i'm alix steel. joe: and i'm joe weisenthal. alix: u.s. stocks adding to yesterday's rally. policymakers began a debate on raising rates. oil rising to a one-week high. joe: stress tests. one day to go before we find out the that decision on interest rates which will put global markets to the test. alix: the holy grail of 2% inflation is the fed goal unattainable? what do google and amazon have to do with inflation misses? we have to begin with the markets. stocks closing around the high in the session. extending the rally for a second day. it has been a lot of momentum in terms of stocks and treasuries that perhaps can handle a fed rate hike. be: markets do not appear to

unhappy about a rate hike. not only are people bullish in terms of the stock perspective but people are ok with the idea that interest rates might be rising. alix: jpmorgan says if they don't raise it will be a disappointment. today was different in that it was about oil. intraday oil chart, inventory numbers came out, oil storage. -- oil stored. -- soared. joe: in addition we saw copper again, emerging-market currencies gain. a lot of what has been beaten down showing bully and see. what is good about versus what is that you have to look at fedex. i want to take a deep dive into my terminal.

dealing with fedex. the worst performer in the s&p. if you take a look, average shipment per workday. how much is actually moved .round the country down by 1% it is showing weakness in energy and when a truck goes up with goods that maybe you and i both purchase they are not filling. that is a sign of the global economy and what is happening in the u.s. joe: oracle earnings are out. let's go to julie hyman with the julie: coming in at $.53 a share, ahead of estimates. like so many we have heard from it sounds like the currency of rp thans more sha anticipated. the $8.53 billion that had been estimated and it looks as though that is indeed a currency issue. the company without its cloud

business, that is still a small part of oracle. one that analysts are looking forward to be a growth engine. the company says total club revenues were $611 million, up 38% in constant currency terms. obviously you will have a currency negative affect there. the company does plan to double the cloud margins over the next two service cloud margins. it is also on target for $1.5 billion and $2 billion in new cloud business for the full year. the results are mixed on balance and the shares are trading lower in after-hours trading. people try and figure out what to make of the various pieces of the report. joe: thank you. i want to go into my terminal to

talk about something else going on in market street emerging-market currencies on the best rally since 2014. as you can see i have flipped the charts. normally we show the lira and its strengthening, but i don't like that. i flipped the y axes. here for an example this is the south african brand, the green 13.2.t it was closer to 14 to the dollar. this yellow line is the malaysian ringgit. not long ago, 4.3 to the dollar. it was just not long ago every day we would come here and say emerging-market current these are taking. they are rallying. they are on a seven-day winning streak. combine this with oil and copper and you are starting to see for now a respite or reversal. the fed rate decision is

tomorrow. we have a chart that our guest thinks will convince janet yellen too high. jim smith at parsing financial. he joins us now. thank you for joining us. the chart that you want to talk about has to do with corporate profits after taxes. why is it a hot chart for you? jim: it is the main thing everyone has been worried about. why isn't this expansion faster? ,t has been relatively slow business fixed investment. generally that is a function of demand and profitability with profitability at record levels, it is not quite at record levels if you look at the measure, including capital consumption adjustments and inventory evaluation adjustments. i've never been a business person who understood those concepts. they usually just look at the

chart you have up there and that is one, saying we sure should be business big push from fixed investment and you sure cannot complain about the employment situation. so move already. joe: yesterday we talked to the coleman sacks chief economist and he talked about the fed me sing -- fed missing inflation goals. >> is at the right time to move off of zero at a time when clearly you are closer on it unemployment, but you can make a reasonable argument that some slack remains. and you are quite far away on the inflation side. joe: they're missing on the inflation side and it is not clear that they have run the slack out of the system in the labor market. why not wait a few more meetings? jim: they have waited too long. they should have moved two years

ago. then they would be in good shape now. but they did not. clearly, on the way the markets moved today in the u.s., market .articipants are not concerned waiting on the fed is the longest drumroll in history, get off the dime already. acan't imagine moving up to 25-d basis range is going to protect anyone. alix: when you look at the corporate profits after taxes, that being the strong selling point for you, we have not in that money trickle in even though it has been climbing. we are seeing buybacks. we're not seeing real trickle down. isn't that making the case to keep the fed on hold?

jim: i can't see anything making ,he case to put the fed on hold unless it is caving for the world bahich ia bad idea. we have a nice pickup in the first revision to the second quarter number. that was a big part of the increase in gdp from 2.3 to 3.7 percent. -- i don't like having a 2% inflation target. they should target zero like many former fomc members but cpi today, 1.8%, the core year-over-year. i know they don't follow the cpi. they follow the pc. enough., 2.0, close i think they just need to move so they get off of this zero

lower bound, short end of the yield curve be determined by markets, instead of by phony baloney things, and then of course we will all or you they going to move again? if they do move i am sure they will reiterate we intend to be gradual and cautious. i don't know anybody who thinks if they do move they will move any more rapidly than every other meeting and it could easily be every third or fourth meeting. they are dated dependent and to me the data are screaming move rates up now. alix: jim smith, very passionate. we also liked your dog. thank you for joining us. joe: what university is getting paid interest on a bond issued in 1648?

the answer, after the break. ♪

alix: before the break we asked which university is being part -- paid on a bond since 1648? joe: the answer is yell university. yale university. alix: we do want to get to the top headlines this afternoon. energy transfer close to winning its takeover five four williams company. is inmpany ha advanced talks and it will create the largest

infrastructure for oil and gas. the u.s. has said to announce it is closing its investigation after finding no harm from the merger. expedia said it agreed to acquire its rival to reclaim the lead in global online travel. alix: moments ago oracle posted first-quarter revenues of eight point $5 billion. results were hurt by a slowed down, earnings per share at $.53 was a penny a head of expectations. a stronger u.s. dollar had a major impact on results. those are your top headlines. joe: the jobs report shows the federal reserve is doing well on its mandate for full employment. the central-bank target for inflation continues to all sure. -- fall short.

alix: they have missed the target 74% of the time over the last 20 years. the data shows the consumer prices fell in august. joe: the numbers create an inflation dilemma before the fed makes its rate decision. a dilemma that is hard for the fed to measure. secret.is the dirty federal reserve officials keep saying it is important to keep expectations anchored but if you ask them how do you measure inflation expectations they have to shrug their shoulders. joe: here to discuss this issue is michael, what did you see? the surfaceooks on like we are nowhere near the fed hitting inflation goals. is that the read? michael: that is not really what i saw. core inflation tends to be running below the target for a

wild. -- for a while. measuring areally different changes. core inflation averages those to get to the one measure we look at. that is not the only way to measure all of these prices to gather. median inflation looks at the central tendency of the distribution is. if you look at median inflation -- off the things which went up a whole lot. if you look at that what you will the is inflation has been running 2.3% over the last 12 months. since 2012 it has been between 2% and 2.3%. targets of the fed pce means that we are at the fed target and have been for several years. i has actual inflation

fallen short of the fed target? what is the cause? michael: if you look at core inflation, there have been a couple of peace is persistence and -- couple of pieces persistently low. mentionedre, the fed in 2012 that the sequester happened, a delay in medicare payments caused inflation to fall short in that drag down core inflation. that is a big difference. things like medical care. right now it -- some of the larger effects are things like veryres, airfares are related to energy prices. they are still in core because they are airfares. airfares have been falling rather dramatically even though they are only 1.5% of the total basket. joe: how is shelter factoring

into inflation? michael: shelter is the most important part. whether or not you rent your own home, rent an apartment, live in a home that you are effectively renting by not renting it. that is a large portion of overall inflation. how much are rinse rising? rents rising? you will see that you can't get shelter prices and core inflation going in different directions because they are so in origin read shelter prices have been going up natalie -- shelter prices have been going up steadily since the end of the crisis, once home prices stopped going down. out that it is

money velocity that has been dragging down inflation. what does that mean? are two things which affect prices. one of them is the growth rate of money and the velocity of money. how fast does the money get spend? we have been in a virtuous cycle since the 1990's where lower interest rates have led to lower money velocity. that has been going on for a long time. joe: all right. thank you very much for coming on. alix: when we come back, when commodities are cratering, one is the -- what is the one area that is booming? the answer when we come back. ♪

alix: before the break we asked theh solid steel object is surprise news corner of the cratering gas market? joe: a hybrid should called a floating storage and regasification unit. nations likeerging egypt and pakistan a way to deal with power shortages by importing liquefied natural gas. order for the ships which can import gas quickly have soared. alix: we have been talking about it all day, u.s. inflation set to rise? our guest has to charge you need to see. that,: the reason for

debt service was higher than it is today. >> this is the amount that households are spending. guest: correct. the real economy is sensitive to interest rates. ofdon't have that level pastor we expect. alix: we have not seen the as much in the u.s. for -- why is that then? guest: baby boomers are earning a lot of money but not spending much. believend thing is we millennial's are saving for down payments to buy houses and they are getting raises. they are saving money to eventually buy a house. joe: one of the charts that you point to that you think is important is the percentage of work horse in the can's -- workforce in the construction industry. what does this tell you? guest: if housing were to that would be a half

percent more workers working than currently are. it unemployment is at 5.1% we can expect that to go down. a is not really clear why little bit of an interest rate hike will hurt the economy at all. alix: does the trickle down to wages? guest: exactly. that would make the labor force tighter than it already is an push more money into high sold -- household pockets. joe: inflation is going to accelerate faster than the these thinks, then pundits think. why is that? as you know people have been overestimating inflation forever. guest: right now we're in a bizarre 2008. housing was crashing. households and banks had too much exposure. a stark market -- the stock market was ok.

it is not clear what is going on with inflation. now it is the opposite. markets have been volatile because of china. surging from the low level. as the price and oil falls it will put more money in the pockets households. andhave to trust your model -- the fed was so late in 2007 is because they relied on oil and the star stock market too much. alix: is there any idea of what might be a trigger to push wages inflation, to push people to spend more? what is going to be the tipping point? guest: with 2008 lee bear stearns going down or the banks seeing this debt. run out ofnt you slack and you're going to see those pressures emerge. that is where the debate is.

people keep saying core inflation is in there yet. the fed, if you trust their productions, normalization looks by a3.5% and shrinking couple trillion dollars. that process will take 2-3 years at the minimum. joe: a lot of people say we can't go in september we can go volatility,cause because we are not there on inflation, why do you think now is a totally fine time? guest: if you have to cut rates fast the way we do in 2008, markets like that. the question is if you had to hike quickly because you're behind the curve that is destabilizing than hiking and then waiting 3-6 months for the next one. joe: we'll be right back. ♪

alix: don't miss this. tomorrow's rate hike decision. 32% probability the fed will move tomorrow. joe: what is interesting about that, morgan stanley pointed out what were the odds of a fed rate hike prior to tightening cycles? a 76% chance. 1994 it was a 78 chance. iswe get a hike tomorrow it different from the historical perspective in terms of the extent that the market will be surprised. alix: morgan stanley says it could lead to bigger tightening

if the markets are not expecting it. joe: tune in tonight at 6:00 eastern time for a primetime bloomberg surveillance special. you will not want to miss it. thank you for watching. alix:

emily: i'm emily chang. this is bloomberg west. investors bet on the state of oracles cloud business. uber ceo talks about prices and robots with marc benioff. bill gurley on amazon's challenge. all that ahead ooo