it is the count down to the fomc. matt: general motors will pay to settle the government investigation of all to ignition switches, but they will hold a press conference to give details at exactly the same time as the fed announcement. pimm: crude oil prices are main the subject of debate. prices from opec. details ahead. matt: good fed day morning. i'm matt miller. pimm: i'm pimm fox. we are 90 minutes into the trading day. let's look at how markets are trading right now. ..s. stocks a little higher the s&p 500 little changed.

the nasdaq higher by nine points and most traders waiting until 2:00 eastern to hear what the federal reserve is going to say about interest rates. let's look at the bond market. we see a little buying across the complex. almost no movement. basically markets tend to be placid ahead of fed meetings and i think the interesting thing is a lot of traders have told me they will turn algorithms off, especially around the announcement because the computers cannot read the fed statements and adjust the information. pimm: not yet. matt: not yet. not as well as we can. i mean humans. flow you get less order but it begs the question what

happens to the liquidity when everyone does figure out -- matt: does the massive amount of liquidity caused by high-frequency trading cap volatility or cause more volatility? .imm: this is always the debate i want to bring people into my bloomberg because you have been following this story having to do with general motors. basically it is telling you that shares of general motors are up about .5%. if you look all the way over to the right, you can see the intraday chart and the big spike higher. we got the announcement they were going to settle this suit with the justice department. you can see the historical chart , since the beginning of the summer, the gm stock price has been attendant. fact i can get over the

they scheduled their press conference at 2 p.m. when all financial news agencies will be focused squarely on the federal reserve. i cannot imagine that was a coincidence. , i have ang said that feeling all those human beings will be able to digest all of that information at the same time. matt: in this 24 hour news cycle, i feel like things get lost. pimm: let's take a look at some of the top stories at this hour. a french leader is buying one of the largest cable television companies in the united states. they have agreed to by cablevision in a deal valued at almost $18 billion. cablevision has 2.6 million subscribers and is based in long island. the chief executive talked about the deal on a conference call today. significant synergy

and efficiency opportunities will stop it continues to be a good basis for continued consolidation in the u.s. it further diversifies our portfolio not only in terms of but waits locations us back toward mobile revenues. pimm: selling the cable business will leave the family to focus on their madison square garden sports empire which includes the new york knicks and new york rangers. is assign the housing market all about location, housing andts fell 3% last month july's figures were revised downward. meanwhile, ling permits for single-family homes rose to a seven year high. this signals builders remain confident of future sales. the number of buildings with

five or more units under construction climbed to their highest level in more than 40 years. vacancy rates for rentals are at their lowest levels since 1985 because of growing demand and a lack of supply pushing up rental prices. matt: first-time claims for on employment benefits fell last week to the lowest level in two months. claims were at 264,000. opec is bullish on oil when it comes to the long-term outlooks. the cartel says it expects prices to rise steadily and hit $80 a barrel in 2020. goldman sachs thinks everly, saying a glut of crude places -- goldman sachs thinks differently, saying a glut of crude prices -- egg glut of low forll keep prices 20 years.

costsw amazon fire tablet $50. it has a seven inch screen and amazon says it has twice the processing power of the samsung aleksei tab, which goes for $100, so there. -- samsung galaxy tab. i thought it was weird and now i want to buy a pack of amazon fire tablets. i am a consumer. pimm: let's focus on our big story of the day -- the federal reserve is still meeting at the fomc meeting. we are waiting for that magic moment sometime after 2:00 when they will announce a decision on we have rates will stop been gathering opinion from economists all morning on what the federal reserve is likely to do. let's check on a sampling. >> the bond market mispriced the fed for five years.

the bond market always expected the fed to be hiking in a year. it was always the little orphan annie bond market -- it was always a year away. they learned janet yellen is a super dove. the reason the fed did not move is because the economy was so fragile at that time. the difference now is the economy is in better health and i think you have a more balanced view in the committee, including janet yellen herself. i think they are probably going to hike. draw.eel like this is a there are people on one side and people on the other, that they have not really come out in the way they probably hoped it would. it is a difficult decision. it's probably going to have pre-much close to unanimity and it looks like they are split. you know my view is they should not raise. i don't think they will. the worry is if they do, what is

the -- what are the consequences for doing that? fascinating that ethan harris and i are on the same side of an interest rate call. his conventional analysis is very much in line with the fed. very much in line with a speech from janet yellen that argues the fed should be raising interest rates. whatever the federal reserve decides, it is important to put it into context will stop -- put it into context. we have aseems like lot of talking heads making their point so strongly that they were trying to draw the center toward them. it's almost a political move. is that possible? gina: i don't know. it seems to me that they are not listening to outside chatter so

much as they are listening into income data, whether it's unemployment data. based it -- they do seem to be focused on the data. they seem to be implying or promising that they are going to raise rates at some point this year and you can make a promise like that if you are truly data dependent. : which is a point many economists bring up. it's one argument the fed could make that both statements are true. they are hoping to raise this year and they are data dependent. it's just that the data has looked better this year than it did immediately postrecession, so maybe they could make the case the data shows we are to hit that point where we are capable of raising rates for the first time since 2006. what could you describe you believe the legacy of janet in this ratebe

decision. a lot of people say this would be her most important decision. interesting. we talked to economists about this and one thing there is an appreciation for across the war the more hawkish economist edward dovish economists is that she's making it in a world that is very changed compared to what we saw in previous hiking cycles will stop she's dealing with a breakdown in some traditional economic relationships. wages and unemployment don't seem to be tracking the way they used to. there are a lot of open questions janet yellen is dealing with. of legacy is going to be one presenting over the fed at a particularly different -- articulate difficult moment. matt: thank you very much. join us later today for live coverage of the fed decision with a special report -- am i

wrong? is it slated for 1:55? at 1:55 will focus stop -- at 1:55. this will be followed by a news conference where everyone will ask about what she did or did not take. that will be on bloomberg television and bloomberg radio. bloombergd on the market day, what with the world's largest software enterprise conference be without a cruise ship or musical ?ensation, the foo fighters we will tell you, next. ♪

matt: welcome back to the bloomberg market day. i matt miller. pimm: i'm pimm fox.

let's go to julie hyman who is taking a look at what's happening in the markets right now. not too much action ahead of the federal reserve announcement. julie: the overall averages remain little changed as people wait for the fed. we do have a big deal to talk about. you mentioned it earlier and i wanted to get another check and talk about it. ice agreeing to buy cablevision. inlevision shares are rising the u.s. by 15%. quite to the acquisition price, but close to that level. we are seeing some other cable providers on the rise, other pay-tv providers. time warner cable, charter tradingations have been higher. i have been talking to alex sherman about this and he pointed me on the bloomberg

terminal to a price we have been looking at for these various deals because we've seen a lot of consolidation in this industry. this chart comes to us from bloomberg intelligence. they are looking at the price of these deals per subscriber. over the past several years, as we have seen these deals go on, the price per subscriber has been climbing and climbing. the premiums on these deals have .een going higher interesting given the fact that we have seen shrinking cable subscriber growth. price per subscriber has been going up. verizonanted to mention , which is holding an investor day. it ceo said 2016 earnings will plateau at the same level as 2015. this goes to the same issue they are facing in the cable industry -- they are not seeing an evenous amount of growth

know these businesses tend to remain cash businesses. the ceo of verizon saying he's not interested in buying a cable company or media network. so he's not going to get into this arms race we have seen elsewhere in the industry. thank you very much. we have been talking about the foo fighters all day. pimm: the musical band? matt: do you know any other foo fighters? pimm: i just like to have the details. matt: salesforce's dreamforce conference is underway and they've spent a lot to make the event unforgettable. cory johnson is there life. what is this? see that again? that is an amazing thing, that cruise ship. pimm: i just thought you liked

alcatraz in the distance. matt: i thought you might be at the bar with a coconut filled with rum. pimm: what is dreamforce and what is going on? cory: what you see is what you get from salesforce -- and enormous spend of money on a conference that has taken over the city of san francisco. they have rented a cruise ship for people to stay at the cruise ship. i can actually see it out the window. they have rented a cruise ship, they are having parties all over san francisco. they have the foo fighters for a charity event. this is important if you want to understand the business model of salesforce and why salesforce is different.

and what you get if you buy salesforce stock. salesforce stock has not been as great as it has been in the past. it has been a terrific performer over time, but a big part of that has been the spend in marketing, the spend in things like rock 'n roll band and this massive conference that has turned this city inside out, and even a cruise ship. salesforce spends more money in marketing than any other software firm when you look at the percentage of sales. imagine you run a business -- i don't care if it is an ice cream stand or musical act -- what percentage of your revenue are you going to spend to get more business? 10%? 20%? salesforce spent 51% of their ,evenue last year on marketing on things like the cruise ship. onlyre to oracle spending 20% of revenue. 38%.ay spending

i'm looking here at my bloomberg and checking out the last fiscal year for salesforce.com. million.any lost $286 you keep going back in history and they don't seem to make a lot of money, but that doesn't matter i guess? and i thinks matter they would tell you it matters. you have to think about how the salesforce business model works. the context for the spending is that rather than having profits, they are spending money on marketing to get the revenue to rise. the question investors have to ask themselves is what happens when they take their foot off the pedal of spending or they are spending billions of dollars in marketing more as a percentage of sales and any other software company, what happens when they slow that down?

you have to ask yourself the simple question, does marketing work? if they spend less, maybe revenue will quote -- will grow slowly, more slowly than it is. matt: if you are going to sell the company, wouldn't you try to sell the moat -- try to have the most lavish party? cory: it is showing less results. even though the dollars spent on marketing are much later, they're spending so much on marketing that they don't even have an opportunity to make a profit. and the cruise ship. pimm: i look at things like market value. the markets is the company is worth $47 billion today. what do you think the market cap of ford is? 57. that doesn'tany

make money. 57 for one that does. thank you much, cory johnson. catch emilye to chang live from dreamforce. she is going to sit down with the salesforce.com ceo. and coming up on the bloomberg market day, general motors is said to be settling a criminal probe by the u.s. justice department over its faulty ignition switching. we will tell you more, next. ♪

matt: general motors is set to settle a criminal probe by the justice department over faulty ignition switches. it's linked to more than 100 traffic deaths. than 2.5called more million vehicles and the ceo has been bogged down in investigations since almost day

one of her tenure. have gm has recalled more than 30 million vehicles overall since this issue was brought up. they have had trouble putting it behind them. i think until recently, even though they have this legal issue out there, there has been more focused on the quality of their products and sales numbers , which i'm sure they are happy about. now they get a fine that is smaller than the fine toyota got , the problem is has the culture at general motors changed? barra's main goal after this issue was unearthed. i wonder scheduling a press conference at the exact same time as the fed meeting -- pimm: having said that -- the stock is up today. if you look at the stock performance since the end of

august, few have been able to pick some up for under $25 a share, you are doing pretty well. what kind of marx would you give barra?r a -- give mary , maybe in ast and a plus but i don't want to give an a plus. pimm: turn your attention to the products themselves. whether it's a cadillac, the chevy truck division, they are knocking it out of the ballpark. matt: stunning products. corvette, thee silverado, the colorado, the canyon -- amazing products. pimm: and how about competition against ford particularly in the pickup market? it has been incredible. their trucks are as fuel-efficient if not more fuel-efficient without the whole

plant refitting. pimm: and you haven't heard much about overseas, how they are dealing with the opel business in europe, the problems they may have with buick in china. matt: they have actually done well in china. they pulled chevy out of europe, but she has done a fantastic job managing this business. pimm: it's not so bad. 2:00 p.m. or not 2:00 p.m., it's good business. a little underhanded as a reporter, as a journalist. i would like to go to the press conference. we will be speaking to employees about the settlement. ♪

great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about.

i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. tand that's what we're doings to chat xfinity.rself, we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. pimm: this is the bloomberg market day. i'm pimm fox. the jefferies group, the investment bank saying

third-quarter trading revenue fell 50%. the reason -- losses are tied to the distressed that market for energy ties. jeffries has cut its exposure to the sector. outlook on the economy has fallen to a four-month low according to the new bloomberg consumer comfort index. those who took part in the survey are concerned about global economic slowdown. two british kayakers got a little closer than expected during a whale watching tour in monterey bay, california when a hot back -- when a humpback whale breached and landed on top of the kayak. survive without a scratch but they set it for like a bus landing on us. those are your top stories at the moment. at the moment, markets are closing in europe. let's go to ryan chilcote in london. an aimless dayen

for the european equity markets. mostly green, but it has been green, it has been read. the ftse down nearly .5%. italy is up. interesting one, up almost 1.4%. spanish banks have been punished just a little too much. little bit of a relief rally there. let me show you one other thing onee go ask over here -- stock to talk about is altice. they said today they had agreed to by cablevision. it's not every day when the acquirer says they're going to buy something and their shares top, but that is exactly what happened. shares went up almost 13%, then

gave up nearly all of their gains. investors having a second thought there about how that deal might work out. not a lot of conviction because everyone is waiting to see what the fed is going to do. thedy wants to get in on market today. they're waiting to find out what happens with the fed and what janet yellen has to say. pimm: thank you very much. ryan chilcote reporting from london. coming up, how the federal reserve interest-rate increase various asset classes and your investments. and we will look at why the anheuser-busch merger might adversely affect the sports industry. and we will speak with federal rivlin vice chair alice who will join us for a preview of the fomc meeting this

afternoon. those stories and more coming up on the bloomberg market day. on oil it is opec versus goldman sachs. the priceit expects of crude oil to rise to $80 a barrel by 2020. goldman sachs says it sees 15 years of week crude prices ahead and there's a chance oil could trade as low as $20 a barrel. so who is right? washington is jack gerard, head of the american petroleum institute, the oil industry's top lobbying firm. thank you for being with us. how can both opec and goldman could drive an oil tanker through the discrepancy in their analysis. jack: i understand, and there's a wide variety where the oil price may be not only in the short term but in the long-term. one of the things we are concerned record -- representing

the american industry is that we have become more efficient, we are cutting costs, we're tightening up what it takes is to produce. but the one thing we are focused on is the role we can play in the mobile marketplace. there is a bill being considered on capitol hill to lift the crude export ban to allow us the same access that our competitors round the world have two produced a mystically and put that into the global marketplace which could have an impact on price. some believe it could put further downward pressure on the the rent -- on the brent price. with thatou agree analysis, that that's what's likely to happen if the crude from the united states starts to hit world markets? jack: we agree with that analysis. the u.s. government has done ande different analyses have concluded three things, all of which are very important if

we are allowed to lift the crude export ban. first one is that it is a job creator. we have access to the global market and we trade another 300,000 jobs in the u.s. producing the oil to go to the market. the impact to consumers. it is estimated by 2020 that they would save an additional $5.8 billion as downward pressure is put on price and the price at the gas pump would be lowered to as much as $.12 a gallon. the third piece relevant to the current debate is the u.s. congress has sustained the president's approach to allow iran to have access to that global market by lifting sanctions and it is a great irony that there are some resisting that same opportunity for american producers. i don't think the american public is going to stand for that. i think it is a win win for the united states to allow open

competitions with opec nations and others around the world. pimm: i'm glad you mentioned the concept of competition. it seems anytime we hear from opec there either trying to talk up the price of oil or warn that they will pull back from production. has the united states reached a point in its technology and extraction services where we can come by at -- where we can come -- where we can combat that gerrymandering in the market? jack: absolutely. what has happened in the last two or three years, you often hear this concept about who the swing producer is. it has often been viewed that saudi has been a swing producer because of their power through opec and other arrangements. however, what has happened is our production has grown to about 10 million barrels a day. we are now becoming the major superpower of energy in the world. if given access to the global

marketplace, you are seeing the free market principles are what is going to determine what the price will be based on the law of supply and demand. it could be that the u.s. could be the swing producer? jack: absolutely. but it is driven by free-market principles where, based on supply and demand, we produce as much as the market will require to satisfy the global market. but now we get to compete with others, and that is the great irony surrounding this debate on it ran -- on iran. the president says he will lift the sanctions on iran and let them have access to the global market to sell their crude, yet we still have an export ban on u.s. reduction being put into that same marketplace. imagine the american public is going to support that for very long. we believe there is a groundswell with broad momentum

saying let the united states compete globally, put our own people to work, benefit consumers, and that is what we are working on with congress that allows the u.s. to be that swing producer because now we have open access to the global market. is somethingthat that comes up for a vote, could you describe quickly right now what percentage of your members have a smile and what percentage have a frown? who is hurting in the oil industry? the: it varies across continuity. it depends on what their balance sheets look like. longer-term, the world is going to demand more product and need more energy, particularly once the economies come back. you look at china, india, other places around the world, we believe what we see today is a downturn and a challenging time across the industry as we look

at becoming more efficient. we believe the long-term opportunity is still great and we are still going to be major players and it's up to the united dates to get over partisan politics about republicans and democrats and say how do we seize this opportunity for the country as a whole and bring the epicenter of energy power here at home where we have far more influence over those global events because we produce not only our own energy but now we produce enough energy to put it in the global marketplace. pimm: thank you very much. america, perhaps a swing oil .roducer for

♪ ♪

this is the bloomberg market day. i'm pimm fox a longtime associate and veteran of wall street has died. walter -- walter newberger was 102 years old. he was a floor trader on the new york stock exchange, starting out in 1940 on the floor. except for a brief turn supporting the country in world war ii he stayed on the stock floor. he went from riches to rags to riches again. what take another look at other top stories crossing the bloomberg right now.

there was a victory in court today for apple. the company won an appeals court ruling that could force samsung to remove features from its older smart phones and tablets. this is the latest development in a patent fight that has been going on for years. facebook has a new deal for skeptical marketers. you pay only if your whole ad is seen. completelyt has passed through a user's news feed and has been seen by a human being. getal network says it will verification from a third-party company. you are not imagining things -- it really has been a hot year. the government says august this past summer and the first eight months of the year all broke global records for heat. year isers say this almost certain to be 2014 for the hottest year on record. those are your top stories at the moment.

as we await the federal reserve decision on interest rates, investors are pondering how an increase could affect various assets like minutes of bonds. the -- in will a lot of long only funds. is thatparison i heard

it is one step above putting money under your mattress. you put it there and forget about it and that's why it is so stable and a great place to go if you are not sure what is happening next. unless you happen to be caught up on what is going on in puerto rico. as far as a potential rate increase, is there a supply of municipal bonds that will be available if rates go up and you see a small increase in the rates and bonds offer? the rates are at generational lows and the effect of that is you have seen what will likely be a record-breaking year of issuance. money.is not new it is a lot of refunding bonds. states and cities are taking out old debt and replacing it with cheaper debt. the issue that you are seeing is isthey do raise rates, that

going to further impede all of those states and towns that have put off all of these and

live coverage of the federal reserve interest rate decision. a special report scheduled for 2:00 p.m. eastern followed by janet yellen's news conference that will take place at 2:30. we will be giving you headlines on bloomberg.com and the bloomberg terminal. proposing anh is acquisition of sab miller and this could result in the company controlling half of the industry's profits. this would reduce competition in sponsorship negotiations for baseball, football, basketball teams. such pressing power could drive down beer spending, one of the sports markets most lucrative categories. my cohost scarlet fu is here. i know you are a big fan of hockey. this has to do, not with the beer you are going to drink,

this has to do with -- scarlet: the commercials. pimm: the people that own the sports rights. if you only deal with one big customer now -- scarlet: they have pricing power, leverage, less competition. you don't have as much negotiating room as you might've thought. it is all the major sports leagues and the individual teams as well as the networks that broadcast the shows or sports companies that own the rights to broadcast the shows. all of that comes into play here. we spoke with one former sports marketing guy at anheuser-busch before a.d. invest to go over the company and he says with this deal, if it goes through, it could reduce spending on sports sponsorships by 20%. that is a pretty big number. pimm: last year, in dead spent for a 3.5 minute

advertisement in super bowl. for network like nbc or abc that airs the super bowl itself. if the sale does happen, all of these different teams and network bone -- will need to look at other sources of revenue. scarlet: automobile companies, banks. pimm: you take a look and these are the major categories. does this mean nontraditional advertisers would come in? i know there was go daddy. people thought, what is go daddy? they seemed to have clicked with the super bowl. scarlet: they also made a name for themselves for advertising, coming up with some provocative stuff that gets people talking. pimm: seems to be a common theme. i will see you in a bit. it is time for today's options insight. julie: we are coming up on the

top of the hour. right now we have seen the movement today ahead of the fed. let's get more into the options perspective. joining me is jerod watered. -- you like many are making the distinction between what the federal reserve is going to do and what it ought to do. that maybe explains the divergence in the economists we surveyed were more evenly split on what the fed is going to do today and futures traders were looking at fed funds futures and saying there is not a high probability. where do you come out in that debate? that is the best way to frame it. but they're likely to do based on their own tie they have made the financial markets. there is a change that has to decide to stopey

following financial markets and market prices and start leading on a policy level. it is not seem to be any indication that they have -- in terms of their own decision-making, they commit to that leadership stance. do you think the market pricing is that we are not going to see an increase today? jared: more hawkish language for the rest of the year. they will probably say, we are not worried about international volatility in markets around the world, we're worried about strong daughter -- the strong dollar. we want to see more clarity on that before we do this. if they moved today, i'm a big will be as big a deal as people have worried about all year. julie: why not? jared: the leverage people build up this year has been really significantly reduced over the last several weeks. even investors who were not really committed this summer, i

think we've seen risk measures increase that force them to be less aggressive than they would on the margin otherwise. if the fed does surprise, i think the magnitude of a response is probably lower now than it was three or four weeks ago. do you short volatility going into the decision today? jared: if you think about what goes into the mix index, what applythat number, correlation stocks which is theg to decline, even uncertainty factor is going to go away once we have the knowledge. all of those things point to a lower vxx in the near term. we have been looking at selling october vxx call spreads on the view that markets are not going to freak out again.

30 35 october. you could do that for a net credit of about $.10. you get paid if the market turns sideways. julie: we're going to leave it there. we are all waiting for that fed decision. no action from the market. jared woodard, thank you so much. much more at bloomberg market day, after this break. ♪

pimm: good afternoon. it is noon here in new york and midnight in hong kong. scarlet: welcome to the bloomberg market day. just two hours away

from the crucial federal reserve announcement on interest rates. investors are cautious on whether or not we are going to experience a rate increase. scarlet: the republican candidates fight it out on stage. did the world see a different side of the donald? pimm: stay tuned for a major global player in cable television. altice agrees to buy cablevision. pimm: good afternoon. scarlet: let's begin with a look at the markets. stocks inching higher. the dow is up by eight points. the s&p 500 gaining. we are all waiting. pimm: you take a look at the treasury market, before we go to

the treasury market i know you have custom crafted a chart. this is called dow swing. scarlet: this is the dow's intraday point swing. it moved 66 points in this session. the smallest move for the dow jones industrial average since may 16. the two year yield was at 55 basis points. the average point swing in august, 303 points. pimm: today we are talking about 66. right now. is blah pimm: people want to get this study, how can they get it? scarlet: you would have to message me. pimm: they would have to send you a message here at bloomberg. scarlet: scarlet fu at bloomberg.net. pimm: i like the custom chart.

let's take a look at this chart for us. really nothing. year. the 30 a little bit of selling across the board. the euro. versus i know the dollar was weakening today. scarlet: against the euro. pimm: the dollar weakening against the pound sterling. scarlet: it is stronger versus the yen. pimm: the japanese government would love to get the yen lower. let's take a look at some of the top stories at the moment. cablevision is being bought by altice. the deal is worth nearly $18 billion. cablevision serves more than 3 million customers in the new york much a politician area and the chief executive of altice tells bloomberg the combined companies will gain through streamlining. >> there is synergy opportunities.

it continues to have a good basis for continued consolidation in the u.s. it further does verse a five -- further diversifies altice's portfolio. looking for fixed over mobile. cablevision controlled by the dolan family, they also control madison square garden. which includes the new york knicks -- scarlet: and the new york rangers. apple one an appeals court ruling that could for samsung to remove some features from older smart phones and tablets. this is the latest development in a patent fight that has been going on for years. pimm: opec is bullish on oil when it comes to the long-term. the oil cartel says it expects prices of crude to rise and predicts it could hit $80 a

barrel by the year 2020. .oldman sachs says no goldman sachs says a glut of crude may keep prices lower for the next 15 years. scarlet: american outlook on the economy falling to a four month low according to the bloomberg consumer comfort index. concern about financial markets and the global economic slowdown. is sellingal motors a criminal probe over faulty ignition switches. gm is going to pay $900 million to settle the department of justice's investigation. here.iller is can we talk about the settlement? does this mean this is over? for --t is called by called deferred prosecution. the same thing with toyota over the -- the unintended acceleration issue. it will be able to have monitors

working at general motors or watching at general motors over the next three years. if they find any violations in the agreement they have reached, they will be able to revive the prosecution. most likely this puts everything behind them as far as a case from the government. pimm: what about cost? matt: $900 million. they said they are going to take a charge of $575 million in the third quarter. i would say, it is less than analysts on the street were looking for. i think people were the for a number that was $1 billion to $2 billion. scarlet: maryborough -- mary barra can move on from this? matt: they have a memorandum of understanding with 1385 people who were affected by this ignition switch issue.

there are 370 injury cases open and 84 wrongful death claims open. they are trying to reach agreements. can feinberg runs the $625 million fund. tim -- as pimm and i were speaking, on the operational side of the business, she has done a great job. i think this issue is pretty much behind general motors. today's federal reserve meeting is the most crucial news of the market day. which arguments are more in favor of the fed raising rates. persistent low interest rates over the next few years, or are people spending time on the global slowdown saying don't raise interest rates now? scarlet: loan face and -- low inflation. there has not been a width of

inflation near the fed target rate of 2% in years. joining us with the afternoon to kick us off as we count you down toward that decision is alice rivlin. former director of the omb and congressional budget office. thank you for joining us. we want to touch on monetary and fiscal policies. we need to start with the federal reserve. you do not believe the fed will raise interest rates today. everyone will be paying attention to the news conference hosted by janet yellen. what do you want to learn from her? dr. rivlin: of course, the first thing is, what are they going to do. i don't think it matters very much. a lot of hype about it. they will do one thing or another. it should not affect the real economy whether they raise a little bit now or wait a few months to do it. they certainly want to get back to the normal range.

we will look first guidance about the future. if they don't, it will be a wait and see pattern. pimm: based on your reading of the u.s. economy, what a 25 basis point increase this afternoon make any difference? dr. rivlin: i don't ticket would. -- i don't think it would. everyone expects it to come soon. it does not much matter whether it comes today or later and that is a small increase. there is no reason to think it's going to lead to rapid increases in the future. the fed is clear it will be very cautious. one interesting thing is, they are experimenting with how to you actually get the rate up. so many excess reserves, trillions in the system, that they have to divide -- devise new ways of raising rates and

they are experimenting with different ways. scarlet: what is the prescription? dr. rivlin: i don't think there is a prescription. you have to try something fancy how they work. a situationver been when they were trying to raise rates. pimm: what would you do? dr. rivlin: the banking system had such excess reserves. i think i would wait until the next meeting or the one after that. when you decide you want to go up and you have a couple of tools, one is the interest rate on reserve balances themselves. the other are these reverse repos with nonbanks. scarlet: we talked about how the fed's 2% target is more wishful thinking than reality. when you back out food and fuel costs, only a quarter of the

time in the past two decades. should the fed lower its inflation target to 1.5%? dr. rivlin: no. i don't think so. desirable target. there is no magic number. it would be nice to get it up a bit. i doubt it is going to happen anytime soon. i think the forces of downward pressure on inflation are very strong in a competitive world. a world where everybody who feels price pressure has options. pimm: are we going to get a federal budget anytime soon? is a more dicey question i think than the fed. it is a question of who is in charge. we know who is in charge of the

fed. we are not sure who is calling the shots in congress. the leadership of the house and senate would like to avoid a shutdown. that is very sensible. we should not have a shutdown. it would be really bad for the economy, talking about things that are bad for the economy. a prolonged shutdown, even a short shutdown i think would be a very negative sign for the economy and for u.s. reputation around the world. it is not clear that the leadership of the congress can carry the day. they may have to have a shutdown to satisfy white ring -- right-wing members in the house. rivlin, thankr you very much. former vice chair of the federal reserve and currently at the brookings institute. some breaking news at the moment

having to do with gm. the criminal case with the department of justice over faulty ignition switches. let's go to preet bharara speaking about the settlement. >> targeted at the issues that led to the tragedies that occurred here in the first place. in a case like this, a case about public safety and life and death, continued oversight is critical. the resolution includes detailed admissions by g.m.. the statement details how gm designed ignition switches for compact cars with socha low torque that it could slip out of the run position into accessory or off while the car was driving. cutting power to the engine also cut off power to the front airbags so if the key slipped out of the position in crash,

the driver and front passenger could lose protection of those airbags. gm knew about this low torque ignition switch for a long time. from the early 2000's shortly after it was first installed. it did not fix the problem back then because gm personnel completely missed the connection between the switch and airbag deployment. -- air back -- they did not do the torque problems a safety issue. in two dozen five, the company assured the public it was not a safety issue. not until 2012 did they realize it was a safety issue after all but they did not disclose it at the time that they discovered the connection. g.m.'s criminal nondisclosure lasted almost two years. at least one person died in an accident related to the defective switch during that time. our investigation of this matter began february of 2014, shortly after gm disclosed that certain

of its older cars had a defective switch that caused the front airbags and failed to deploy. scarlet: that is the new york attorney general speaking about the g.m. settlement. pimm: he is going into detail about the settlement and shares of gm up about $.16 right now. processlking about the after the settlement that they will be monitoring. scarlet: a lot of details to be worked out. the republican candidates fight it out on stage. who should get the best award for best breakout performance? we will discuss.

pimm: this is the bloomberg market day. i'm pimm fox. scarlet: here with scarlet fu. an hour before the fed makes it decision. matt, give us a scorecard. matt cannot hear us. matt: we are looking at gains although very little changes because of the fed decision. more momentum than we saw yesterday. -- earlier this morning. the nasdaq of 3/10 of 1%. the dow jones industrial average up and the s&p up 2/10 of 1%. i will point out that we are seeing low-volume. if you take a look at my terminal, i brought up the spx function. the s&p 500 divided by industry groups. you can see that they are all

down compared to their 20 day moving average in volume. the only groups that are gaining telecommunications and consumer discretionary. cablevision, big game today as it got a big boost from the altice purchase. cablevision is up about 50% or was up about 50% year to date before this and now it has gotten another 15% used. a lot of the gains we saw throughout the last 12 months and cablevision where because of speculation that someone like altice would come in. you are seeing other providers across the industry rise today. altice's says it will be part of .urther consolidation you hear analysts say that some of these companies could be up for grabs. time warner cable going right now. charter communications is buying time warner, also a gain. company a telecoms

although the volume is higher than the 20 day moving average the price is lower. verizon says 2015 may be the plateau for earnings. it has a change in the business model for its wireless bills -- its wireless business. as a result, the earnings outlook may not have been as good as some investors had expected so verizon is training down. scarlet: matt miller with the latest on the markets. turning to politics and the republican presidential race, donald trump did not pull punches in his attacks on carly fiorina's business. pimm: bloomberg politics phil mattingly joins us live from simi valley california. we about to see the former hewlett-packard executive start climbing in the polls?

phil: smartest person in the stage. clear, concise. a couple of the things i've gotten the a text from top .onors and operatives it ran across the gamut from social policy to foreign policy. it was also collect fiorina possibility to stand up -- carly fiorina's ability to stand up to donald trump. >> mr. trump said he heard mr. bush clearly in what mr. bush said. i think women all over this country heard clearly what mr. trump said. a reference to a rolling stone article were donald trump appeared to mark -- to mock fiorina's face. not a good political move to attack someone's looks. carly fiorina's answer, making it clear how wrong she thought he was on that, that was a moment fiorina's face.

that you much everybody seized. if anyone will rise in the polls , everyone is certain it will be carly fiorina. bush?t: what about jeb he did not come off the first debate in a good way. look like he was lacking some ability. you have spoken to jeb bush's team. how they feel he did? phil: it will shock you that jeb bush's people think he totally won the bait -- totally won the debate. there are a lot of donors worried about his first date performance -- his first debate performance. there was an effort to go after donald trump last night. it is tough to get the last word in with donald trump but i think they're happy with the performance. it ended with them! exclamation point.

aggressiveness he brought to that high five p he got all of his frustration out. his team is happy with the performance last night. scarlet: phil mattingly, thank you very much. pimm: i think they should have lined up on the airplane wing. scarlet: i was thinking about that. i would've been dramatic. pimm: baby inside the plane. coming up -- maybe inside the plane. the federal's reserve could make history. some details on the fed's history, next. ♪

scarlet: this is the bloomberg market day. pimm: federal reserve chair janet yellen and the federal reserve will make history in just 90 minutes. scarlet: which got us thinking, what does history make of the federal reserve.

we started with -- pimm: marriner eccles. the headquarters. he was appointed by frequent roosevelt. i called him the first modern fed chief because he decided it was not just targeting and statistics, he wanted to look at the broader economy when making policy. scarlet: he was a millionaire by age 22. pimm: fdr tapped him to be the fed chief and he lasted well into the truman administration. truman then appointed travis mccabe. scarlet: only three years. pimm: he was caught up in a political battle between the federal reserve and the treasury. jean william martin may be remembered. by truman. appointed scarlet: a huge term. pimm: a huge portion of the time we enjoyed inflation as well as

spending on social programs. , he disagreed with and on closing the gold window. he did not think that was a good idea. burns,n after arthur -- scarlet: he only lasted a year. pimm: that gave way to alan greenspan -- , ben bernanke and finally to janet yellen. we await the decision today. i leave it in your capable hands. scarlet: we continue to discuss the implications of the fed move. ♪

scarlet: welcome back. i'm scarlet fu. learn if sergeant alburgh all stand trial for

desertion -- sergeant bowe bergdahl will stand trial for desertion. bergdahl was freed 15 months ago in a controversial prisoner swap for prisoners at guantanamo bay. it is a sign that the recovery in real estate will need more time. housing starts declined 3% and july's figures were revised downward. building permits for single family homes increased. the number of buildings with five or more units under construction climbed to the highest level in more than four decades. vacancy rates for went totals -- for rentals are at their lowest since 1965. while the republicans were debating last night, hillary clinton visited jimmy fallon at the tonight show. she still cannot escape donald trump. the billionaire had some advice. >> a long campaign.

traveling across our great nation, i'm listening to stories. i'm confident americans will see i can deliver for them. >> you sound like a robot. does not compute. you want to win? here's what you have got to do. turn and yell. i yell all the time. 'sarlet: this was clinton first late-night talkshow appearance as a presidential candidate. streetn story is wall and how it is awaiting the fed decision due out in less than 90 minutes. pundits have been weighing in for months, for years on the tick-tock of the markets. tom keene and michael mckee spoke about fundamentals with the man who manages the world must largest hedge fund, ray dalio. mike and tom asked him if quantitative easing works.

>> d think qe works anymore? dalio: it's going to work a lot less than it worked last time. we cannot have a big rate rise for the term structure raised in assets. the amount of debt, what the distant -- with a deflationary pleasure exist around. we will have a downturn. the downturn should be particularly worrisome because we don't have the spreads. when you are asking whether the work, qe is the purchase of those assets to get those premiums up. when you keep pushing, am i going to buy more bonds. is there an attractive investment relative to bonds, the spread is what is going to drive that. if there's not much spread, you get less effective monetary policy. michael: are we there?

dalio: we're not there yet. we are closer. europe is there. michael: they are pushing on a string? dalio: what happens is, what are you going to buy in the way of the bonds? michael: you can't buy a german two year. dalio: we are very close. that is why you need more currency depreciation. the effectiveness in japan is there. the effectiveness of monetary policy comes through the currency. when the person who was receiving that cash for selling their bonds has to do something, they are in different between cash and that other asset so there is a pressure to move it to the country. we have very high rates in the world by comparison to those in europe and japan. it comes through the currency. you have to have currency moves. that is the environment we are in. tom: ray dalio with us here on

bloomberg television and radio. i want to get to this important video from economic principals.org. why don't you introduce the video? michael: ray has put together a video. it has been a huge hit. millions of hits on youtube and other places. tom: he is like the area micron iana-- he is like the ar grande of economics. dalio: that accumulated knowledge raises our living standards. we call this productivity growth. those who are hard-working raise productivity and living standards faster than those who are complacent and lazy. that is not necessarily true over the short run. productivity matters most in the long run but credit matters most in the short run.

productivity growth does not fluctuate much so it is not a big driver of economic swings. debt is because it allows us to consume more than we produce when we acquire it and forces us to consume less than we produce when we have to pay it back. principlesonomic .org. coming out of this, it raises the question i want to get back to. dalio: i'm sorry to interrupt you. i want to emphasize that the reason that i did that and the reason i'm doing these interviews is because i think we spent too much time arguing about what's going to happen and all that. , if we could like agree on how the machine works we will have a simpler foundation for agreement and that would be positive. i've seen so many economic tragedies. printing of money.

was a debatethere about printing of money. they thought it would be inflationary. ,hat i was trying to convey is it's the month of spending that matters and of credit goes down and money goes up and the amount of spending remains the same, it's not going to -- tom: this is critical. a presidential debate tonight. we don't need to get into republican and democrat. this nation to many people's flat on its back and they want productivity. the smartest thing in your work is this mystery, this discussion of going from non-efficiency or inefficiency to efficiency. what is ray dalio's prescription for the next president to assist the nation in productivity? .alio: it's interesting we have done a study going back 60 years and we took various factors and correlated them with the next 10 years growth rate.

we did this across 20 countries. studies on economic principals.org so you can read the study if you're inclined. the same things work in all countries. economies like a human body. it is the same thing as an individual. when you ask yourself, is that individual going to be productive, you will ask, what is the education. what is the cost of an educated person? educated, -- more if somebody is more educated, that is a good thing but you have to adjust by the number of hours worked and what the cost is. let's say in europe, southern european countries, france, italy, after adjusting for the average hours worked in a week -- they cost twice as much as an american.

the income, you can have an education but if you're a expensive, it is not good enough. does the income pay? if you have a situation where you have an educated population, single most important factor is what does it cost to have an educated person. scarlet: that was an excerpt from our primetime special with ray dalio of bridgewater. if you want to see the complete interview, go to bloomberg.com. we have more coming up. a major global player in cable agrees to altice, buy cablevision. ♪

scarlet: welcome back. we want to get a check of the markets with an hour and 20 minutes left for the fed decision to read let's check in with matt miller. i lost my earpiece for a moment. markets, there has been very little change all morning. as is normal on a fed decision day, you don't see a lot of action in the equities market because traders kind of sit on their hands until a decision comes out and then they try and i just the statement and make the decision. after 2:00, closer to 2:15 is when you will start to see action. we have seen the nasdaq start to climb. all of these indexes were unchanged and 90 can see the s&p and the dow unchanged.

tilting toward gains for most of the day. i'm going to show you a couple of things. -- w.a.r. p -- wirp. we have seen it hovering around 30% for the last couple of days. fed funds futures will not be at an increased. economistssee what think. fed funds futures were saying there is not going to be an increased while economists are saying there is going to be an increase. the median estimate is only about a quarter of economists think there will be an increase. you don't see an expectation of an increase. pr.ant to show you mi a page that shows you what the swaps market is pricing in. even click on the chart and see the curve.

there is going to be an increase here at the short end of the. it does not matter if it is september, october, december. it's going to happen as far as financial markets are concerned in the near future. there is a look at what markets are pricing in although markets today are not doing a lot of all. the 10 year, you can see that there has not in a lot of movement. we are almost exactly unchanged. 2.29%. the same picture is what you're going to see if you look at the shorter end of the as well which is normally more sensitive to fed rate increases or expectations. the five year is not moving, the two year is not moving either. looking into commodities, there's not a lot of movement. -- crude down 1%. gold futures, almost unchanged

because there is not a lot of moves in the dollar today. things that are priced in dollars are going to change depending on the dollar price but you can see very little change. the dollar index compared to a basket of 16 currencies come almost unchanged today. you're not going to see a lot of reaction until after the fed decision. i know it is exciting. i've been on my all -- on my terminal looking at everything i can see. up and had trouble falling back down below 25. i will pull it up on my terminal and we will see, gip today. a jump up right around a minute ago. that is very interesting. a gain of about, it is come back down. could be a fat finger. in general, the vicks is not trading that high.

it has come back below that 25 level that was so critical. i'm looking at everything i can, trying to prepare myself for the move. i think everyone is interested, even excited. i just talked to kathleen hays about it. ,e will start our live coverage special program covering this at 1:55 p.m. you'll get a conference at 2:30. a decision at 2:00. i am pumped up. scarlet: if you look at it over a three day period, it is interesting. it is all in a narrowband. we will check in with matt once again. meantime, let's get to some of the other top stories. productsshift to cloud

is causing a sales shortfall. the company posted first-quarter revenue that missed analyst estimates. the move to cloud has hurt traditional businesses. jefferies group investment bank says third-quarter trading revenue fell 50% and the reason, losses tied to the distressed debt of energy companies. rich handler said jefferies has cut its exposure to the sector but that is raising concern about what it means for trading revenue at other big banks. the texas teen arrested after's homemade clock was mistaken for a bomb is going to the white house. ahmed mohammed was detained on monday and now he is a techie sensation. participate them to in its science fair and twitter

offered an internship. that is a look at top stories at this hour. the consolidation wave that is sweeping the cable television industry. patrick draghi is back with the bank. his company has agreed to buy cablevision for $18 billion. this deal will accelerate drah i's push to create across atlantic cable giant. the stock gained as much as 15% today. is alexme to discuss sherman. we knew cablevision was an attractive target. it has been talked about for a couple of months, a couple of years. alex: lt teeth was the obvious buyer at this point. the timing of it might be a surprise. cablevision, if you look at shares over the past year or two, has really creeped up, trading at $26 a share. sources around all teeth and -- around altice and cablevision indicated to me several months ago that altice found

cablevision to be trading at a price they were not comfortable with and why by now because they could just wait for cablevision to come down to a lower price it is traditionally traded at and then make the move, yet that did happen. scarlet: was cablevision caught up in the media stocks fell off we saw that took down disney, comcast? alex: no. in fact that is the great narrative. the cable providers, time warner cable, cablevision now, suddenly -- sudden link, had been trading through an and a deals at higher multiples than we have seen historically while the media companies are trading at lower multiples so people in this industry love to throw around the phrase content is king and yet that is not what we are seeing recently. we're seeing distribution as king, the content companies come down. altice'swhat is

ultimate goal in the u.s. market? how does buying cablevision get it to its goal? alex: expect altice to make more u.s. cable acquisitions. out has been public with happen. scarlet: this. ,hey want to come into the u.s. build a company of significant scale so that there can be three large cable companies in the u.s., comcast, charter and altice. the more cable assets you have, the more leverage you have over those media companies. let's say altice thanks their viacom programming is overpricee u.s., comcast, charter and . if you build up enough cable subscribers, you have an of half to say if you do not pay the right price, we are going to drop all your channels and now millions of americans are not going to be able to see it. that is the idea of buying up a lot. scarlet: what happens to the dolands?

do they have a role here in this takeover? alex: the deal is done. they sold it for cash. they don't even need shareholder approval. , this dealstandpoint is done. there are regulatory things that need to happen when you have a european company coming to the u.s.. there might be political friction in new york because altice is known as a company that comes in and guts companies. i would not be surprised if new york politicians showed up and said, if you're going to come in here, you have to guarantee you're not going to get this company because we don't want to see a situation where jobs are lost. scarlet: there is a formula everyone is familiar with. alex sherman, think you so much. still to come, sales is wrapping up its conference in san francisco. emily chang will join us to tell us what is make headlines. ♪

. if you build up enough cable

scarlet: welcome back to the bloomberg market day. a tech conference so big attendees have to sleep in a crucial. salesforce is holding its annual gala in san francisco. hotels ran out of room to accommodate visitors. what is all the buzz about? emily chang joins us live from the event. you are not sleeping on a crew ship, you live in san francisco. give us a taste of what the buzz is. emily thank goodness i don't need a room over the next few days because there aren't any to be had. rooms are going for $900 a night. the dreamboat's housing the overflow of people in town. 1000 people on that crew ship. dass -- cruise ship. customers --es for

salesforce customers. the rise of the company like salesforce is indicative of what is going on in the broader tech industry. we are seeing giants like oracle struggling. a disappointing earnings report yesterday. they are not transitioning to the cloud as quickly as some had hoped. hp announcing 30,000 layoffs. big tech companies are needing to change in this new environment. i caught up with the new ceo of cisco. i asked him if there will be new layoffs. he says he will be thinking hard about the size of the business. he thinks there is giant consolidation coming to the technology industry given what is going on in the broader environment. take a listen to what chuck robbins told me. >> i think there will be significant consolidation in the world.stomers i think what you are finding are the customers are looking for the business benefit of the technology.

they are looking to get to the outcome faster. in order to do that, we have to bring architectures to life. we are to bring solutions to our customers in a way that work -- we are going to provide the benefit immediately. smaller players are going to have a challenge with providing a box because it does not get them to the business outcome. i think that an customers at dictations are going to lead to tremendous consolidation. emily cisco has been inquisitive over the last couple of years. they are looking to buy. they have ample cash to do it. --ot of consolidation is saying a lot of consolidation is helpful to cisco but it will he puts that cash to work. scarlet: another member of the old tech guard is microsoft. the first year that ceo of the company has been part of the conference. why are these groups coming together? where's their common ground? stage he spoke on

yesterday. interestingly, microsoft and salesforce which have been rivals and still compete in a number of areas, actually forged a partnership. benioff, keen on partnerships as well. it will be interesting to see if they need these partnerships to ensure growth in this new environment. scarlet: emily chang, thank you so much. emily's interview with marc benioff will be here with us, coming to u.s. 5:30 eastern time on bloomberg television. coming up next, we are approaching the fed decision with focus. wall-to-wall coverage, next. ♪

mark: we are one away -- one

hour away from the fed policy announcement, raising interest rates for the first time since 2006. scarlet: u.s. stocks are fluctuating. they are looking for direction as we await the big announcement. its: as the fed makes decision, new economic data is underwhelming. housing starts in august and a key manufacturing index posts a surprise climb. scarlet: good afternoon. mark: everybody has been waiting for this and waiting for this and waiting for this and now we are one hour away from the up to our. policymakers at the u.s. federal reserve are deciding whether to raise interest rates for the first time in nearly a decade. let's begin with a look at the markets.

wall street is fluctuating a bit today in anticipation of the fed move. 500 is upr market s&p nearly 0.20 5% and the dow jones nasdaqearly 0.10%, the is up over 0.33%. commodities, nymex crude oil is down 8/10 of 1% and 033%. crude is falling 2. looking at gold, there has been a question as to whether it's a safe haven given what policymakers may be doing today. nymex crude is giving back some of yesterday's monster gain and inventory data. stocks, things are moving very little. this is a chart that tracks the intraday swings. we have calculated that so far

72ay, the dow has swung points which is a long way off from the high. this is since the beginning of may so this is the salt -- smallest point movements and may 15. -- since may 15. mark: that seems like three years ago. scarlet: i don't know when that happened. mark: the way the numbers were a couple of months ago and where we are now in anticipation of the fed decision, it tells a story. scarlet: everyone has had to re- rate every asset class print checking on the bond market, higher prices which means lower yields at the shorter end. we are talking marginal moves.

in currencies, the dollar is firm against the yen. japanese policy makers like to see the week yen and the euro is gaining a little ground. let's take a look at the top stories. tice is buying cablevision for $17.7 billion. cablevision serves more than 3 billion customers. the combined companies will gain streamlining . >> it continues to have a good basis for continued consolidation. it further does aversive eyes the altice portfolio in terms of fromaphy but we are 70/30 fixed into mobile. scarlet: cablevision is controlled by the dolan family.

they also own the madison square garden company. jamie dimon is speaking into in detroit ahead of the fed decision. he thinks the fed will hold off on a rate hike. he also says the u.s. needs better growth overall despite income inequality. we will bring you headlines from his discussion. the blackstone performance food group is seeking $400 million in an initial public offering for the sale could come as early as this year. performance photos the third-largest u.s. food distributor. blackstone will remain the therity shareholder after ipo. average long-term u.s. mortgage rates have gone up for the second straight week. freddie mac says the average rate on a 30 year fixed rate from 3.90%..91%, up american outlook on the economy is fallen to a four-month low

according to the new bloomberg consumer comfort index. those who took part in the survey are concerned about financial markets and the global economic slowdown. that is a look at the top stories at this hour. scarlet: as we have been reporting, it is d-day for the fed open market committee. will they raise interest rates? julie: it's a key decision for investors and the economy. isk: charles calaveros joining us along with rick rick adonna. i have to start on a personal note. we bumped into each other on the patch in yesterday and you gave me a 10 minute summation of what the fed is likely going to do today and why it can use some that uppity audience? >> i will shorten the lecture. my expectation is the fed will hold off. they were very close to raising rates and they are eager to get off the 0% to declare victory over the financial crisis.

the uncertainty that emerged in the economy which your stock chart highlighted, that financial market turmoil during the summer is giving them some potential negative shock to the economy. i guess it's a small shot but they want to wait and evaluate and err on the side of caution. i think they will hold off today and keep october in play. janet yellen called for an october press conference but to tightening,upcoming they will signaled that it will be a slower path of policy tightening over the next couple of years. scarlet: there will always be some doubt even if you push off until december. others can make a passionate argument as to why they should raise rates. why are investors convinced the fed will not raise rates? >> i think the signal out of the

fed has been in the direction that carl is saying. it does not mean those of the right signals to be sending. it's amazing to me how shallow some of the discussions of the fed leadership is. deflation is somewhere between running about 1.2 - 1.7%. scarlet: below 2%. monetary would think policy should be accommodated. be loose.t should that does not mean we should have a zero interest rate. that is maximally accommodated. the fed funds rate should be at least 1.5 percentage points or some equivalent. the fed is way behind the curve. is thing that is strange that people re: quitting a commentator with zero interest rates and that's strange. fischer tried to

break away from that. he said we would be moving to an ultra accommodative stance. they are trying to win the market expectations but given what happened over the last six weeks, it is too touchy to do just now. mark: we mention that had is been since 2006. is there any time you can fromber during that time 2006 until now that the fed probably should have moved on interest rates? >> yes, we have had about six years of continued growth. the fed has kept the zero interest rate policy for a very long time. mark: why? >> because the fed has decided that it's not ready to move on interest rates. i think the fed is adrift and confused. of course there are opportunities. it's not like we just started this recovery. the fed is way behind the curve. the bigger failure at the fed is the following --

whattold the market today the next two years of growth and inflation and unemployment would become a market observers could not tell me what monetary policy would look like two years from now. the fed is so completely adrift and confusing and bereft of any systematic rules guiding it that it is having -- it is adding a huge uncertainty to the market. if they gave some indication to the market of how it was going to behave, it could actually cause a boom in the stock market and improvement in the economy. the problem is the fed is a source of trouble right now in the economy not because of interest rate levels but because of huge policy uncertainty. scarlet: and perhaps some communicative disarray. janet yellen has not talked publicly into weeks of the turmoil began about six weeks ago. we have gone from overcoming

occasion to know comedic asian. how does that feed into the conviction on the markets that there is not going to be any room to move? >> the fed goes into the blackout period a week before the meeting. watchinguncertain and the data as it comes in and they are not willing to commit to something. they are watching market expectations and seeing a little hiccup in the data and market expectations falling for a rate hike so there is not a lot of reason for them to correct the market under those circumstances. i don't think they want to provide a surprise to the markets. the reason the fed has not gone for the last several years, i -- i think they have clearly missed their mandate on inflation and on the high side on unemployment. once they get closer to the mandate, they will be able to normalize policy. mark: i saw you shaking your head. >> they have not been to the

loci on inflation. it has been 1.5% which is close to the target of 2%. on unemployment, every time they get close to hitting what they say is their long-term target, they lower the long-term target. not getting wage inflation which tells us we are not yet at full employment. >> wage inflation ceased to date the target for unemployment. the problem has been that the fed has been reducing those target long-term unemployment rates because this is the most politicized fed we have had since richard nixon in the 1970's. scarlet: you think this is a political decision? >> absolutely. >> i don't think so. inflation is 1.2% by the metric the fed follows which is the lowest since march of 2011 when we were in the middle of quantitative easing.

the fed does not have confidence that inflation is heading back to their target and every time the dollar get stronger oil prices fall further, there is confidence -- of confidence in the rebound is further reduced. mark: what are investors on wall street thinking right now? from the minutes away decision. what are they saying? >> i would say they are confused. agree that my preferred measure would be the dallas fed 1.7%, close tos 2% but not justifying for -- for percentage points of interest rates below what should be the mean. it is a ridiculous position the fed has gotten itself into precisely because of its overly politicized concerns. ,carlet: talk more about that if something happens, what happens next in that context? >> i was on capitol hill yesterday giving a briefing with

a lunch of congressional staff about various legislative proposals to reform the fed. the fed knows it's under attack for good reason. the fed has always been having to field political uncertainties but now especially. i don't think chairman yellen helped much when at her first press conference, she brings in unemployed individuals and points to their stories. that is the antithesis of a long-term oriented central-bank. she is very much a lightning rod for those kind of political concerns. i think it is not done her any credit. mark: let's let you get the last word in. >> you have to look at the balance of risks for the fed. if it is late to the game and the economy overheats, we now have to slow that down. central bankers have done that for the last 100 years. they can raise rates if they need to slow the economy. if they need to speed things up

because they have a policy mistake, there is not much room. scarlet: stay with us because this conversation is not over. we are going to talk more about the implications for the financial industry. thank you both for being here. and thank you for being here after the break. jpmorgan chief executive jamie dimon is making comments about the fed at the detroit economic club. he says the economy is strong enough to handle a rate hike. mark: he does not think they will actually hike rates in more on that straight next. ♪

scarlet: welcome back. mark: let's go straight to julie hyman with a look at the markets with less than an hour to go until the federal reserve makes

its decision on interest rates. know aboutlet's us know about that decision. we are seeing the markets get a little bit of traction in stocks but not a lot of change before we hear from the fed. let's focus on individual movers -- todayes are doing well and in particular united is doing well and american is doing well. united is talking about a new credit card agreement with chase being positively commented on by analysts. the 16 earnings-per-share estimates will be on the rise and american. and oilst leg downward is good news for airline companies. american airlines came out in the past moment saying it is experiencing grounding of flights with technical issues. this is looking at the airlines in north america and they are cost sources. wages as the white light and

fuel is our engine maintenance and repairs are way down here. if you have seen the price of oil come down, the cost of fuel for these companies have come down and wages is now a higher cost for the airlines collectively than the price of fuel. we can consider that as we look at the price of oil and what effect that has an airlines. another top performer is eli lilly. it says they reduced risk of cardiac issues with diabetes patients. earnings will be below what estimates are. they have talked about demand for its products. a check on oracle after they came out with earnings and revenue fell short of analyst estimates. the company's cloud business is doing a little better which is where is looking for growth.

that is not the biggest part of the business. software license sales are slowing down and that is what hurt their revenue and the shares are down 3%. scarlet: it's been tough for these old tech companies to make the transition to the cloud. mark: we are back with more on the countdown to the fed decision and the state of the u.s. economy. scarlet: our guests are joining us again. let me talk about the banking industry for a moment. banks themselves have been pushing for an interest rate increase and have been hurt under the zero interest rate policy. we have seen how jeffries has reported a 50% drop in third-quarter trading revenue because of losses in fixed-income and citigroup and bank of america are looking for a 5% drop in trading revenue for the third quarter. how much has this policy hurt these banks question mark >>

that's a great question. i had a paper published last your that looked at that question. what happens when interest rates are zero for a long time is bank branches become very unprofitable. the point of setting up branches is to attract deposits which are can pay low interest on. when interest rates on market debts or a 0%, there is no savings from having those deposit accounts. you have all the expenses of running your branch network but none of the benefits. it would be hugely beneficial in terms of bank spreads, interest rate spreads which will absorb some of those expenses. i have a long position on the banking sector because i think there is no place for interest rates to go but up. mark: what about the community banks? this will have the same effect because it has to do with the lack of any advantage to maintain the deposit base through the branch network. at the: when you look

macroeconomy, how much can you extrapolate from banking trading results? what does it mean for the broader economy? >> it's the issue of volatility. if you have perfectly still markets, then these banks are not profitable but you don't want days like black monday in august where the market tanked and then people are stuck in positions. i feel like i'm a broken record but it comes back to the consumer. what about the customers question mark what impact has this had on them? >> low rates have allowed credit extension into the economy. to that extent, it has been an effective policy but you cannot force banks to lend. i have to be confident and economic outlook. in the early stages of a cycle, the fed cutting interest rates, household and consumers simply

were not responding as they were deleveraging and now it's a different environment and there is greater conference and people are applying for mortgages and auto loans. scarlet: getting back to volatility, charles peabody makes this tension between good volatility and bad volatility. he says this was driving the cutting losses. is that bad volatility engineered by the central banks? >> that's a great question. i am trying to figure this out in a research project now. there are lots of other explanations for volatility. one is a regulatory expedition having to do with the ball roll and other things. liquidity is disappeared in these markets. the central bank policies may be contributed to this through qeiii. if you take the collateral out of the market it's hard to do repos and that is the liquid

liquidity that greases the wheels of financial markets. you can look at that is your story for this bad liquidity. thank you both for the lively discussion. will be back to help us break down the trading and the argument for and it dense the rate increase as we lead to the fed decision. take a look at treasuries are trading -- about 40 minutes to go before the fed decision. yields are lower and prices are higher. ♪

mark: welcome back to the bloomberg market day. we are getting ready for the fed rate decision and about 35 minutes from now. scarlet: jamie dimon is speaking right now at the detroit economic club and has talked a little bit about the federal reserve, saying when all is said and done, the fed rate increase

is not that important. he does not believe the fed will actually increase rates but the u.s. economy is strong enough to handle line. he said it is not that important if they do it in september, october, november and december. just like everyone else, he is waiting for the fed decision. this has been one of those hotly debated issues. it seemed a certainty there would be a move but august 11 happened and that's when china d valued its currency and that threw everything into turmoil. scarlet: and now the market is position for no change but for comments that might indicate when janet yellen and her committee are ready to move. ♪

mark: welcome back to the bloomberg market day. thank you for staying with us. the fed decision will be out in 35 minutes and last night, one of the world's most successful

investors of bridgewater associates spoke to bloomberg surveillance in an exclusive interview. here is what he said about interest rates. >> i don't believe that they can raise rates faster than its discounted and the curve for a large part because that interest rate curve -- the rate at which it's discounted to rise which is built into the curve-is built into all asset prices. if you raise them much more than its discounted and the curve, i think that will cause asset prices to go down. all things being equal, all at the present value of discounted cash flow. all of them are subject to the same discount rate. they have that built into their structure. from joining us now washington is michael mckee who cohosted that interview and in the studio, josh wright is with us. what was your main take away from that interview? he is concerned about

where the u.s. economy is and sees a driven by three factors -- productivity, short-term debt cycles, and long-term debt cycles. he says we are at the end of a long-term debt cycle which means central banks will have a hard time creating more credit and credit drives the economy. anthis point, he expects additional decline in economic growth rates if not an outright recession. he is worried that the central banks around the world cannot do much about it. josh, he said central banks are having a hard time creating more credit. how difficult is it? >> that is one of the challenges we have seen across different jurisdictions. central banks have been accommodated but it's gotten hard to get banks to take that money and extend loans in the u k, they had a program or they were paying banks to go out and make loans. you need the animal spirit of giving people money.

that's what has been missing along with a couple of other elements that have made this a weak recovery. makes up at about the central banks and we talk about what investors want to hear from the federal reserve today. bankso the other central want to hear? what do they expect to hear today? michael: it depends on whom you are talking about. europe is relatively isolated from the rest of the world in the sense that it has its own banking system. they are going ahead with their qe and japan is the same but the rest of the world wants the u.s. federal reserve on hold with interest rate differentials. anddollar is already strong their currencies and corporations have to pay back dollar loan so it's more difficult. they would prefer the fed does not drive the difference rate differentials higher. we will see the reaction in asset prices but will we get

commentary from policymakers abroad? in the last couple of weeks and months, we have seen the head of the imf and the chief economist of the world bank come out and say the fed should really be slow and careful in the world is not ready for this. than we also had anecdotal reports that a number of central bankers in emerging markets were saying we are ready for this and we want the fed to get on with this. mark: is there a sense of fed fatigue? some point, they say we have been talking about this for so long, just make a move and give us something to chew on, some direction? michael: you do hear that from people in the markets, even people who don't think the fed should really raise rates very much. fed admit that there is fatigue out there and a lot of the volatility comes because they don't know what the fed is going to do. if they don't raise rates today, what they would like is something that gives them a clue

as to when they will so they can start planning. the uncertainty has caused problems on trading desks. mark: whether a move is made today with a max half hour or what is incumbent upon policymakers to tell people about why they did or did not raise rates? >> the trickiest things to come up with something that is consistent with their prior diagnoses. heard the fed about how the initial basis is not matter, it's the cumulative amount of tightening. that sits uneasily with the idea of keeping away from calendar-based guidance and focusing on databased guidance. the could be one of questions that keys into the decision today is how confident c in his ability to control the expectations. they still want a gradual path. mark: there's the question of

data. there are reams of data that policymakers have to go through in order to come to this decision. what is most important for them? needis your janet yellen to convince her one way or another? michael: that's going to be one of the first questions people ask if they don't raise rates today. if they do not raise rates today but suggest a will do it in october or december, everyone will want to know what will be different than from now that would lead you to believe you could do this? will it be that we have another gdp report, continued strength and jobs? progress on inflation? nobody things we will see progress on inflation until next year. it will be hard for them to make a statement even if they don't move today to give the market some idea. toi think the fed will have

think a lot about what it feels data versusconomic what's going on in the financial markets and what's going on abroad. one of the big pieces of information we don't have is what kind of model the fed is using in order to evaluate this development in financial markets and abroad. there has been discussion recently about the probability placed in by the market of a fed rate her today -- a for fed rate heart -- a fed rate hike today pit there is only one model that has given a specific number. we don't know what model the fed is using. we know they design their own and we know they do a lot of work to gather intelligence and provide -- apply certain critical thinking to market prices and the models being used. did this thing happen during the chinese d or did it start to happen before that? it in the volatility

leading up to this and you expect that whenever you are going to have a big shift in regimes or the expectation with the fed going into a tightening cycle. it has accelerated since then and there are concerns that have grown as well. been doingnd i have this for a while there have been times when we are on the air at mantra was to read between the lines and the language. the dots?ad between is there something the dots can tell us? michael: sure, if we see all of the dots for 2015 moved down to 25 basis points, you know they will be one and done and the same will be for next year. people will look at those very closely to see how many rate hikes the members of the open market committee are going to be needed by the end of next year. that will give them a clue as to the path. they were higher than the market the last couple of years.

if they get closer to market expectations for a gradual tightening, maybe 100 basis points by the end of 2016, then we will see a market re-price for that. the. plot, just we'll get a slew of other economic forecast. i have my eye on the unemployment rate. there is an indication in the july minutes that the fed would supply the long-term on a planet rate and will probably have to revise down their forecast for 2015. the relationship between the year end and the long term will be an important factor when it's appropriate to raise rates. that will tell us something as well. mark: we will find out and about 22 minutes. thank you both for joining me. we will be back in two minutes with different perspectives on the u.s. federal reserve. here is a look at currencies ahead of the decision. we were discussing currencies a

few moments ago. weaknesseing dollar against the euro but we are seeing dollar strength against the japanese yen. stay with us, we will continue in a moment. ♪

mark: welcome back to the bloomberg market day. let's check on the markets. julie hyman is standing by. there, t minus about 19 minutes until the fed decision. we are seeing the markets have gained a little bit of traction into the afternoon. there is relatively little change and we are seeing relatively light volume until the decision comes at a we expect to see more volatility

and volume pick up. let's look at the other asset classes. let's get a reference point for how they react after we get the news. the 10 year yield is moving a little lower and it have been little changed earlier. there is a little bit of steam heading into the statement. 2.26% is the yield now on the 10 year. we're looking at how the dollar was trading. dxy which is the the dollar index. 3 it's down/10 of 1%. it has been in a relatively tight range. people have economic data to digest like jobless claims falling, we had housing data and the philly fed number coming in

below estimates. all of that factors into the dollar trade. with commodities, looking at oil and gold, we are seeing them both trade a little bit lower. nymex crude is turning around every couple of days of gains, down 7/10 of 1%. let's take a last look at what world interest rate probability. at.s 30% we are looking fed funds futures traders are pricing that him in an terms of the chance of an increase at this announcement we are about to get in a few moments. it has been vacillating a little bit today beating the 8%-30 2% and now 30%. we'll see if they are right. mark: we have been talking about this and talking about this for

the past couple of months. i asked michael mckee about fed 50. what are the markets thinking? what are people on wall street thinking about the lead up to this decision? this: you tend to have quiet going into these decisions. , if you look at volatility, the s&p 500 has gotten more expensive and there is rising demand for people to buy hedges. they want to protect themselves if indeed rates will go up. it could be announced today are at one of the subsequent meetings. the market price and expect moren that people need safety. there seems to be some pricing in of continued volatility. mark: thank you. we are about 50 minutes away from the fed decision, 45 minutes away from the news conference.

jamie dimon from j.p. morgan chase talked about the fed moments ago in an address at the detroit economic club. >> the fed has made it clear they will raise rates when america strong and strengthening. the strong and strengthening part is most important. no one i know who said 25 basis points will hurt them. it's the psychology of it. it's just not that important. whether they do it at the end of the year or not, i don't think they will do it. for the same reason i have not done it for six years, it will be a good thing when they raise rates and the economy is hotter wage inflation goes up a little bit. normalization is a good thing and central banks have been manipulating short-term rates for six years now. it will be a good sign and america has the strongest economy in the world. when they do it it will be good and i trust them to pick the exact right month. that was jamie dimon

speaking at the detroit economic club. that is moderated by chuck todd of "meet the press." let'sre perspective, bring in eric economics editor and mike reagan. thanks for joining me. let me pose a question to both of you -- people are using the word historic, is it? >> it will be. the federal funds rate has been since 2008 in its never been that low in history. to have it be that low for that long, there is a generation of people who think the federal funds rate is zero. it's a rarity over history. has that made this a more volatile event? right, if you are going up 1 it'sint every meeting,

shrugged off the when you make a step change to a new level and the expectation is that will continue, yeah, it will be volatile. for: we have been speaking the past couple of weeks about this and i spoke about that with our last guests, it seemed to august 11, before china devalued the currency, it was a given that the u.s. federal reserve would move to raise interest rates at this meeting in september and then the d valuation, even though was small by standards, it was a small move that it seemed to throw the global markets into chaos. that settled down somewhat but here we are. how did the chinese move possibly affect u.s. central-bank policy? >> china is such a key trading partner all over the world not just to the u.s.. when you have a currency valued at x and then its 2%, it ripples

through all the financial models. mark: even a move that small? >> and there is that there is that china was doing this to get ahead of the fed. the main question today for janet yellen but i will ask you, this notion of why hasn't inflation picked up? the whole world was worried about zimbabwe-style inflation from qe and there is the thought that people have said that may be they had the exact opposite problem, that it is causing disinflation by boosting the supply side. is there any validity to that? >> it has created a lot of reserves in the financial system. that does not necessarily translate into money being out there. that's why we haven't gotten insulation. naive view that the fed prints money is a sample of occasion when you are in a hurry but it's not actually what happens. there is no printing press.

not only that, not even conceptually does the fed directly print money. it can only give the banks more reserves but the actual money does not come into creation until the banks make loans and they are not doing that. getting close to the deflation you're talking about. we have potentially been in that scenario and we got the cpi numbers which are low. that's why it's a tough call for the fed with almost deflation. mark: let me pose you this question -- what specific data point will the fed be looking at before policymakers decide to raise rates or not? obviously, the inflation numbers at the producer level and the consumer level. mark: they can't seem to get inflation up over 2%. >> inflation is too low and there is jobs. on the assumption that the tightness in the labor market will translate into higher wages , it has not happened yet, but

if we know anything about economics, it should eventually happen. >> you bring up a good point about banks not lending. is that a function of the dodd frank rules or basel iii? is the fed fighting it and in regulation? >> that means the patient has changed. they are dealing with a different connection between monetary policy and the economy than the are used to. mark: we have been talking about the fact that not all federal -- not all central banks around the world have the dual mandate, not all of them have to deal with inflation and jobs. one of the criticisms of the federal reserve is that it has paid too little attention to inflation at the expense of jobs. do we get a sense that that is

justified? they's hard to say because threw the kitchen sink at the economy. for whatever reason, inflation is not meeting their goals but i some say they have not been aggressive enough but it seems like they have done as much as they could and some people say more than they should have. of a long while, both sides the dual mandate point in the same direction. >> you needed more jobs and you needed higher inflation. lately, the employment has recovered to the point where you could argue they have achieved their target on jobs. you could also argue the other direction but where they still fall short is on inflation. it's too low. that's temporary and we are about to take off. i'm with the camp that says of inflation starts to work up, they know how to bring down inflation.

they don't know how to bring up inflation. >> obviously, the oil story plays into this. the boom in fracking that could have been propelled by low interest rates and easy monetary policy. that must be one of the biggest wildcards in the inflation scenario. >> and the global outlook. mark: gentlemen, we have about 20 seconds left. as we approach the up to it the fed move today? you don't believe they will question mark >> i will take the other side to becomes. . i would not bet money on it. right, thank you both very much. break, look at the markets, we are seeing green on the screen but investors are probably paying more attention to what's coming out of washington what's going on on wall street. all three major indices are all

higher as the fed decision is imminent. that's it for me and coming up our special report on the fed deciding. you are watching bloomberg market day. ♪

>> welcome to the fed decides prudent in five minutes, we will know if the federal reserve votes to raise interest rates for the first time in nine years. we are broadcasting live on bloomberg radio and television and bloomberg.com. i'm kathleen hays and tom keene is my special cohost. betty: it's good to be with you. it's nice to sit in michael mckee plus usual seat. : michael mckee is in

washington and will go to him in a minute. we were just talking about this, the fed is looking at the economy and unemployment is low. they want to start normalizing rates but we've got markets and turmoil, a chinese economy slowing and the european central bank that cut its inflation forecast. e marketse got som moving in futures were negative all day but now we have a nice pop with the dow up 50 points. to see the two year yield go 0.86 means it's time to talk to michael mckee. : you will bring us some of the headlines in a minute, what are we looking for today? what are the things you have to sort out in a matter of minutes? the time for talking

about what they ought to do is over and it's time to talk about what they did. we will want to know why the user stood pat or raised rates and it will tell us something about what they will do in the future. if they stand pat, what do they say about october and how will they get us there? if they raise rates, we want to know about the mechanics. it's not just raising fed funds. it's all about thedot plot and the path of rates going from here. it's the second thing people will look for after the rate decision. tom: let's do a market check right now. data with different the fed announcement and we look 6t the two-year yield, .772 which is a lower yield and the yen. yen -- it's a weaker dollar and a little bit weaker yen. somewhat of a jumble in foreign exchange.

gold is down $2.11. yieldn why the two-year is important to fed watchers? michael: it's the most sensitive to fed movement because the short-term rates get the most attention. the fed is going to look at the path of inflation over two years. the 2-year note is the when you look to for an indication as to where the market thinks fed rates are going. will hear from michael in a couple of minutes. ira jersey is with us from oppenheimer funds. you're the bond market expert. what happens today? is the market going to rally? they do hike, the market is not priced for it so you will see short end yields of everything from overnight rates although he out to to your nose will settle -- sell off significantly. we have actually rallied on the front and since i left our office about three or four basis

points. it says the market does not think the fed will do anything. if they do, you'll see the rate go back. tom: you've got incredible perspective at oppenheimer. , how tohey synthesize the manager's synthesize this moment? at ratesnd up looking and foreign currency and credit as three different and separate asset classes. you don't worry about what rates were doing your but you worry about what the euro will doing what foreign car -- currencies do. for some of our funds like international bond funds, we will concentrate on those type of moves today. tom: i cannot convey the coverage we have had. the disagreement is profound. kathleen: i think it's from the heart. move,recently, if they janet yellen does not want any dissent and wants everyone at

that table to agree. it's collegial and sincere and it's about 10 seconds away. we will find out if the fed has voted to raise interest rates for the first time in nine years. tom: we welcome all of you on bloomberg television and bloomberg radio worldwide. kathleen: we are taking a look now at the federal reserve. jeff black is dissenting on the decision by the fed. -- jeff lacher. they leave interest rates unchanged. i'm so excited. this is what the big question has been. ira, what is popping out at you? saidone participant has they will not hike in 2017. three people think they will not hike until 2016. you have a majority