses that see the entire world as a threat and we have to wall ourselves off. some of those same impulses

start creeping into the trade debate. a party that traditionally was pro-free-trade has a substantial element that may feel differently. to their credit, both mitch mcconnell and john boehner on -- are on the right program. they will need help potentially with their membership. the closer we get to political season, the tighter some of these boats get. .- votes yet if i am presenting an agreement to congress, it will meet the commitment i made that this would be the highest standard, most progressive, trade deal in american history, good for american business and american workers.

yes. >> hi, mr. president, thank you for being with us. i wanted to ask you about cyber security. you put an executive order in place because of the issues we have with information sharing and with liabilities. of thevery supportive legislation that has passed the house and is now in progress in the senate. i wanted to get your thoughts on how you are thinking about this and with the upcoming visit of the president of china, about cyber security in -- and our relationship with china. this will nota: go away, it will be more and more important. it will be very challenging. thelenging in part because internet itself, the architecture of it was not intended to carry trillions of

dollars of transactions and everybody's personal information, it was designed for a couple of professors to trade academic papers. security weind of are looking for was not indebted ed intohat it -- embedd the dna of the internet and the vulnerabilities are significant and being exploited by not just state actors by the nonstate actors and criminal gangs. pace.accelerating from a national security perspective and from a business perspective we will have to continue to concentrate on. one of the big issues you mentioned that we are focused on is this encryption issue. tension a legitimate

around this issue. on the one hand, the stronger the encryption, the better we can potentially protect our data. there is an argument that says we want to turbocharge our encryption so that nobody can crack it. havee other hand, if you encryption that does not have any way to get in there, we are now empowering isil, child tonographers, others essentially be able to operate within a black box in ways that we have never experienced before. during the telecommunications age. i am not talking about some of the countries around nsa, i am talking about the traditional fbi going to a judge and getting

a warrant showing probable cause, but cannot get in. we have created a process around which to see if we can square the circle and reconcile the need or greater and greater encryption, and the legitimate needs of national security and law enforcement. say we haveot cracked the code yet. but we have some of the smartest folks, not just in government but in the private sector working together. to try and resolve it. what is interesting is even in the private sector in the tech community, people are on different sides of the issue. with respect to china, this will be one of the biggest topics i discuss with their president. we have repeatedly said to the chinese government, that we

traditional intelligence gathering functions that all states, including us, engage in. we will do everything we can to stop you from getting state secrets or transcripts of a beating that i have had. -- transcripts of a meeting that i have had. that is fundamentally different from your government or its proxies in gauging directly in industrial espionage and , stealingrade secrets proprietary information from companies. that we consider an act of aggression and it has to stop. preparing a number of measures that will indicate to the chinese that this is not

just a matter of being mildly upset but is something will put significant strains on the relationship and that we are prepared to take counter actions. in order to get their attention. my hope is that it gets resolved shortly and ultimately the goal should be to have some basic .nternational framework it will not be perfect because there will still be a lot of nonstate actors and hackers who are very good and we will still have to have a good defense and have to be able to find the fingerprints of those and apprehend them and stop networks engaged in cybercrime. among states, there has to be a analogous tot is

what we have done with nuclear power. because nobody stands to gain , although the chinese and russians are close, we are the best at this. if we want to go on offense, a whole bunch of countries would have significant problems. we do not want to see the internet weaponize in that way. that requires tough negotiations, that will not be a one-year process but we would like to see -- if we and the chinese are able to coalesce around a process or negotiations then we can bring a lot of other countries along. >> we will work with you on that. thank you. >> iq for being here. -- thank you for being here. it is good to be reminded of the progress we have made so thank you for that.

deals good, the iran really good, health really good, the place we have not made progress but that is really important for business is tax reform. what we are getting to now is almost being back in a corner. since you cannot get a grand deal, we are talking about sub deals. the subfields in and of themselves are destructive in the business roundtable view to the grand view, total tax reform or covering tens of tax reform. can you think about how we should negotiate this duality that we are in an where do you think we will end up? president obama: we put forward a proposal early on that i am confident i could sell to this group. not everybody would be thrilled, but i could argue that over time

would be good for business. essentially what we proposed was the traditional framework for tax reform, close loopholes, lower rates, we would address international taxation in ways that currently put american businesses at a disadvantage and would allow for repatriation, but would not simply empty out the treasury. and would generate enough revenue that we could also pay for infrastructure. was that we would get some nibbles on the other side. to his credit, paul ryan expects -- expressed real interest in negotiations but your previous figure, mitch mcconnell, -- speaker, mitch mcconnell, said

he is not interested in getting tax reform, comprehensive tax reform of that sort done. done,is still work being we are still in conversations with mr. ryan i know that senator schumer and others have been working on the robustlities of a fairly package. to --tely, you will have the leader of the senate majority party has to buy into try to get this done. i understand why tax reform is elusive. those of us who believe in a simpler, fairer, more competitive tax-free mark in the abstract, sometimes look at our bottom lines and says that

deduction is pretty good. even if this organization has been supportive, there are other business organizations that have pretty strong influence over the republican party that have not been as wild on it, partly because their view is that the only kind of tax reform that is acceptable is one that would also lower all rates, regardless of its effect on the deficit. ist is not something that viable. we will pick -- keep on working on it, my suggestion was that you continue to encourage speaker boehner, paul ryan, mitch mcconnell to come up with an ambitious package and what i can assure you is that the white house will take it seriously.

we do not expect that everything in our original package would go forward, but the one thing we and i getdo, what isd sometimes that labeled as tax reform ins up just being cuts. you are not closing the loopholes. and, as a consequence, it is a huge strain on the treasury. we are then accused of running up the deficit to help your tax rates and we are not doing enough to help grow the economy and help ordinary workers. that is the one direction we can note here it -- we can move. >> thank you for being here, i would love to hear your thoughts on energy policy but i know we talk a lot about all of the

above, but what is changing in an unprecedented way recently our technology revolutions that are occurring either in the production of energy or perhaps more importantly in the use of energy. that gives americans a way to play offense and what has been a set of unprecedented challenges. what is your thoughts on that? president obama: i think you described it well. i am much more optimistic about our ability to get a handle fornd energy that is good our economy, good for business, good for consumers, good for job creation, and maybe saves the planet in the process. i am much more optimistic about that now that i was when i started as president. a good example is when you look at what is happening with solar. lawre not quite at moore's

yet, but the pace at which the unit costs for solar energy have gone down. it is stunning. we have seen not quite the same pace but similar progress around wind, our natural gas production is unprecedented. and i have been supportive of our natural gas production as being not only important to our economy, but also geopolitically , a huge recipe for energy independence, as long as we get the methane discharge issues right and i think there are ways of doing that with sound science. so, that is on the production side and, as you said, on the utilization side, there is not a company here that is not producing significantly more

product with less energy than you were 10 years ago, and certainly then you were 20 years ago. everybody here has seen the utilization,king timingying waste, and issues around when is energy expensive, when his energy cheap , so there is enormous progress on a commercial side. and then individual households -- we arehings like able to fine-tune our energy usage in ways we have not seen before. then you halve the hole transportation sector in which we have continued to make significant progress in detroit as well is upstart like tesla.

there are still in network issues around the transportation revolution, although companies like ups are doing a great job. already experienced -- experiment with their fleets -- experimenting with their fleets. that is good news. i would say that the big challenge now, if we would realize all the potential, is to theywith utilities so that have a business model in which they are making money while seeing this change in distribution patterns in the grid. i think there are still legitimate economic issues that have to be sorted through. it is tricky because it is a patchwork system, we do not have one at national grid. researcht in basic

needs to continue is the second thing. battery technology is greatly improved, but we have not seen all of the breakthroughs we can make with battery technology that would make a huge difference in storage. for is an exciting area development. i would urge the brt and some of you as companies individually have our redone this, you the issue of climate change and the paris conference will be coming up at the end of this year, as an opportunity, rather than as a problem. because this is coming. it is coming generationally, if you talk to your kids or my kids , they are much more attuned to this issue, consumers will be caring about it more and more.

the environmental effects we are seeing, i will be calling jerry brown today to talk about california wildfires, the snowpack in this year upon -- nevada is as low at it has been in 500 years. the flooding problem in places like south florida during high tide, suddenly billions of properties under what -- billions of dollars of properties underwater. for us to be ahead of it and to andk about our ingenuity our science can solve these problems will give us a jump on everybody else. that there is a pledge signed,bers of the brt look for opportunities and sign it.

companies that have been in traditional fossil -- if you, because know how to do oil and gas well, you can figure out how to do solar well and make money doing it. you can figure out how to create efficiencies that help your bottom line. what we have tried to do with the clean power plant is to give states flexibility understanding everybody has a different energy mix. now south we approve the first nuclear plant in a generation because we think nuclear needs to be part of that package. i am a big believer that there will be different ways to skin a cat on this thing, we have to set a baseline in which all of us understand the direction we need to go.

instead of us spending a lot of time fighting science, let's go with science. we do better when we are on the side of facts and evidence and science. as a general rule, that has proved to be our strength as americans. jim. >> if i could turn back to china for a second. there are a lot of issues we have to sort out. you mentioned security. theirfeelings about tpp, own economy, their inward turn in the name of creating consumer economy has had protectionist elements that we do not like. wouldk many in this room like to see some kind of positive outcome from this summit. that underlines our mutual benefit if we can figure out

some of these things and find a way for the world's two biggest economies to see a path forward as well as all of the issues we have. do you have a comment on the tone he will try to set with the rules -- roles we could play in supporting both the managing our relationship as well as finding a future for it? my tone withma: china has been consistent, it does not jump up and down depending where the polls are. china should be and will continue to be an economic competitor. to make sure that

reaching an understanding with them about our presence as a power. that it is in our interest or china to continue what has been dubbed a peaceful orderly rise. china is a big place with a lot of people and we are better off eating andople are are buyingr and consumer goods rather than starving-- starting -- and rioting on the streets. when itold the president came into opposite and the current president, our goal is

to have them as a partner in helping to maintain a set of international rules and norms that benefit everybody. that in fact, we are what facilitated china's rise. they were essentially writing on our backs for the last 30 years ago as we are underwriting peace, security, the free flow rulesmerce, international in the financial sector. matured, we have said to them, with power comes responsibility and you have to step up, you cannot act as if you are a third world country and pursue protectionist policies or engage in dumping or not realizing intellectual

you are the -- a large economy. you cannot pursue an export driven strategy because you are too big. you will not be up to grow your economy of the same pace over the last -- next 20 years if you did over the last years want your economy reaches a sort -- certain size there is not enough of a global market to absorb that and you need to start thinking about transparency within your own economy. up aow are you setting safety net so that workers have some cushion and are willing to spend money as opposed to stopping it it any mattress, you have to be concerned about environmental issues, because you cannot breathe in beijing and that spills over for all of us. and, as a large country with a

powerful military, you cannot go around pushing your little neighbors around just because you are bigger. ultimately, you will be advantaged by everybody following the rules. areas, thesome chinese understand this. in other areas, they don't. in other areas they still see themselves as the poor country that should not have any obligations internationally. and, in some cases, they still onl that when we call them issues like their behavior in the south china sea or intellectual property theft, that we are trying to contain them. as opposed to us wanting them to

abide by the same rules that helped create an environment which they can rise in. fatesod news is that our are sufficiently intertwined, that, and in many ways they need us a lot more than we need them, that i think they will be continuing areas -- there will be continuing areas in which they move. as long as we do not resort to the kind of loose talk and notice some that i of our presidential candidates engage in. people you know. is -- it tends not to be constructive. bottom line, i think this summit

will be useful and there will be a lot about comes around things like energy and climate change. how theyprovements in deal with investors that will show constructive progress. our military conversations have been much better than they were when i began office. the one thing i would suggest one,the brt can do, number i think i've said this to you in the past, when your company's have a problem in china, and you want us to help, you have two let us help. do not tell us on the side, we have this problem you need to look into, but then -- but leave our names out of it because we do not want to be punished. typically we are not effective with the chinese unless we are

able to present facts. and evidence of a problem. otherwise they will stonewall and slow walk issues. problems ineing terms of the competitive environment, protecting your ,usiness is, unfair competition that runs afoul of understanding the principles that have been established, let us know and let us be your advocate. that is important. the second thing i think everybody here should do is not fall into the same trap that we fell into around japan in the 1980's, which is somehow china has taken over just like japan was taking over and we are in inevitable decline. this whole argument, i will go

on a quick rant. this whole notion that somehow outre getting out competed, --s, at-bat, we are losing, out-that, we are losing, nobody outside of the united states knows what we are talking about. we have problems, we have issues, our biggest problem is gridlock in washington. overall, our cards are so much ,etter than everybody else's our pool of quality businesses and talent and our institutions and our rule of law and how we manage and adapt to new and changing circumstances and our dominance in knowledge-based

industries, nobody matches us. and we attract the best talent around the world still wants to come here if we would let them come. so, i think it is important for business voices to point out every once in a while, america is in the drivers seat if we make some smart decisions. comment.ot a partisan that is the fact. there is not a country out there, including china, that would not look at us with indy. -- look at us with envy. our problem is not that china will out negotiate us or that mr. bruton is out strategizing not --that mr. boudin is mr. putin is out strategizing

us. i am being generous when i say but, we engage in self inflicted wounds like this potential government shutdown. it is unnecessary. we have time for a couple more questions. good to see you, having are you doing? -- how are you doing? >> earlier this summer, the expiration of the xm bank authorization. president obama: speaking of self-inflicted wounds. >> part of the ongoing debate in washington, the senate has attached a reauthorization to the transportation bill which is now down at the house. on monday, the roundtable sent a letter to the leadership on both sides in congress, pointing out

the benefits of reauthorization that some of those get lost in this debate, because it has been characterized as only benefiting a few companies, which ignores the thousands of people who are basically employed by our suppliers across the country and the impact positive -- and the positive impact that has as well as it is a net revenue generator for the government. we have plans to have further discussions later today and this week with leadership in the house. do you have any, we had a good discussion with your team, do you have insights that you could share with us that would help us in getting that reauthorization? it isent obama: this was not that reauthorized a year ago.

reversal inis weird which the principal opponents caucus and thety republican party. become thisank has -- what aree of some of the presidential candidates calling it -- crony capitalism. what is ironic, some of you know the back story, a member of this organization started this whole thing because they were upset -- a planes being sold competitor on a route and suddenly this caught fire and the right-wing internet. it is hard to explain. look, i had a group of small

businesses ranging from four people to a couple of hundred people talking about how they use xm, the only way they can get into these markets. xm does not cost the government. a money loser for us. -- i do have to tell not have to tell jim how important this is, every time i have to take a foreign trip i have to sell a turbine or a plane. about thisrned announcement that the jobs in the united states will not be going overseas because we do not get this done. that is true for the supply

chain and true for smaller companies that use xm directly am a not just that they are part of a ge or boeing supply chain, they are selling tea to a country and this is the only mechanism they have to make the sales. the good news is that mcconnell and boehner say they want to get it done. as you said, we have already shown there are sufficient books for it in the senate and we think -- votes in the senate and we think in the house. i would concentrate your attention on house republican caucus members. i think you have to flooded the zone and let them know this is important. that includes him a by the way, talking to individual members who, in their districts, have companies adversely affected as long as xm is frozen.

my expectation is that it gets done during the course of these budget negotiations. and we will push as hard as we can to get it there. >> mr. president, thank you for being here. one of the issues we deal with and we talked about last time you were here was regulation. the businesseas roundtable is focused on these days is the ozone rule which october 1, your administration will be coming out with a recommendation. our position is that we need to maintain the 75 parts per billion to lower that standard when technology does not exist, and when communities are already advancing toward the 75 goal, if you lower it to 70, and voters -- it will introduce another 200 counties in the nonattainment which means we are not open for

business and that is our concern, do you have any thoughts or what your plans are? there are a lot of complicated technical issues but i will try to simplify as much as possible. number one, we are under a court order to do this. i think there may be a misperception that the epa can do whatever it wants. there were lawsuits brought under the previous administration that continued into my administration and we went before a judge and properly got some additional time because there was a notion that we would ago, standards a few years and then immediately get new data and force everybody to lower them all over again, and we said, let's do this one time and -- in a sensible way so

people can plan. we have legal constraints, this is not something that popped out of my head full blown. theso i always enjoy seeing advertising for -- obama's ozone plan. the ozone rules they back to -- date back to when i was in law school, before i had gray hair. stringentsome fairly statutory guidelines by which the epa is supposed to evaluate the standards. the epa is following the science and the statutes as best as it can. we are mindful that, in some cases, because of the nature of pollutants are

generated and where they blow, this can create a complicated situation for local jurisdictions and local communities and some states and counties end up being hit worse than others and we are trying to work with those states and those communities as best we can, taking their concerns into account. -- youhe bottom line can't legitimately go after me on the clean powerplant role, because that was hatched by us and i believe we needed to deal with climate change and so we can have a lengthy debate about that. ozone, this is a existing statute, and an existing mechanism and we are charged

based onementing it the science that is presented to us and that is what we are trying to do, taking this input into account. i recognize the concerns. i will say this, the last point i will make on this. the costs associated implementing the ozone rule, when you do a cost-benefit, the amount of averted, is asthma substantially higher than the cost. that does not necessarily resolve all of the concerns people may have about local costs being borne where the savings are spread out more broadly. legitimate economic issues would

have to be considered. us epa has been listening to -- every stakeholder. what you will see in the analysis overall is that we do not issue a regulation where the costs are not lower than the benefits. if you look at the regulations we generally put forward, the costs are substantially lower than the benefits that are generated. >> thank you, mr. president. any of us are interested in cuba and the opening has been positive, a lot of issues to get normal relations, how do you see that hat happening and what is the future in your opinion? thank you. president obama: i do not think it will be a overnight transformation. by i am convinced that

reason gave you in cuba, reengage -- we engaging cuba -- we are creating an environment in which a generational change and transition will take place in that country. already you are seeing conversations taking place about -- how is cuba going to accommodate an influx of tourists? and how do they think about the internet? open communications in order to participate in the modern economy. that inevitably leads to questions about -- can a company hire a cuban directly? as opposed to going through the government? over time that creates space for long-termreedom and a

political transition. for now, what we have said is step-by-step look for areas and opportunities within our authorities, as long as congress still has the mr go in place, -- embargo in place, there are certain things we cannot do an certain things we can do, in terms of telecommunications. and we will also press the cuban government around issues of and when hisedom holiness, the pope comes, he will visit cuba, that will be an interestingfor more conversations inside of cuba. my biggest suggestion would be for the brt to have

conversations on a bipartisan basis about lifting the embargo had it does not have to happen in one fell swoop. if you look at the economic opportunities that are presented, they are significant. sense does not make much that the country 90 miles off the shore of florida, that is not at this point a significant has shownus, and that least looking to at beyond its borders for the first time. even if it is still scared of what it might bring. that does not make sense for us to keep sticking to the old ways of doing business. . will take one more question then i will come around and say hi to everybody. anybody else?

you and i know a topic near to your heart is education for young people and you spent a lot of time on this. ,any of us have done things private partnerships, and you made a comment recently about computer science for all high school kids, which is an important point because technology will infiltrate all jobs. maybe a chance to make comments about how you envision something like that taking root over the long-term, that we could make progress. president obama: i want to commend ginny and ibm because you have done terrific work, anybody who wants inspiration go ibm's high school that participating in in brooklyn where there is a collaboration between the public school system, the city colleges of new system and ibm.

you have kids, most of them these parents never went to college, a lot of them immigrant kids. temy are marching through s education, preengineering education, getting college credit by the time they are sophomores or juniors in high school. they are able to save money because in five years in high school they have come out with an associates degree and then are either transferred to a four-year university with those credits or are starting to work with ibm because they had been apprenticing and the curriculum design has given them confidence that if they do well they will get a job. something we are looking to try to duplicate all across the country. , as i mentioned at

the top, because of the strong work that arne duncan has done, the strong work that a lot of governors and local communities have done to increase accountability, creativity, have high expectations for kids, bus through some of the old bureaucratic obstacles, we are seeing the highest reading scores, highest math scores, inhest graduation rates, and -- part of our goal is to improve stem education generally, a critical element of that is understanding this computer age that these kids are immersed in. i do not want them just to know how to use their phone to play video games, i want them to know how that phone works and eventually program it. what is remarkable, i am a doubt

the age where, i think my high codingjust had the first class when i was in seventh or eighth grade, you had those cards and it was, you had the punch cards. now, the way these tools and now the tools and resources that are available for kids are starting in first and second grade. andad these science fairs these girl scout troops come in and may have designed their own simulations with entire towns of people and all kinds of scenarios where they have figured it out. it is actually something that they naturally gravitate to him you have to start early. it's almost like a foreign

language when rather than try to catch kids when they are intense, 11th, 12th grade -- make it part of the broader curriculum and how they are teaching math and how their teaching social studies. that seems to be the way in which kids get engaged. so we are doing a lot of work with many of you individually as companies on this stem education issue. we hope that you will continue to participate and you have been great partners on that front. closingll just say in that it is always a pleasure to be here. reiterate as we enter into the silly season of the primary thing

that is holding back a lot of potential growth, jobs, improved stabilityes, greater is well within our control right now. things that traditionally enjoyed bipartisan getting ptpm bank, financing and executing on infrastructure policy. i've had conversations with folks like larry fink and others and we are open at looking at new creative ways of financing it, but the notion that we are not doing that right now makes absolutely no sense. investing in research and development -- these are not partisan issues. there are some areas where they beentraditionally legitimate arguments between democrats and republicans. there are some issues like on

environmental regulations or financial regulations where jamie and i may disagree or nick and i may disagree. and we can have those arguments and we probably won't convince each other on some of these things, but what i'm looking at is the low hanging fruit that are no-brainers and that nobody here would argue with. and the notion that we are n doing them right now because faction within one of our parties has gone off the rails and sees a conspiracy around everything or simply as opposed to anything i propose, even if they used to propose it -- that's a problem. and i think it is very important for all of you to just step back

and take a look at it because you still have influence on at andt some of those folks challenge them. wouldn't we do things that everybody knows makes sense? thank you, everybody. [applause] that was the president just wrapping up. ceos ofth several the business roundtable. i'm betty liu. pimm: i am pimm fox. let us get insight from phil mattingly. he is live at the reagan library in semi-, california. the president talking about a potential government shutdown and tax reform and china as well as spending on infrastructure. phil: a lot to unpack. explicitf implicit and

references to the individual speaking behind me and a couple of hours. the white house when it comes to tax reform and this government shutdown you have talked about like running out of government funding at the end of september, is going back to an old push -- the so-called carried interest tax loophole, taxing funds as ordinary income instead of capital gains. this is something that has been bolstered by none other than donald trump and jeb bush. what they are using now is a political season to go back and push this. pimm fox, you mentioned something that is the biggest take away and that is cyber security and china. this has been a big issue going back and forth between the two countries throughout the most of the president's term. just this past weekend, top white house officials held closed-door meetings with senior chinese officials about this. on the table -- potential sanctions for chinese companies

based on what is going on. economicalleges a espionage. this is a few weeks before the chinese presidents official visit. the president's willingness to is tryingon publicly to put pressure on them so they .o not have the file sanction it was really interesting. betty: let me follow up on that. it was very interesting that he tackled that out right and the sanctions are something the white house is considering. do we expect perhaps now that we know that there is a date -- september 25 at the chinese president will be here -- that there will be an announcement on cyber security and the will come to some sort of agreement on it? phil: i been told about the meeting that happened this past weekend. again, this was not just officials from both countries meeting. this was at the highest level. this was susan rice and fbi director jim coming in on these

meetings and easement work meetings about cyber security. there was an agreement reached in principle to the devil is in the details, but the way these two countries have been going back and forth -- any type of agreement really needs to be fleshed out. you have seen that the president brought this up in 2013 when president xi jinping visited the united states that it was the first person the person talk about this. the pendulum has been swinging back-and-forth. if they reach an agreement, that's a huge deal. what that an agreement -- agreement entails is even bigger. if they announce what that presidentis during aziz and pings visit, that would be an enormous still. mattingly, you, phil reporting live from california

at the site of the republican presidential debate. we are talking about the president's remarks at the business roundtable and washington, d.c.. betty: joining us now is jim connor and a former advisor to republican presidential nominee mitt romney. you heard the president take a bit of a swipe at the republicans there, saying there is a faction of the gop ruining the whole conversation. and turning this political season into the silly season. tonight, we have got the debate. he still has the democrats there with this debate. is anything going to stop donald trump here? ed: i don't think so. i think donald has two arguments that resonates with the public. one of those is that immigration is dampening wage growth and there's probably some truth to that. if you have an unlimited supply of labor, it's unlikely wages grow. the second is that you show

taxingness to attack and the successful any rich. donald is in agreement with bernie sanders. he can get the same agreement from the inside as he could on the democrat side if yo he ran with this. if he wins the republican primary, he can't believe when as a republican. the fix to that problem is to become a democrat. we won't have a republican running because we will have to democrats because they will be talking about raising tax rates to h./ he will nevertheless be running with that because he will get a high share of the voting population. pimm: how is it that he will get a high share of the voting position from the republican electorate? ed: he will have a hard time winning the public and primary. pimm: why is he pulling the such substantial high numbers?

ed: there is a large protest vote. pimm: a vote for nobody. betty: or person outside of the beltway. ,d: on the other side mainstream republicans are still fragmented. there has been no coalescing to a candidate. is aecond is that donald reckless showman that makes great tv. everybody wants to see what crazy thing he might do. that draws a large audience and that he uses our media to diminish the other candidates. and the other candidates are selected to wrestle with the take because you get dirty and the pig likes it. so they stand back on the sidelines. he is getting all the attention pouring negative advertising on the other candidates, diminishing them, and it's working. by the time it gets to the primaries, they're going to pour millions of dollars into diminishing him. they won't attack him for emotional instability and the reckless comments he makes about the women. betty: what will they attack them for? ed: on being a democrat. he has been for higher taxes,

more spending and health care, lots of positions he has taken in the past will come back to haunt him when they start pouring millions of dollars in. betty: you do not actually believe the polls that say donald trump for lack of a better word is trumping the other candidates? you say online betting is more accurate. the volumes on online betting are still small, historically they have been way more accurate than the polling, which is highly inaccurate at this point in the race. i think rick perry was winning at this .4 years ago. when president obama was the candidate for the democratic nomination against hillary clinton at this time during that original primary, hillary clinton was ahead of him. ed: i think on my betting -- bush is at 35% and donald is at 15%. almost more than 2-1. ?imm: do you take that bet

ed: i would take that bet. the volume on the internet is far more willing to take the bet against bush. they want to bet on bush because they think the odds are undervalued on bush and overvalued on trump. pimm: that is interesting. thank you very much. conard, the former advisor of former presidential nominee mitt romney. betty: join us for special all new one hour "with all due respect." they will be live from the breakin reagan library. that is at 5:00 p.m.. pimm: i will see you later this afternoon. betty: i know you will be watching could still ahead, the and now cio at private land will be joining us to talk about the fed. we will be back. ♪

betty: beautiful sunny skies there over new york city here on our last few days of summer. now a look at the top stories at this afternoon. your chrysler has reached a tentative agreement on a new contract with the united auto workers union. the two sides elevated last night, but revealed little about the bill. it eventually does away with the two-tiered wage structure. the union will try to reach similar agreements with ford and general motors. fewerr" us will hire holiday employees this year. the company is taking on 40,000 temporary workers, 5000 fewer than a year ago. toys "r" us will rely more on existing workers. the chain is in a missed of a

turnaround plan after three years of falling sales. target once its employees to shape up. the discount retailer's ac offering fitbit trackers to its employees in u.s.. the idea is to improve worker fitness and improve health care costs. bug is taking longer to fix than expected. the new operating system is supposed to let third-party apps run more quickly on the apple watch. and facebook is looking to change its like it or not approach. the company plans to add a button letting users show sympathy when hitting like wouldn't be appropriate for something sad or upsetting. says it willerberg start soon, but do not look for the dislike button. the company has said that such a button would make it too easy to criticize such a post. that is a look at top stories at this hour. coming up, what insight on china slowing growth and what it means

for other emerging market economies. to 33,000utting up jobs as the tech giant plans to split into two two separate entities. that is coming up on "bloomberg market day." ♪

betty: welcome back. i am betty liu. back to the top question on investors minds today -- will the fed raise interest rates tomorrow and are fed officials repaired to deal with the consequences? dan arbess is joining me and he is the chief investment officer and shutdown the fund at weinberg because it was a tough season for even investment pros. holding down rates including the fed. i know that you have been laying low for a web. i'm glad you decided to come on our program. shutdown't

because it was a tough investing environment. i very happy to be here. betty: i'm glad. the fed first off -- you said before that central banks are keeping rates down a naturally. you think the fed should what -- do one hike at least? dan: i think the fed needs to act now and needs to implement what is called a dovish height. we're going to raise rates so that we can demonstrate that people are not going to fall out of bed, but we are going to be very measured in the pace of raising interest rates because economic data, as everybody knows, is not particularly robust. in fact, i think they should be raising right now in spite of the fact that the dow is not that great. betty: why? dan: because they need to eliminate the uncertainty and they need to bring people to see and appreciate -- and i don't

just mean markets, i mean the whole political process -- to see and appreciate the reality, which is that the efficacy of monetary policy to support the economic recovery and support economic progress from here is done. the fed is done. they can do with zero interest rates and unconventional monetary policies -- the shift now needs to move the fiscal side. action, regulation, tax reform, infrastructure investment -- these are big things that need to happen that have not happen because everybody has lazily, i should say, relied on the fed. in the markets have been reduced parsinglor game of fragments of data and of fedting on segments governors as to what is going to happen, all of which is unhealthy. there are some very big things

going on in the economy. everyone's focus needs to shift to those big things. participantsmarket , everyone down the line. betty: but here's the problem. presidenteard the talked about the dysfunction going on in washington and how we've have got a budget showdown coming up in just a few weeks. you might even see another government shutdown. that physical side of the equation may never get there, right? there. will get ok, i'm an optimist and i take the long view as you known me for a long time. i'm a multi-good thinker. i'm actually optimistic about the political process. despite the polarization because the polarization has gotten so ridiculous that i have to believe that it will not be tolerated. in 2016, 40% of the electorate is going to be the millennials. they are not interested in this partisan discussion and the

alternatives that it presents. they are looking for compromise and collaboration, which is what our constitution is designed to foster. going to haveare a better outcome than most people seem to believe in 2016. betty: we're going to leave it to the 18-year-olds and a 16-year-olds now. let us move on to the fun. tell me clearly -- what happened at syrixerion and what you're doing now? dan: i'm an investor in big ideas and multiyear investments -- not in trades, not in even investments that are syste sensitive to fragments of information. i have never been interested in that. .e had a terrific track record we had one down here in 2011. our performance during the financial crisis, from

2007-2010, was in the top 20% in the whole industry. 12.5% annualized. one year down and we work really hard. i had a terrific investment team. we worked really hard to recover the vast majority of the losses. we got to the fourth quarter of last year and i started the process of reflecting on what i saw ahead for this year. you know -- you have read what i wrote at the end of last year that basically everything that happened was anticipated in that piece. i felt that we were going to have a tough year in the markets. we are going to have slow economic growth. it is going to be a difficult environment to invest in for short-term horizons. what i need to do now if i do not have a positive outlook on 2015, and particularly after what we have witnessed in october of 2014 in the credit

markets where the regulation that has been imposed on wall eliminated the liquidity that has been provided historically in the credit markets, and we saw something that really, really concern me when the credit markets in october basically went dry. the bid offer spread in some very large issuances. they were five points or more. betty: we saw a little bit of that this year. me, was a huge flag in the final, sort of technical consideration that had a good timethis is to give back the capital to investors, take a parts, and to proceed withw to some of the very big ideas that are out there in the world, but doing it with capital whose duration is aligned with the time it is going to take to recognize and harvest the

valley. betty: so, you corrected me and you said this is not shutting the fund down. dan: i did not say it is not shutting the fun down. i said it is not shutting the fun down because it is a difficult environment to invest in. environment has paid extremely well. we should not be complaining about the environment. we should be doing the best that we can. my point is that, for what i do multi-investing, i need longer duration capital. i need capital that is not focused on news fragments and what happens today, tomorrow, today, tomorrow. even this whole fed discussion, if you have read the news the last couple of days, retail -- -- that.de data

people are too focused on the minutia now and losing focus. betty: it sounds like what you are saying is that this is here to say. this kind of behavior is here to stay and you do not want to operate in that environment. man: i think the short-termis is affecting all disciplines. it's affecting the political discipline. it is the accessibility of information through social media that is causing people to feel obliged to react to ever smaller bits of information. and real progress in whatever discipline you're talking about comes, i believe, from taking a step back from tactical fragments of information and thinking more robustly about longer horizon developments and capturing those if you're in the investment business. betty: how are you investing now than? because you are still investing. in august, youe,

and i were corresponding a little bit. when we saw this huge market volatility and everybody said, that is because the chinese economy is melting down, i thought that was ridiculous. and so i was buying. i could afford to be buying because if it goes lower, i will buy market i can afford to do that becau it's my money. betty: it to them money right now. -- it is your money right now. dan: i do not want to be in a position where i can be shaken out of investments because their short-term worries. there are investors who are great they don't want the downside volatility. i present that. if they invested in its hedge fund and have the right to withdraw every capital quarter, then by definition, i suppose they are looking at performance in the lead up quarter, which means every week and every day, and i do not think that is the right environment to do it in.

on the other hand, the other side creates the right opportunities. if you look back in august, what happened? the chinese stock market went up like a rocket. that was driven by uneducated retail investors in china. -- theunds followed retail investors. then, the retail investors, for whatever reason, bailed out. they were followed by hedge funds. and whoever was managing somebody else's money had to explain to their investors what was going on. so what did they say? they did not say, i taste the retail guys and now i'm chasing the other way. they said, well, the chinese economy is in trouble. absolute nonsense. couldn't be farther from the truth. the chinese economy is moving in exactly the right direction. people who are focused on the growth rate slowing are focused on the wrong consideration. the quality of growth is much more important than the rate of growth in gdp. 5%-7% because you say

live by the consumer in china is worth more than 14% -- dan: a fixed asset growth. absolutely. the reason is that the chinese the efficacy of their growth model, depending on investing in urbanization, has reached its limit. and so they are showing discipline in moving away from that growth model as opposed to cities andto build railways to nowhere and all the stuff that we have heard talked about over the years. bey are moving to what will the greatest economic development of our generation, which is having moved people into cities and created conditions where wages have been rising at 17% annually. they now want to focus on building consumption. they're liberalizing factor

pricing. they are liberalizing exchange rates. they are putting their increasingly well-off consumers in a position where they consume the rest of the world. that is going to benefit them and it's going to benefit the whole world. it will turn out to be the single most important economic probably of our generation. i think it is fabulous. if growth goes down to 5% in china, now it's at 7%, i would say that's good. why? it's reality. reality is good. slower growth, but more sustainable growth is better than faster, less sustainable growth, which is led by investment decisions. betty: before i go, you mentioned china. i'm sure a lot of people i are wondering -- you bought chinese stocks? is that your big bet? dan: i bought chinese stocks in this particular instance and it has worked out well so far. if it goes the other way

tomorrow, this is the critical point. i do not care. i will buy more because i'm in it for the next five years. i'm not in it for the next five minutes, the next five days, or even the next five months. betty: it is your money and you will not be fielding phone calls ked investors. dan: except my wife and my kids. [laughter] betty: dan, great to see. dan: thank you so much. betty: dan arbess, the cio of private lands. i want to get a look with julie hyman. change when things were little changed from the overall averages as investors await the fed. there are still awaiting the fed, but we are seeing a rally in energy shares. we will get more into detail about 40 minutes time. you can see alternate averages are higher with the s&p 500 leading. it is more heavily weighted

towards energy than the other major benchmarks. i didn't want to point out an individual stock movement caught my eye today it happened over the course of the session and that is an under armour. the athletic company -- take a look at this big leg upward that we had just after 11:00 it that is because the company is having its investor day today and the ceo was speaking at that time. he also said the company will reach $7.5 billion in revenue by 2018 and that the $4 billion annual target will be reached earlier than the company had expected. if you take a look at my bloomberg terminal, you can see the revenue trajectory for under armour. the steep climb that we have had over the past years. right now on an annual basis, under armour's revenue under $3 billion. you're looking at $7.5 billion projected by 2018, betty. speaking of under armour, they are holding the investor day. how ourtty: competitors doing? julie: i want to look at nike

today. they are up around 1%. that was an analyst call from deutsche bank with the price to $120.ised from $125 you're just talking about china. china's athletic sector is the despite theor nike fact that the chinese retail industry is outperforming, given the negative headlines we get. those mikey shares are doing well. in the year today, under armour is more of a growth stock. the key has been a slow and steady and consistent performer. if you look at the year today performance, and this is adjusted for the percentage difference here, you're looking at a 49% gain an under armour for the year today. nike is up about 19%. you can also look over the longer term of the past five years and under armour's trajectory here. again, this is more of a growth smallerd a much company. its percentage gains and revenue have been steeper than they have

been at nike and so has its stock performance, betty. mark: julie hyman joining us. i'm mark crumpton with betty liu. that extended interview was fascinated. he said he will let his wife know. what is the consensus on how he feels about china? betty: he clearly is a china bowl. i think it is interesting. it is one of those opinions you don't hear a lot. what you hear mostly is that china is going down the two. they are in recession. the quality of the growth now is more important in china than the actual number, which is what we are all focused on. there 7% gdp. onk: we will also be focused china tomorrow because we want to find out how china and other markets react depending on what the federal reserve decides to do. we will have full day coverage of that. moving on to politics, the second republican presidential debate is tonight.

it is in simi valley, california at the ronald reagan presidential library. the 10 other candidates in the main debate will be looking for ways to draw contrasts between themselves and the front runner, billionaire donald trump. betty: joining us now is bloomberg politics reporter phil mattingly. what is going to at stake.gest moment is it going to be seeing if donald trump can hold his own again? phil: look, the last couple of months of the political campaign have revolved around donald trump in this debate is going to be no different. he will literally be in the center of the 11 candidates on the debate stays behind me tonight. i think our couple things you need to pay attention to. first, the people who try to aggressively take shots at donald trump. of advisorsshortage and operatives who are very upset at the fact that they have got no media are certain of the last couple of months because of donald trump. they see a pathway to that attention by attacking donald trump. the other thing i think you need to pay attention to his ben

carson. steadily, slowly but surely -- he has not only risen in the polls, but he is now in the top two. it is the top two and everybody else. the latest cbs and new york times poll -- and carson was at 23%, four points behind donald trump you this funny thing about that poll is that he has gained 17 points in a month. how he operates tonight knowing he is a top-tier candidate that will almost certainly be targeted -- that is something to keep an eye on. that aside from the fact other candidates have not been able to gain any traction by trying to go at mr. trump, what do they do? do they concede that mr. trump is the final runner -- front runner and it'll be scrabbling for second and third place or is it up to the likes of dr. ben carson tonight to a certain self -- assert himself? phil: tonight will be a grand extreme it. when you talk to the campaigns, all 11 or 16 if you want to expand it to the secondary

junior debate that's going on right now -- nobody has a good, on how toht" answer deal with donald trump you i think you will see a lot of different strategy. i think you'll see people take shots at him. when you talk about wisconsin governor scott walker, once a top-tier candidate and now in the listing of digits, he will be aggressive and go after donald trump you look at marco rubio, who again has not performed how they wanted him to, but that's not really his idea to go after donald trump you it will be interesting to not only see what's to play tonight, but what happens to her two or three weeks later. for the last 90 days, everybody who is tried something has more or less failed. betty: i thought you wrote a great piece on the cover of bloomberg politics.com where you say there are five things to watch. we just talked about trump and ben carson. one of the things to watch that you guys wrote about is who is going to endorse a government shutdown? who could, phil, and why does

this matter? phil: there is a lot of pressure for these candidates that are on the stage tonight. this is a most certainly going to be proposed to them and they're going to have to make a choice. the government has until the end of september to reach an agreement on funding. the crux of the issue right now is on funding planned parenthood. obviously, there have been a series of almost 10 videos now ,ealing with fetal tissue similarly grotesque statements made in the secret videos better in taken. plug-ins on capitol hill are making very clear right now they do not believe the government should be funded so long as planned parenthood funding is minting. it's about $500 million in the current appropriations process for planned parenthood. among the people who say shut the government down unless you defund planned parenthood -- ted cruz, rand paul, likely marco rubio. guys who will have to vote on this. how the pressure goes on the rest of the stage? you heard the president a few

hours ago saying there is a responsible lead a shutting down the government. there's a chance all 11 people on the stage will endorse shutting down the government. anybody who does not will be an interesting stand up. moment agoentioned a that mr. trump seems to have stuck the oxygen out of the room and other candidates cannot seem to get any media traction. it seems according to reports and folks in mr. trump's own campaign that he is down confident at this point. what about the other candidates who know that even if mr. trump than usual,t spoken even if he does have some sort of verbal gaffe, the electric does not seem to be holding that against him because he is still holding onto first place? phil: it is a frustrating experience and i right now conveying what you hear explicitly from campaign operatives from campaign managers. there are a couple of ways that you hear people looking at it. one is that if the electorate is just going to go this way, if

trump's appeal on its own, not digging into policy into his past or for any other standard -- candidate would be disqualifying, if that's how it's on the go for the next 15 months, there's nothing they can do. it's how it's going to be in you have to throw up your hands. you control what you can control. each candidate not mean donald trump tonight, they have a set of metrics that they would like to hit almost top on every single one of them is trying to figure out some way to appeal to donors. i think the donor issue here is going to be one of the most interesting things. the summit is traditionally a very dry campaign fund-raising period. we saw the rick perry had to drop out because he did not raise enough money. all these candidates are hearing from donors that are concerned about donald trump, concerned about low poll numbers. how they feel like they need to appeal to donors tonight may be the key to victory internally. if the donors come away from this not only happy, bubbling to cut marchex.

-- but willing to cut marchex. mark: phil mattingly live at the reagan presents a lighter. reminder, join us later today for special one-hour "with all due respect." john heiman and mark halperin will be hosting the show in simi valley, california. that is at 5:00 p.m. new york time. when the other titans of industry of corporate who is expressing some concerns is lloyd blankfein. we have this story on bloomberg.com. he told the breakfast sponsored by "the wall street journal" today of trump that it is hard to imagine his finger on the button. that blows my mind. betty: that says it right there. [laughter] that's all you need to know. mark: it's want to be interesting to my. betty: let's get a look at the top stories at this hour. president obama urging congress budget action on a at and a business roundtable moments ago.

he said reluctance to agree to negotiate to a budget on spending and not hold it hostage to ideological issues such as planned parenthood. president obama: the notion that we play chicken with an $18 trillion economy and global markets that are already skittish all because of an issue around a woman's health provider $.20 outives less than of every thousand dollars of the federal budget is not good policymaking. betty: federal agencies run out of money to weeks from today. after today, the house has only five workdays left in washington this month. there are a number of americans living in poverty and little change from the last year. the census bureau says the u.s. poverty rate is just under 15%, the same as the prevus year. i family of four -- a family of four is considered to be in poverty in the annual household income is less the $40,000. mark: consumer confidence is at a high and that will grow in the second half the good that is according to the national

association of home builders readings from the seventh gauge at 62 this month. readings above 50 mean more favorable market conditions. inflation is staying below the level the u.s. federal reserve wants. consumer prices fell 1/10 of a percent last month thanks to cheaper gasoline. that was the first decline since january. that policy makers consider the inflation rate today and tomorrow as they decide whether to raise interest rates. and that is a look at the top stories we're following at this hour. betty: still ahead, the axes out again. hewlett-packard says it will cut about 30,000 more jobs as it prepares to split in two. mark: could wave after wave of job cuts actually turned the company around? we will go live to san francisco when "market day" continues in just a moment. ♪

betty: a beautiful view of the san francisco bay bridge as we look at it every day. it looks like the weather is the same every day. welcome back to "bloomberg market day." i am betty liu here with mark crumpton. the ax is out again at hewlett-packard. mark: the company is trimming its payroll of to 30,000 jobs are expected to be a limited. bloombergs cory johnson joins us now from san francisco. why does this keep happening at hp? cory: talk about whether that never changes. the clouds at how will out of never seem to end. this is at least the sixth time they have up the number of layoffs and the restructuring

just goes on and on and on. these layoffs are very big number, but interesting how they're coming after the split of the company. this came during a financial analyst meeting when they announced that the new companies are going to continue layoffs and continue restructuring. it is not just hp enterprises. that's what got the headline last night with 30,000 jobs as the guidance they gave. they are also going to lay off a few thousand jobs on their hp incorporated business and continue to make restructuring there. the number of layoffs at this company -- this is on top of the 50,000 people to have already laid off over the course of meg whitman's take near there. -- tenure there. we are talking about at least 85,000 people laid off during her time at the company could it comes in drips and droughts. it is a fairly amazing number. iont importantly, the note this happens after the split of the two companies is bizarre. this is supposed to right size

to businesses. instead, it's like they are building two new houses, both of which need a kitchen remodel when they walk in the door. betty: what is going on hp? cory: they have been dealt a tough hand in a tough game. the business of enterprise computing is changing dramatically with moves toward software and the cloud. the first to tell you that slinging hardware has been a lot harder to you have seen ibm, dell, and hewlett-packard take it on the chin. the only company doing well on cisco, whodware is is doing a little bit well. they're spending billions in acquisitions. the restructuring costs should be a big focus here. if you look at the restructuring that has happened at hewlett-packard in the last six quarters, it has been an enormous amount of money could restructuring that they are announcing just for hp enterprises is more than hewlett-packard has spent in restructuring over the last nine

months for the combined company. it is a huge number of new restructuring. mark: can we point a finger at mobile devices? isn't this in a sense that the explosion of mobile has an effect reduced the demand for many of the products and pcs that hp makes? cory: if you are going to do that, you would have to say that has happened to everyone. some other companies have done better with this. ibm has certainly had a tough time, but they got into the pc industry when hewlett-packard should of got out of the pc industry. this is monday morning quarterback in, but what we have seen from hewlett-packard's they have been slow to make some of these moves when they made them, they made it spastic we could you cannot look further than the $10 billion acquisition of autonomy, which hewlett-packard says smoke and mirrors. there was no company there and made a big mistake. they wrote down most of the cost of the acquisition. these dramatic moves to change direction seem to have come too late with two little investigation have left a rapidly strengthen company that

is going to continue to shrink. both of the new companies are saying yes to the printer and pc the other company is expected to see shrieking revenues right after the merger. there is no growth in a shrink and company and hewlett-packard is certainly having a rough time of it under the leadership of meg whitman. cory johnson, our editor at large there in san francisco. mark: stay with us. "bloomberg market day" continues in just a moment. ♪

mark: welcome back. i am mark crumpton here with betty liu. betty: the highly anticipated federal reserve meeting kicks off today with the critical rate decision set for tomorrow. will they or won't they? goldman sachs ones that markets are vulnerable because no one can agree what the fed will do. >> i think that's probably an argument for why they are not going to go because i think there will be some concern that the market is not prepared for

it and we have already had quite a lot of financial market volatility. there is a risk of an adverse market reaction. economistman's chief predicts that the central bank what not act until december or might wait until 2016. john is now is lisa abramowicz, who has a special message for janet yellen and company. the floor is yours. what would you like to tell janet yellen? saye: the people i speak to that the uncertainty of not knowing when you're going to move is creating so many ripple effects in the market right now that it would just be better if you gave some definitive direction to if you moved already want to ratchet down or how far up he would eventually raise rates -- in the long run, that's fine. ofs sort of directionless the market is creating some dislocations that they have been talking about. mark: you're just a conduit for

this message. julie: i am a conduit. i see the validity in that. we have had a lot of turmoil. frankly, i've talked to investors who say, this would be a buying opportunity it did that came out and said we are going to raise interest rates at 25 basis points. people are waiting for what they do not know. lisa: they're waiting for what is overloaded and what is going to explode and what is the uncertainty out there. get it out of the way. and then we can move on. betty: we make an answer tomorrow though, right? they may hike inserts race -- anticipated what that side of the people -- they may hike interest rates. will that silence people? clearly depends on how they make their message. no one expects a rapid move. there's a fear that if they do not hike rates now and they wait too long that they are going to have to make more severe and steve moves and i could actually cause a greater dislocations

in the market down the line. mark: how will investors react if the fed does move tomorrow? lisa: you actually could see a bounce in some riskier assets. it is kind of counterintuitive but if you think about it, if things do not explode and you do not see some kind of mechanical armageddon, you could actually see people will into assets that they have been wary of just because of what they do not know. mark: bloombergs lisa abramowicz joining us. a nice column on this on bloomberg.com and on the bloomberg terminal. .etty: suspense, marke i i'm signing off now. mark: before you go, do not miss our conversation with ray dolly of, one of the most successful investors. he will be joining a special primetime edition of "bloomberg surveillance." ♪

mark: in hungary, migrants are being arrested under new laws

into stopping asylum-seekers. officers on horseback rounded up afghan refugees, trying to reach hungary from serbia. hungary just build a razor wire fence on that border. hungarian officials say they have arrested more than 500 people since the new laws took effect yesterday. standard & poor's has cut japan's credit rating. japan was cut one level from double-a minus to a-plus. sayslus government -- s&p the strategy will probably not change things for 2 to 3 years. a bug is forcing apple to delay the launch of its new watch operating system. the new operating system is supposed to let third-party apps run more quickly on the apple watch. apple ceo tim cook is talking about his decision to come out. cbs's "lated on show" with stephen colbert and said he had a tremendous responsibility to do it. >> it became so clear to me that

kids are getting bullied in school, kids were getting basically discriminated against, kids are even being disclaimed by their own parents. and that i needed to do something. i felt that i was balancing my privacy too far above what i could do for other people. mark: mr. cook defended steve jobs in the wake of negative movie portrayals. cook said steve jobs, the one he knew, was an amazing human being. when of the biggest pop stars of the 1980's is headed for vegas, lionel richie says he will begin a residency there next year. the former commodore's front man will play 20 shows in april, may, september, and october at the access planet hollywood resort and casino. $199.s range from $59 to coming up in the next half hour of the "bloomberg market day,"

why companies like uber and amazon may be playing an important role in the fed's interest-rate debate. a new report from morgan stanley's trading desk says the government of puerto rico may be overestimating the island's budget deficit. we will explain why coming up on the "bloomberg market day." the two biggest rue -- beer brewers in the world are bellying up to the bar and talking about a megamerger. anheuser-busch has made an approach to take over sab miller . if the deal goes through, it would create a company that would control half the industry's profits. investors are liking the taste of that. shares of anheuser-busch and sabmiller saored. -- soared. joining me is matthew campbell. and from princeton, new jersey, a senior analyst for bloomberg intelligence. thank you for joining us. matthew, why does this deal makes sense? : the reason this makes

sense is the brewing industry is barely growing. by some measures, it is shrinking. what do companies do when they are in sectors that are not growing? they consolidate. this is a big consolidation between two the big companies that are extremely large. basicly comes from that logic, get bigger, cut costs, spread your revenue even further. is thatgger cut cost, the recipe for success, especially in that business? >> i agree with matt. the skill is about other things also. two key trends in the beer marketplace is a growing appetite for craft, locally produced beers. , think that sabmiller strength also i believe that most of the emerging growth areas will see the lion's share of the growth over the next 10, 20 years or so. .ab knows that

that is why it's looking at africa, southeast asia, china, for growth platforms. to us aboutw, talk antitrust concerns here. is the deal going to clear regulators? matt: the overlap between these two businesses, despite how big they are, is not as great as you might think. the particular problem is in the u.s., where the combined market share if they were to merge without any asset sales would be well over 50%. while there are going to be in-depth antitrust inquiries all over the world, should there be an agreement, the u.s. seems to be where people are focusing in terms of your good fee really derail this transaction, unless there are substantial asset sales. mark: our story on the bloomberg terminal and bloomberg.com, we speak to tom russo. he oversees investments worth $10 billion. shareholders som e

see the company's exposure to the emerging markets as a drag on its share price. how much of a drag? >> it probably is true and it's hard to quantify that. a lot of these emerging growth markets, in the near term, are sluggish. look at some of these oil dependent nations that has the growth in the future, it's currently depressed because of low commodity prices. big multinationals look beyond what is going to happen next year and the nearest cycle. i think this is a bet for decades in the future about where the growth is going to be. mark: no doubt. tothew, m&a, are we going see more of this in the beer industry as a result of this proposal? very good's a question. there aren't that many big brewers left. there has been so much consolidation in this space, so many mergers. there are four big players.

two of them are the ones who may be moving towards a merger. the other two our heineken and carlsberg in europe, and then you have a fifth in the americas. it's very hard to see further deals, both heineken and carlsberg are controlled by families, on nations that would be reluctant to give up that control. bigay be this is the last beer deal. that doesn't mean there could not be something else in the beverage space. you even hear occasionally about pepsi and coke getting involved somehow. when it comes to things that come in bottles, there are many more deals to come. beer, i'm not so sure. mark: if this deal is consummated, what can we see in the supermarkets, what can we see in your local liquor store as a result? >> that's a great question. unless there are depressed men's that go along the justiceproval,

department is likely to require -- you probably would see higher prices. ceo companies would produ seven of the top 10 beers in the u.s.. that level of consolidation in the past has normally led to high price flexibility. mark: high price flexibility, no doubt. matthew, let me pose this question to you. at some point, the possible rippled effect -- effect you just discussed, are they going to be felt by the consumers? will that be something consumers have to pony up more money? matt: that is a question looking atwill be very carefully, if there is a proposal made to them for a merger between these two companies. beer is a consumer product, something that no politician once their government to be seen making more expenses. it is an easy attack line to say, my opponent let the price of beer go up or it i do think

antitrust authorities in the u.s. and europe are going to be crawling all over this and doing everything they can, if the deal does eventually get approved, and we should note that as many steps down the road, that it does not impact consumers negatively. mark: matthew campbell joining us from london, ken shay joining us from princeton university. thank you so much. we are just about 24 hours away the u.s.decision by federal reserve. we will find out if policy makers will raise interest rates and what that might mean not only for the u.s., but global markets. we will have special programming for you on thursday beginning at 2:00 p.m. new york time. ♪

mark: let's get straight to a check of the markets. julie hyman is standing by in the newsroom. good afternoon. julie: we have had the major averages gaining throughout the day as investors await fed decision. earlier today we had a change, and that's more typical as investors do wait for the fed, especially when we have actuals and around the decision -- suspense around the decision that will be announced tomorrow. it looks like a lot of the gain is coming from energy stocks. you see what exactly i'm talking about here. rally at thisased point. energy is the best performing group, closely followed by utilities. wise as well as materials, are contributing to the gains in today's session. oil of the most in about two weeks' time.

we had weekly inventories coming out showing a drawdown of 2.1 million barrels. that falls on the heels of yesterday's a data from the american petroleum industry that showed similar numbers. we had oil prices start to gain a little more steam. that is fueling those gains we are seizing in the energy stocks as well. also potentially helping out is the fact that the dollar is down today. if you look at the dxy index versus a basket of different currencies, you see the decrease we have. this decrease was pegged to the data we got out of the u.s. on consumer prices showing a decrease of about 1/10 of 1% in august, the first drop since january. treasuries, obviously these bonds move closely with a fed. the 10 year yield is little changed, but we see gyrations today. it was as low as 2.25% earlier.

gain, investors try to figure out what the fed is going to do. goldman sachs said globally the market is not prepared for a federal reserve rate increase. the chief economist earlier saying that. he thinks the fed might not take action until december or even going out until 2016. the two-year little changed today. mark: bloomberg senior markets correspondent julie hyman. thank you. china's stock market investigations -- bloomberg's stephen engle is covering the story from hong kong. stephen: police are investigating the civics security head. the chinese government hunts for culprits in the $5 trillion stock market wrap. executivesfour other admitted to insider trading. the government has been going after so-called malicious

short-sellers, insider traders, and those who spread false rumors. authorities say they want to. five the stock market. the market collapse has put an abrupt and to -- abrupt end to the rise. let's take a look at some of the top stories. we are following president obama will meet with the leader of israel in november. mr. obama and prime minister benjamin netanyahu will discuss the controversial iranian nuclear accord. prime minister netanyahu's visit to the united states is a deep demonstration of the deep and enduring bonds between the united states and israel, as well as our unprecedented cooperation to further enhance israel's security. mark: prime minister netanyahu is a fierce critic of the iran accord. earlier this year he addressed congress in an effort to derail the deal. the u.s. defense secretary is criticizing china for its land

reclamation projects in the south china sea freight ashton carter calls beijing quote out of step with international rules by militarizing disputed reefs. china's actions have put it at odds with vietnam and the philippines. secretary carter called for an immediate halt to reclamation spy all nations. the affordable care act helped lower the share of people without health insurance in the united states last year. the census bureau says 33 million people were uninsured in 2014. that is down from almost 42 million the year before. last year was the first time he will begin enrolling in the plan's health exchanges. back to our top story, we know the fed has 2% inflation goal, but history shows that 2% is more wishful thinking than reality. food and fuelout costs, consumer prices have met or exceeded the 2% target only a quarter of the time of the past two decades. scarlet fu joins me with more on

this story. and the culprits are? scarlet: technology. alanes back to what greenspan said a while ago, that inflation may have died with technological inflammation. we've seen massive structural changes in the economy and that is putting a lid on consumer prices. that 2%nomists say target does not sound right. says perhaps the fed should lower its target from 2%, or they risk financial instability by keeping monetary policy low. he's looking at potentially a 1.5% inflation target. mark: is this more about technology, giving consumers more choice? scarlet: it has allowed everyone to scale to keep crisis low. amazon is a good example. it came in with low prices for books and expanded quickly to everything else tried -- else. because it was able to cut down

and onlyysical cost relying on the actual distribution center, it was able to spread that low-cost idea to everyone. another good example of technological innovation which has kept prices under control. it is in many cities cheaper than taxicabs, especially to and from the airport. it is a game changer whether you angeles city like los or san francisco or even new york, where there is a decent supply of cabs. in some instances it gets down to what one person told us, price visibility and dynamics. scarlet: absolutely. we are in an environment where you can comparison shop in a way you could not before. you just need to put the time in. usually when you pay higher prices, oftentimes it's because you choose to. mark: you might not know any better because you haven't done your homework grade -- homework. scarlet: the cost to you is

time. another technological innovation is fracking. certainly it has been around for decades, but only for the last couple of years have we seen the technological advances have become cheap enough and widespread enough that you can actually scale it, apply it on a large scale. there's one analyst who says the next stage of improvements when it comes to technological advances could send a breakeven price of u.s. oil down to five dollars or $20. that would be on par with saudi arabia. mark: if you want to read more on this story, thank amazon uber for a streak of inflation misses, it is on bloomberg.com and on the terminal. what is coming up? scarlet: the chairman of the council of economic advisers for the white house will be on to speak about the president's address, and the looming budget showdown taking place in washington. it seems we have done this before, haven't we?

we will also be speaking with the founder of the national women's hockey league. the actual pro hockey season begins in 21 days. the women's hockey season begins on october 11. we will find out why she decided to go from an ncaa college hockey player career to founding the first women's professional hockey league where women get paid. mark: still ahead on the "bloomberg market day," the puerto rico debt debate. a new report that says the government deficit projections are way overblown. ♪

mark: now to the latest on puerto rico's debt crisis. a new report for morgan stanley's trading desk says government officials in puerto rico may have significantly overestimated the island's budget deficit for the next five years. laura keller has been following this story. she joins me in studio. let's start with three different forecast for puerto rico's deficit and those are in your story. what do they show? which one is right? laura: all of them are up to interpretation. the first one is from the official puerto rico government and it shows deficit after certain measures are taken of $14 billion through 2020. we also have what the government commission, the report from showsimf economists, that $9.6 billion of a gap. those are big numbers. you are looking at things here, looking at taxes, trying to estimate how much will come in, and how quickly these spending cuts can be put in.

says,rgan stanley report we are overestimating hereby almost twice as much. mark: we just saw that graph on the screen. i guess my initial action is, why is there such a wide disparity? of it comes from the difficulty of estimating some of these things and the assumption -- morgan stanley saying, some of these things you're not giving credit for, some -- such as how much you're going to get back from the u.s. government for health care, you should be adding these things in. you need to add those things back so the deficit is not overestimated. mark: sounds like something we heard a long time ago. why do the forecasts matter so much to investors? numberif you have this -- as an investor, puerto rico is going to use that against you and say, this is what we need from you. you need to help us fix the

shortfall. if you suddenly have a report that says, that is 60% overblown, then you have this .mmunition mark: talk to us about what it seems to be headed towards a battle royale between puerto rico and its creditors. is there any room for compromise on either side? laura: i think there is room for compromise. it depends on how in transit and bondholders are going to be and what they demand. will they say based on the time and effort and cost to us on our advisors, maybe it's a little better to settle for something. i think you can see different things happen because puerto rico is not just one piece of debt, it's many different bondholders. mark: so many parts to the municipal debt. where did the negotiations start? laura: what we have been looking

at and harping on is the government development bank. puerto rico has really been zeroing in on this entity to say this is where we need to start. they have been getting operations together. citibank is helping to do the restructuring. they're preparing the bondholders to get a hold of -- this connects to each part of puerto rico. mark: have we heard anything more about possible discussions between u.s. congressional officials in puerto rico? there have been some members of the senate who say that perhaps puerto rico should be able to have a backstop, maybe there should be bankruptcy protections for puerto rico, which is a u.s. territory? is the presidential candidates, senators, representatives all talking about this. you will see more and more. there are discussions going on, try to figure out what we can do. all of these discussions -- it gets harder if you don't have a chapter nine laws to force

bondholders into actual negotiation and sign on the dotted line. you can have -- save 30% of bondholders agree to this, but if the other percentage are not going to agree and you have no way to force them, you're stuck. usk: laura keller joining with an update on the situation in puerto rico. thank you so much. fed's big interest rate decision is just 24 hours away. we will have special programming for you on thursday, starting at 2:00 p.m. new york time. find out if janet yellen and policy makers will raise interest rates and what it may mean for a global markets and for investors. the fed decides, a special report on bloomberg tomorrow at 2:00 new york time. "bloomberg market day" continues in just a moment. ♪

scarlet: this is the "bloomberg market day." for the first time in nine

years, a rate increase seriously in play. markets are flashing mixed signals about what they think janet yellen and company will do. mark: the world's two largest beer makers are discussing a merger. what the deal could mean for the industry. national women's hockey league will pay players a salary, making it the first pro hockey league in north america for women to do so. ♪ mark: good day from bloomberg world headquarters in new york. i mark crumpton here with scarlet fu. oil rallies boosting stocks. scarlet: it is t -24 right now. let's get straight to a look at the markets. mark, you mention oil prices giving the stock market a boost. we see this energy stocks