alix: from bloomberg world headquarters, good afternoon. we are covering stories from san francisco to beijing. here's what we are watching. highsude rising to it day . it entered a bear market, struggling for direction has volatility. scarlet: tesla has missed on vehicle deliveries. now they need sources to take over. we will look at the cash burn angie:. lower commodity prices are eroding at the second-biggest mining company. we are talking about rio tinto. from the ceosghts interview. we are halfway through

the u.s. trading day. let's go to julie hyman, tracking the moves. in terms of s&p 500, still in the range of euro modest. -- fairly modest. julie: we have seen a 1% move 18 sessions for the s&p 500. and we are printing this for the moment. the dow also breaking and seven session long losing streak. the tenure is a little more positive. if you look at the course of the session intraday chart, you are not seeing a lot of movement. this is intraday, as tight as the past several weeks. this is turnaround from stocks trading earlier. there is not a lot of movement or othern the s&p 500 averages, we are seeing a lot of big stock movements, individual. double-digit gains the companies with earnings. , in theh recovering

process of recovering after it posted losses on long-term. the ceo has been moving past that. goods, thatrting company beating estimates, announcing a buyback. they should be mid to high single digit range. and 3-d systems doubled analysts estimates. there is also some losses as well. crank coming in with earnings that missed estimates and slashed the revenue forecast. kate spade also missing the forecast earnings per share. and crocs as well. they are missing estimates. these have been putting pressure on the rest of retail. if you look at oil prices, it has been a wild ride. we have seen them gain, then weekly inventories came out. oil is now rising once again. we had the biggest weekly drawdown in gasoline inventories

since april. that offset the unexpected bills in crude inventory. but is having a ripple effect. stocks are rising, one of the reasons also that we are seeing. overall, williams got upgraded. scarlet: there is a crack today. julie: that is the inverse of small gains in stocks overall. the big pullback today, it jumped yesterday. the dollar versus the again, and gold going back. a little bit of a stock rally. scarlet: thank you so much. angie: let's check in on the first word news this afternoon. mark crumpton has more. mark: there was a dramatic escape today in dubai when a packed emirates a jet crash-landed. interrupted in flames after spiraling down the runway on its belly. emergency shoes were deployed and 300 people escaped unharmed.

one firefighter was reportedly killed during a response. the accident is the worst ever for emirates, the biggest carrier by international category. it was shut down for several hours before reopening. donald trump says there is unity in his campaign to fight the turmoil from -- despite turmoil from fellow republicans. he says he is greater than ever before. he faces criticism from republican lawmakers for attacking the muslim american parents of a u.s. army captain killed in iraq. the soldier father criticized mr. trump at the democratic national convention. hewlett-packard enterprise ceo has endorsed hillary clinton. she once ran for governor of california and republican. she urged all members of the party to reject donald trump, saying he is uninformed on critical issues. clinton's temperament and

experience make her the better choice. more armed police on the streets of london. it is an effort to reassure people worried about terrorism. former prime minister david cameron announced funding for 1000 extra arm is police. they began patrolling today. day ourews 24 hours a by more than 2600 journalists and analysts and more than 120 countries. i am mark crumpton, this is bloomberg. scarlet: it has not been a smooth road for tesla. they are facing withering criticism of the offer to buy solar city. autopilot with the technology not helping the lackluster stock performances. as investors are racing, second-quarter earnings dropped after the bell. jamie butterworth is standing nearby. vehiclenounced a mix on deliveries. we know that is coming. what is the number one metric we

will be watching for as an auto reporter today? julie: we are looking at anything they say going forward. if there is any chance of delivery target for this year or the more ambitious targets down the road, like the model three oh by next year, -- model three out by next year. themhey stay even with miss in the second quarter, stay on track with bigger goals? angie: how critical are the margin pressures here? jamie: it will be at it will be a tighter margin. in massive battery factory nevada, factory retail network, supercharger stations and developing new products. it is a lot of pressure to deliver and make these sales efficiently. scarlet: the big story with tesla has to do with solar city,

which has not pleased shareholders. has elon musk made the case convincingly that is full or will help boost tesla? jamie: they made the case it would be more streamlined, bringing solar city in with them , trying to say if someone is buying an electric car from tesla, we can send one service truck out, put up solar panels, give the batteries that store energy overnight until a better time, and a charger for the car. they can do it all at once. is it totally compelling? we will see. angie: also tesla's first cash flow. of 2020 ofe goal making one million cars, they have got to have a huge capital raise. these are questions investors are looking for answers. jamie: especially when you in solar city.

is that will get done. fold inially when you solar city. burn after, they have so much investment to make, they cannot generate enough in the first you will future. -- they needmoney to raise money. scarlet: that would dilute shareholders even further. thank you for joining us. coming up on bloomberg markets, the largest part of china's economy, data showing slowdown in the service sector. analysis coming up. ♪

♪ angie:angie: you are watching bloomberg markets. hurdles and its challenge to reform the economy for domestic consumption rather than heavy industry and exports. new data is showing growth in the service sector cooled in july. how does that boost the hopes of a restructured economy? let's ask the chief strategist for civil parts asset management. you are a china watcher here. what is in this index of services? is it a slowdown reflective of a broader chinese economic slowdown? is there a silver lining? >> i would not say a silver lining. they do need the service sector to grow. it is underdeveloped. and manufacturing has been in clear contraction, if you look

at pmi numbers for a year-and-a-half now. this represents a shift to a different kind of economy. if there ised that not the kind of reform that , you up new opportunities don't see the growth in the sectors you should see. mark: the silver -- the silver lining of bad news equals good news, the pboc will step in with stimulus. patrick: that is the eternal hope. that is what people say when they see bad news out of china. what they don't appreciate is that has run its course, china has over stimulated the economy. when they pump more money into more overinvestment and sendingion instead of the right price signals. they need market adjustment and reform to get there. outflows isal something they are dealing with. when we get the pmi data, official or private, all of it

tells the story of transforming the economy. what does it tell about the challenge? hasick: i think china still a substantial outflow problem. look at it, two things of happened, two pieces of data came out recently. that private fixed investment in china has cratered over the past half year. and the second thing is chinese economies -- companies are sitting on cash. so where does ago? it goes into speculation and property and the stock market, but because there is a crackdown on people getting money out of the country. that money wants to flow somewhere where there are higher returns than china. scarlet: we are seeing that. cash hoarding. the techy amongst sector, consumer driven companies.

reflective of concerns about the future, the slowdown and financing debt. patrick: this is not that different from what we saw in japan in the 1990's, after the bubbles burst. you pumped all this money in, goes into investment boom. and then the first response of the government was to put more stimulus in, monetary stimulus. they were pushing on a string. people take the money and did not want to invest. in this case they say, in china's case, they send it abroad. was,ther thing they did the japanese turned to fiscal. that did put money out there, and it did support gdp, but compensated for the small loss in private investment and the losses that had to be tapered over. over.ered you avoid the dramatic fall in gdp, but you don't get new growth, and that is where china

is right now. scarlet: we are approaching the one-year anniversary of china devaluing the yuan. china took all kinds of steps in response to that. it is planning to loosen restrictions it put in place, on stock and index teachers trading. our authorities justified in confidence markets cannot stabilize enough for them to do that? patrick: no. every time they talk about it, the market does not fall. the devaluation in china is quite high. unreasonably high. when it comes to the currency, i have always argued that is a different thing from trying to prop up the stock market. i have argued china can and should support its currency. that is essential with the right price signals to shift the economy away from overinvestment to consumption driven economy. they have the means available to

do it on their own, much less with international support. they have not been sending clear signals about what they want to do. that has encouraged this tendency for capital flow out of china and accentuates the problem. angie: if you look at the mp, look, check it out. 149% that burst essentially. this was already correlated to the depression of the property prices where a lot of people have managed their money. what does this look like today? we are seeing the property prices coming back, but it is unfavorable in to your two frequencies. wo frequencies. put it: they can't

abroad, but they have got to put it somewhere. they stabilized at 3000 and wobble's around. people think there is a government -- the government won't allow it to go below 3000. they have been right. you take that away, what happens? you look at the prospect of the chinese economy growing. you look at the valuations of the market, which i don't think our supportable without the assumption the government will prop up prices. scarlet: let it show this headline that just crossed a few minutes ago. india passes landmark sales tax reform. this is the prime minister's biggest win so far. india andd contrast china's efforts to reform their economy. who is getting it done? modi hasnobody -- emphasized state changes and a

local level. even though it is national said if you are a state in india and you want to has reform about land, labor, taxation, go do it. it is creating competition among different states in india for who will capture the growth. there is not much of that in china. there is some talk. there is some situations in which local reforms is an attempt to create these laboratories like the shanghai economic zone. but the kinds of reforms china ours to do right now financial reforms. they cannot be localized. they have to do them on a national level. it is a binary thing, you either do it or you don't. angie: good to talk to you, thank you for joining us. strategist. more coming up. ♪

angie: this is "bloomberg markets. the world's second-biggest mining company rio tinto has posted its worst profits since 2004. earnings fell 47% for the six months of the year and the company has been hurt by depressed prices for iron ore, aluminum, and copper. were notaid results too bad given volatility and the market. this may be a low point in earnings. >> i believe there is a strong in theresults challenging environment and more importantly, we did deliver on our commitment. me give you a few examples. we did generate $2.3 billion of operating cash flow in the first half. we did pay $1.9 billion of

dividends. , we did but not least reduce gearing from cold $.9 billion around $900 million every landed in december last year. billion around $900 million every december. jonathan: so the company essentially, the bottom line is you mine more to earn less. the question is not just for rio tinto but the entire industry. why does mining more and earning less make the right strategy? jean-sebastien: i can't say anything about my company. i can only defend the strategy where we have rio tinto concerned. theelements, the policy of culture, tier one assets, and [indiscernible] in the short,iver

medium and long term. we said we would deliver in the first half. we have clear goals. we have a good gearing target. we have $2 million cost savings for 2016-2017, and we are on track. this is whereaps confusion lies where the m&a is. it was clear that the company was a buyer and not a seller. there is speculation what rio tinto is doing, getting ready to spend them off. does it look more like a salary asset as a ceo than a buyer? jean-sebastien: there are two parts to your question. in terms of recalls, looking forward. rio tinto is about build and small by. -- buy.

we want to watch potential assets that we would love to put in the portfolio. large, low-cost. is the other aspect value. if this is an example of copper in recent months, the transaction of second-place, if i will get more and see, by the buyer, we are fully priced. that is not what is lost. do we have mla? the answer is yes. my answer about going forward, not being billed, that is not buying. the second question was [indiscernible] putting together a cluster of assets. before you ask the question, it 32 by 32.

i know you are going to ask the question. the old logic is very similar. -- simple. we need to work as best as we can with a free cash flow. that is one part admission. davies has isalan working as an incubator for new businesses. we have new prospects. we talked about it last year. in the lithium business, it is very attractive. we have a project in serbia we are looking at. the rio tintowas ceo. look at the bloomberg at rio tinto shares, trading in london. you can see the invest reaction to the worst profit since 2004 under this new ceo, three quarters of a percent down as costompany cut spending. scarlet: let's take a look at

how this compares to other minors. white, see rio tinto in middling performance up 20 7% when you include dividends. the off shares index overall has been trailing behind, up 7%. minors as a group have done fairly well, 62% gains including dividends so far this year. of a 28-year-old activist that took on facebook and actually one. ♪

>> live from bloomberg world headquarters in new york, i'm angie lau. scarlet: i am scarlet fu.

this is bloomberg markets. mark crumpton has more from the newsroom. mark: there is a report that senior public officials are exploring options if donald trump quits the presidential race. those officials believe trump is so unpredictable, he might withdraw. a new candidate would have to be of thed by 168 members republican national committee. democratic vice presidential nominee tim kaine is calling on republicans to bring the senate back into session to address the threat posed by the zika virus. he told an audience in florida yesterday that congress should not the in recess while the virus is advancing. he wants fast approval of a 1.1 billion dollar measure. a deadly wildfire that continues to spread near big sur was started by an illegal campfire.

whol trying to determine started the fire and are asking for information from campers in the area to more than 69 square miles and destroyed 57 homes. memberama, a former kkk convicted in a church bombing that killed fourlack girls 50 years ago will remain behind bars. met withion was applause. the last surviving kkk member convicted of murder. day,l news 24 hours a powered by more than 2600 journalists and analysts. bloomberg. back to you, scarlet. scarlet: thank you. the dow has been declining for seven straight days. it looks like angie is about to snap that. the s&p is still moving within the very narrow range up 1/10 of 1%. the nasdaq up even smaller

gaining 81 hundredths of 1%. >> let's go right now to abigail doolittle live with the latest. abigail: the nasdaq is really clinging to very small gains, trying to avoid the first today losing streak since the frexit fallout. we will have to see whether or not the nasdaq can hold on to this gain. tesla, this is one of the last earnings reports that we have for the second quarter earnings season today after the close. emotion is very high and of variouse titles sources, some of those titles include, in the -- is the end near, so a lot of emotion here. the secondw about quarter report, tesla .reannounce back in july delivery targets by about 3000,

delivering 14,370 vehicles. it is also likely, looking for another operating loss of about $98 million. looking ahead, for what can drive the stock tomorrow in the gate -- days and weeks ahead, what would tesla say about the delivery target, looking for about 80,000, already lower. target ofbig 2018 500,000 vehicles, big, 50,000 last year. most likely big volatility. the stock has swung up and down on average 7.5% in the last four quarter percent. big volatility once again tomorrow. another stock that has tended to move big after how has theort,

stock been performing since? but it is -- >> it is surprising to us. is another blowout quarter, a third in a row, a string of strong, quarterly reports, underperforming the nasdaq, flat over that same time. a mutualis rating to .irm whether or not mark zuckerberg and his team can excuse us for -- so flawlessly. it is that execution it helps explain why facebook is a top performing stock of the year up and the nasdaq this year. you can say facebook right now is the king of the nasdaq. scarlet: let's stay on facebook. the european union data privacy took hold this week.

numeral's affecting more than 4000 companies. instead of celebrating, he is saying the new rules should be ripped up. we're joined by adam in london. a 28 euro lost in louisiana come you describe him arriving late to an interview wearing black shorts, a black t-shirt, and flip lots. how did he come to cause so much change and turmoil in the global data privacy rules debate? >> a lot of perseverance. this started several years ago. spoke to his clasp. did appreciate european privacy laws and he -- they in getting out

are keeping a lot of data on him he thought was deleted. complaints saying facebook violating his privacy rights in europe. successful in the european high court, it ruled these data privacy rules had to be rewritten. the new rules went into effect this week, essentially. why are they significant? data,ause all of the every time a customer in europe is using a computer whether it is searches or liking something on facebook or making purchases when it movesata to the u.s. is governed by certain rules. this is important legally. the company was scrambling. this is supposed to come in its place and it is being

questioned. there is a lot of uncertainty and it is proving costly for the businesses. >> right here the same question, he said the rules are not adequate. how specifically? >> a lot of these have a difference of opinion about privacy in europe and the u.s. and a bunch of it is back to the revelations of edward snowden and concerns about how the data is being shared with u.s. intelligence and government agencies. new rules put in place new protection around how the data is used and gives people in europe the right to go to court if they think it is being misused, but the trends are saying that does not go far enough and the u.s. government still has a lot of leeway in its ability to get access to the information. though, what is next once he finishes his launch anon, he will

ngo and make this a full-time job. >> it is a fascinating story. a classic millennial, he does not really know what he wants to but this is one of the ideas he is playing with, setting up an ngo that will look at this issue more closely. at the same time, he has said he is not sure he wants to be involved in the privacy debate more closely long term. he is still grappling. he has a phd to finish. scarlet: what is the response from the big tech companies, facebook, apple, google? >> it is mixed. companies get to decide whether or not they want to adopt the use privatetead contracts with counterparties. microsoft and amazon have said they are adopting it aired facebook and others have said they will wait and see. it is uncertain. lossesould be a lot of

and it could just end up back in court. scarlet: good stuff. adam joining us from london. his story is available on bloomberg.com. coming up, women and wall street. we will hear about gender pay, women's leadership roles, and the presidential election. this is bloomberg. ♪

mark: you are watching bloomberg. i am mark barton. matt: i am matt miller. are there too many banks in europe? a ceo says yes and he has a solution.

over aet ready to fork lot of reality. the debate onned the so-called shery economy. is it good for companies and bad for workers? the bests one of capitalize lenders in the eu, but that does not mean the bank will buy troubled -- isla tells bloomberg there no industrial rationale for tesla to make the deal. he still thinks the other banks in europe should not consolidate. >> in my view, there are too many banks. there can be consolidation within the countries. if you want to make a merger, you have to create value for shareholders.

exploitssible to synergies. sharea2 $.5 billion trying to prove -- reverse its stock slump. the bank is bouncing away from annual dividend increases. a 10% return on equity's. the bank says quarterly profits -- the prospects of a recession in the u.k.. mexico is making a big push to reduce air pollution. company will auction it billion dollar bonds for energy process. a drivingy propose ban and forced factories to oppose production. the worst smog in a decade. expensive city on airbnb. theilian city pushed to

costs of the chart. average of $206 per night. all of latin america and airbnb, 42% cheaper than hotels. matt: we provide context and background on issues of interest. dollars --my flag flag bearers like over give easy and cheap access to products and on use. that would go venture capitalists have invested heavily in shery economy companies despite little evidence of progress to ward profit -- profits. in 2015.lion

raised $1ly 2015 billion in evaluation of 150. 2016, airbnb began a new round of fund raising and evaluation of $30 billion. challenges have ranged from new overlawsuit that accused of the san francisco law meant to flush out illegal rentals and the airbnb is challenging in court. in july, oversold -- sold china operations, and expensive price war. today's shery economy got its start in 2008 when apple introduced its app store. was suddenly easy to summon a business partner in minutes. one of the earliest shery economy countries with others

looking to avoid doing chores. with a smart phone, it is easier than ever for us -- for a company to use sophisticated communication software. thomas performance of workers throughout a rating system exists there. ideological points say the sharing economy creates -- to go without benefits or job security. they make it easier for poorly paid workers to supplement incomes. it also offers an escape for -- from regimented office life. you can see more of all that our quick case on the bloomberg and that is your global business report. head to bloomberg.com for more stories.

♪

angie: declaring the debate on gender diversity all over. the conversation is just starting. we'll take a dive. joining bloomberg surveillance earlier today with michael. >> we have not even reached at closely at. the idea that it is over and we should stop talking about it and it is women making too much of a deal, it is just not right. >> right. you look at the figures and it

is estimated it may take 80 years from now at the current rate to reach leadership from companies across the world. what do we need to move that forward. >> some of it, a ceo has to do it. we can put in another diversity committee but until the ceo's is decide to do it, it will not happen. one comment island make for those of your viewers out there, they said, i'm a dude at does not matter for me and this matters for everybody. things gender pay gap were money into the economy. tom: you are more wired on this than anyone i know. sally has been doing this for years. other. he are

a totally unfair question. how many are out there? it this way. i spoke to my team recently and we talked about the downturn. whomd to the team, some of are watching, treated so badly and i said, do me a favor and name one male cfos one business. this team could not. women that when things go badly, women can be held to a higher standard. >> let's assume that clinton fall.n the you have the united states run by women in germany run by a woman in the imf run by woman. you have our fed run by woman. woman, does that help the

district -- that tipping point of the corporation? womanhink seeing that a in those offices, for anyone, live -- women and men and fathers and girls, that is fantastic. you cannot be what you cannot see. the research is beginning to show they pay for themselves a less year. women are more likely to come back to work after having babies. her -- tontributes to her for -- 401k. is not just a woman's issue. tom: i love your idea, i think that is the heart of the matter. >> yes. the children of the children of our children. act to michael's

point. prime minister here in the u.k., is it more important to have politicians, women, fortune 500. >> it all matters. the one thing i would say is just because we make address, doesn't mean we know very -- necessarily keep projects. teams andith diverse that has gone backwards. as we had the crisis. what typically happens in crises tend tose individuals get kicked out. us of thends conversation we had about marissa mayer and whether or not the failure as ceo is hers as an individual or whether or not the criticism is did she fail because she doesn't have support

because she was a woman? some would say maybe she had it all of her option. years ago asight cfo of, how the conversation has really changed it years later. tracked inlity is the financial services industry. here is a description page. it includes 26 public companies in providing opportunities for women. the number include of women in the company, child care and benefits, you can take a look at the heaviest weighted members, bank of america certainly at the top there. smaller ones, hartford international and old mutual. if you look your today, performance is not great. down 12% mainly because of those losses.

we are talking about credit barclays, ubs, all of these are down at least 20%. best performers are canadian, the bank of montreal. >> having more women in senior roles as a positive net is his when you have a diversity of opinions on board, it helps you understand strategy better and that diversity of whether it is gender or ethnicity, it is certainly something that abbe is a look at because he has got a demographic problem. mix -- women -- women on of his reforms this womenomics.

this is just government example. the thing about japan culturally, it is not necessarily cultural. senior. it will take at least 15 years behind their 2020 goal. >> is a compatible with childcare and all the challenges that come along in the midcareer yields -- years. still ahead, bill gross says he does not like bonds or most stocks or private equities. what does he like? we will get his answers at 3:00 p.m. today. that is coming up. ♪

e

>> welcome to bloomberg markets. ♪

>> good afternoon. i'm angie lau. scarlet: we are covering toys from los angeles and washington and london. what we watching. u.s. stocks hedging higher. finding weakness in the american consumer keeping equities near. cents.ing by six has the ceo's's cost-cutting efforts work? we will hear from peter hancock in this hour. scarlet: donald is confronting the roughest path of his presidential campaign so far. he is urged to reevaluate his trade agenda. we are halfway into the trading day today. let's head to the market just -- the market desk where julie hyman has the latest.

julie: meager as they may be in today's session, a rebound is from a couple of days of losses or seven sessions of losses in the case is of the doubt. have a lot of health care news today. we have health-care related earnings and on the plus side, we're seeing companies that provide health care solutions and tech knowledge he coming out revenue that beat estimates. the company is raising its 2016 forecast. medical, which makes orthopedic. charles river raising a forecast for the -- for the full year, however, shares her point back. and we have got the health care insurance companies and focus. an interesting case here,

apparently united health is disputing a military contract that it lost. higher after the company before the earnings that and so all of these are coming out and rising. dateo want to point out to, allergan might be interested in buying it. various analysts and reports have ordered cold water on the notion. byergan shares are coming up 1.5% today. >> you have the fed president making some comments and he basically said one rate hike could be appropriate. you had mentioned the fed president had made similar comments earlier in the week. >> yes. they are trying to

communicate that they are not off the table despite what the market has then in late december and possibly 2017. that is something the markets are digesting. >> we are not seeing treasury reaction, not in the latest comments, though it is piling up on this front. >> the commodity outlook has a lot to do with what happens in the inflation rate >> most definitely, we have oil prices rebounding after we saw a big drawdown in gasoline inventories even as crude inventories rose. gold prices are trading lower as we see more of a risk on tender to the market. >> thanks. mark has more from the newsroom. >> the trunk campaign says it

raised $80 million in july. mr. trump raised 64 million from digital and direct donations and more than 60 million for fundraising events. trump donated more than $2 million of his own money to the campaign. $90ary clinton raised million in the last month. the obama and mr. secretly lifted $4 million in cash to iran. the airlift coincided with iran's release in january. a way has had this first. >> this $400 million, it is money the iranians had paid into a u.s. account in 1979. transaction to procure military equipment. that miller test -- military

equipment was not provided to the iranians in 1979. because it was overthrown. the state department spokesman weighed in and said, we do not and will not pay least, and in india, at 22 people are missing and feared dead after two buses plunged into a river after the collapse of an old bridge. officials say the collapse occurred late tuesday and rescuers have not found the buses were any survivors. it is monsoon season in india and various parts have been hit by heavy downpours. tropical storm karl is hit. it takes a method they island of honduras. u.s. national hurricane center says earl could bring heavy rain, flooding and wind to mexico and honduras. news 24 hours a day powered by more than 3600 journalists and analysts in more than 120 countries.

this is bloomberg. angie: thanks. bill gross released his august investment outlook letter saying record low bond yields are too risky. the u.s. and australia touched all-time lows in the past month. sovereign debt is not worth it, bill gross sovereign bond yields and close another top of my shopping list right now. low yields mean bonds are especially vulnerable because a small in greece could bring a large decline in price. scarlet will be speaking with bill gross today. for more, we're joined right now in l.a.. he covers bill gross janet. how worried is bill gross about of bondsng real value and equities?

>> he has been worried about it for a long time. everyone is inflating the value of assets artificially because are so low that they are not making any money. multiple analogies like road liker going off the cliff, armageddon, a supernova exploding, that was another one. and hashe is worried been banging the same jump over and over again. betty: you have been covering bill gross and his comments, dissecting since october of 2015. how has the view evolved? blame or and the more on central banks like janet yellen? saying what they need to do is somehow to get the economy to encourage people to innd money, invest money

real stuff rather than financial as a nation. what is happening right now is people are putting money into bonds,al assets, docs, so as it goes more and more in this direction and as central bank spend more and more to their company and lower interest rates further and further, there will come a point of no return. we have been heading in the same direction and getting worse and worse here at still saying it will not happen immediately, the point of no return, this supernova explosion, what other -- whatever metaphor he comes up with every month. doing -- what see is he doing with his money in the unconstrained bond funds this year? >> on the one hand he said to invest in real assets like gold, plants, and equipment.

like land. has got money in sab miller, the beer maker. his actual stock. he has got that from ally debtcial, also sovereign from places like mexico, argentina. is, you know, investing in many things and at the same time, he is warning people, be careful how you invest. part of the trouble is if you are a money manager, you have got to make money and take a certain amount of. otherwise, keep it in the bank, why go with these guys? angie: exactly. put his comments in terms of what is other peers are doing, some of big hedge fund managers. their comments go back to the same idea that everyone is searching for yields. give us the nuances of what

they're saying? >> jeffrey last week said to sell everything. he quoted an artist who had a work of art that said to sell everything. people, another big fixed him -- fixed income money manager out here, he is it is scary there is a possibility of a recession. on the other hand, scott runs 240 early in dollars for guggenheim partners. another l.a. guy who said stocks can go up 10 to 15% more by the end of the year. he is more of a risk on guy. good: good stuff, a synopsis for us. bloomberg investing reporter joining us from l.a. a quick reminder, i will sit down with bill gross later today and we will find out what assets he is putting his money into. a big stamp collector.

>> also coming up, aig slashed hedge fund instments after a poor performance earlier this year. is the move paying off for peter hancock? we will hear from him next. this is bloomberg. ♪

angie: you are watching bloomberg markets. shares of aig are rallying after second-quarter results that showed profits in areas of the company's restructuring. peter hancock at the new york stock exchange this morning, he the acquisition. >> they consolidated three that we and i noticed

have actually been growing quite well relative to them. they are formidable competitors. area where we feel we have a distinctive value proposition. it is one of many as we do. the mix of business we have today is better than it was a year ago. i look at where we are growing and where we are coming back. it is already shaping their earnings mixed to a more sustainable mix. betty: life insurance is one of the areas, carl icahn came on the scene, aig, his whole be toe was that aig is to manage. life insurance is considered something that perhaps should be separated out. i know the business did well in the second quarter so does that quell any of those separation speculations? >> the life insurance business

products, and we look at this business in its entirety as having different issues. on new bid for it new business grew quite nicely, the increase in your on your on the term life. error -- fixed and very bony woody's, slower growth as the interest rate environment make it less attractive. the portfolio of the legacy of many years past means a lot of capital. we are actively looking at ways to reduce the amount of capital tied up an old legacy portfolios, very consistent with reducing our capital allocation on old is this while at the same time growing new business, adding value to clients in the skills.sing our it is a shift in emphasis for the business rather than any exits.

betty: you mentioned the legacy portfolio. you monetize to the tune. where are the other opportunities to do that? the mortgagested companies, for ipo, i cannot say any more than that. so we have a comprehensive list of things in the legacy portfolio which we are actively negotiating. some of them are complex with assets and liabilities. of the overallt plan to reduce our reliance on volatile earnings and focus it on sustainable client german business. isthe earnings mixed issue something that will be improved. the faster we are able to reduce legacy, as well as economic measures of success. improve the able to

return on equity. into higher capital return a new business. betty: how are you managing lower interest rates? lower for longer? importantly, you need to on thehow you manage it portfolio of assets and police we have on the balance sheets today, versus new business. we have a good match between our asset duration and our liability duration. if anything, on the casualties died, rather longer duration assets than liabilities but some of the other products, it is the other way around. as a whole, the company is well-balanced for interest-rate moves. we disclosed for the amount of moves and interest-rate down at the beginning of the year, we estimate a 5% impact on our intrinsic value. on new business, we have to be careful we design our products

to adapt to the new shape of the old code so we ensure we have a good return on new money invested. , fixedst our volume annuities, for instance, from a high of $12 billion a year to a lower two depending on interest-rate. angie: that was peter hancock with bloomberg's betty liu. ahead, equities? debt may be where you should park your money instead. chief equity strategist at blackrock kate will give us her take. stay with us. ♪

scarlet: this is lumbered markets. july's gains have

faltered at the start of the a bears it extended into market. here to talk about this is blackrock'chief equity strategist, kate, who joined carol massar and cory johnson on the radio right here on bloomberg. >> look at the global investment outlook with our next guest. you so much. this is the global it gets bloomberg evangel bloomberg radio. it is with us, chief equity strategist at blackrock. most $1f money, trillion of assets are nice to have you here with coria myself. you have just pleaded your midyear investment outlook. hard to believe we are halfway through the year. what our thoughts you have an conclusions and takeaways? we updated capital markets assumptions for the next five years. you have that kind of visibility for the five years? kate: we have to think about what are the major macro factors and fundamental factors and the

real pressures in the market that will affect asset prices. our expectation is returns will be lower not just over the next few quarters, but over the next few years. this is one of the things we want to keep telling our clients, we have to adjust down our turn -- our expectations. you: what does that mean -- are saying if you want to retire, you're putting a lot more aside? when you say meaningfully, what do you mean? >> u.s. and this -- individual investor, thinking about a traditional 6040 asset allocation between stocks and bonds. returnsot expect to get pyramid to low single digits. over the next couple of years, when -- in terms of what bonds we think will be pretty soft, especially treasuries, i've inc. we are recommending client think about the allocation, they say at it issued to have a big ford -- portion of a client's

portfolio. but we have to be more thoughtful about those themes and the styles. carol: i notice you are cautious on equities. kate: relative to bonds here. we see opportunities in parts of the fixed income market. when we are talking about tragedies, -- treasuries, we like stocks better, but we like hearts of credit, higher beta, so that would fall into the equities market as well. mark: we -- cory: we see a big move in stocks right now, but those stocks, because of the kinds of companies, they just have a third year of growth that might provide us that return. i wonder if for that reason those stocks are really expensive. they look as expensive as they are but they cannot obtain that growth because of the types of companies therein. beautiful point. a huge amount of flow into any asset that offers yields so far

this year. it is true for equity sectors and specific parts of each sector that have higher dividend yields. you cannot just invest in high dividend stocks, or stocks that have -- have a high dividend rate at this point. you have to think about what probably can grow their earnings and grow their dividend. you have to think about growth rather than just high dividend yield. some of those sectors are at massive, massive valuation premiums to the rest of the market and even, there were some cases, two standard deviations, long-term history compared to the euro -- their own sector. carol: you talk about making projections and is five or six years, is a lot of it just contingent that you anticipate that we will be in this easing monetary policy and lackluster growth in many parts of the growth -- the globe? kate: it is a great point. this is a time to revisit what we're thinking about in terms of

also fiscal policy in the u.s. and the rest of the world. our expectation is monitor policy will stay easy, but the next legs of stimulus will come from fiscal. carol: will it really happen? kate: we need to temper some expectations. we have seen some stocks in the market run-up. the expectation that there will be a big infrastructure investment come a big lag between when i could hit any company's bottom line and it is a more compensated process. but we are starting to see eccentric banks outside of the u.s. partner and really support fiscal as well, understanding their limited in what they can do to stimulate the economy. relatively easy monetary but the baton is being passed to the fiscal side and it has implications for asset markets. cory: really quickly, small caps, thumbs-up or thumbs down? kate: i will give you a new view at this point.

thumbs sideways. in large part, small caps have run high and they are very extended. carol: thank you so much. chief executive strategist over at blackrock. we will send it back to you guys on tv. angie: all right. blackrock'chief equity with carol massar and cory johnson. >> up next, we speak with donald trump's policy advisor on the -- on trade. this is bloomberg. ♪ . .

angie: live from bloomberg world headquarters in new york, i'm angie lau. scarlet: and i'm scarlet fu.

this is bloomberg markets. let's begin with the headlines with the mark: first word news and mark crumpton in our newsroom. public and senator ron johnson of wisconsin says donald trump for -- donald trump should apologize for what he said to bereaved parents whose soldiers were killed in 2004. but he refused to withdraw his support, saying he still preferable to hillary clinton. lorettaorney general lynch says recent tragedies involving police and african have "awaken the pain in people that crosses all boundaries per crosses allt boundaries." a washington dc area transit cop has been charged with attempting to support it islamic state. the fbi says he is the first law enforcement officer in the u.s. to be charged with a terror

related crime. he is accused of lying nearly $250 in gift cards to purchase mobile apps that would help facilitate communication for islamic state. authorities say he gave the gift cards to an undercover fbi source. the united nations security council has scheduled an emergency meeting on north korea must latest missile test. the meeting will take lace at 4 p.m. new york time and it comes after pyongyang fired a missile that landed in what japan considers its exclusive economic zone. fell into waters about 160 miles from japan's coastline. the prime minister called it a serious threat to japan's security. dayal news 24 hours a powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. scarlet: no matter who wins the general election, both nominees

oppose the transpacific partnership. donald trump says he would slap a 45% tariff on imports from china if the country does not and the undervaluation of the currency. joining us is an advisor to the trump campaign, a business professor and author of "crouching tiger -- what china's militarization means to the world." some paid -- paint donald trump as anti-tpp. what is the trump doctrine on trade? donald trump is in the mode of ronald reagan, also a free trader. reaganpan was cheating, slapped a defensive terror of japan, 100% on semiconductors. we have is china is

massively dumping all sorts of products into the united states. says, aluminum and trump if they are not going to abide by the rules of the trade organization, we are going to put tariffs on them. i want to clarify something. are you saying trump is saying that because china breaks the rules, these trade packs should be demolished? but if china plays by the rules, would these trade packs remain intact? guest: the trump doctrine is this -- america will trade with any country so long as the trade deal increases or grows domestic product, decreases our trade deficit and strengthens our manufacturing base. they lobbied heavily to get

china into the world trade organization and that is a trade framework which allows china to illegally subsidize their exports, to manipulate currency, all manner of sweatshop labor, no environmental protections, and we have no defense against that. to theake a complaint debt, the complaint is adjudicated and by that time, the company is out of business. they are going to take a hard look at every deal and he's going to break the deal, renegotiate them according to the trump doctrine. scarlet: is there an example of a trade deal or trade relationship the u.s. has that does work for us? is there any deal that doesn't need to be renegotiated? guest: hard to find. if you look at the worst deals

donald trump likes to talk about, they all have hillary clinton's signature on it. she lobbied heavily for that throughout the middle east and throughout asia. at the time, she promised that, we increased our jobs by 70,000. we got a reduction in jobs that more importantly, our trade deficit has more than doubled with south korea. that is hillary clinton's deal. deal, wto, the worst trade in american history. gettingake of china into the world trade organization, gross to must growth rate was cut in half. we lost 70,000 factories and we've gone through 15 years where wages have not gone up but in fact have gone down. nafta is killing us. across the order, mexico because of their cheating, nafta is

getting the bulk of new production for autos and auto parts that would otherwise be located in the state of michigan. and they are killing us. we had a virtual trade deficit with mexico when bill clinton signed the deal and hillary lobbied for it, the deficit is $60 billion and $52 billion -- we are getting killed by those deals. these supply chain relationships are critical to multi--- two multinationals and critical to the health of these businesses. what is good for general motors is not good for american workers. general motors, multinational corporation, loves to go to china and take advantage of the fact that there are no labor unions. they love to go to mexico and support the tax differential, but that is not fair to american workers and more importantly, it is tearing down this economy.

at 3.5%to grow annually. we did that from 1947 through 2001. once ill clinton put china into the world trade organization, since then, our growth rate has fallen to 1.8% and that means we don't 1% of gdp, create jobs. i want to push back on that. if you take a look at this chart, it's a shrinking share of manufacturing to the u.s. gdp here. it has been plunging for decades doesn't it challenge the idea that trade deals alone are to blame? factories account about 12% of the economy and that's the remainder. go to china and visit their factories building airplanes and semi conductors. a stole all that technology from us and they are able to export

to our country because they cheat. take the aluminum industry. china has virtually put it out of business. manufacturing as a percent of gdp has been shrinking, but that's a problem. if we don't make things, we can't prosper. take the auto industry in michigan. one job in the auto industry creates seven other jobs in the economy. so if nafta puts 100,000 autoworkers out of his nose because of those rules, we get 700,000 more people on the unemployment line and that is the snowball effect we are getting. trade problem is at the center of america's economic woes. instead of handling it structurally, we trade and tax reform like mr. trump wants to do. barack obama has been using fiscal stimulus and monetary stimulus and running up our debt. scarlet: how does mr. trump went

to get general motors and other manufacturers to be good actors? what incentives does he offer? the first thing is we have to lower the corporate tax rate. that's a key part of this plan. basically to eliminate the tax differential now american corporations face. we have the highest corporate tax rate in the world that pushes gm and ford off-shore just to get a tax rate. we have half $1 trillion parked offshore that we would like to bring back to invest. the other part of the deal is stopping our trading partners from cheating, stop the incentives to have sweatshop labor. that sphere we lose of influence if we reject bp? it's supposed to offset china's

influence in that region. guest: that is the white house spin, but we have to stop doing economic policy under the flag of foreign policy. selling tpp to america is a foreign policy thing, the counter veil of power, it's just stupid. what tpp does, it's a 5000 page document nobody is red accept a nobody hasthat -- read except a few people. the two industries that will be the hardest hit will be the auto industry and the auto parts industry. what is going to happen is you will see japan and china flooding capital into vietnam and the unum flooding auto parts into america and you will see states like michigan and indiana suffering perfectly.

that's why the auto industry is uniformly opposed to tpp. it's not a good deal. it's the essential hillary clinton and tim kaine deal that will drag us down. angie: a lot of sectors and a lot of countries are not happy. guest: we are uncle sucker here. they have been getting fat off less than donald trump says no more. we are going to grow and make america great again. that's the slogan. it all boils down to eliminating that trade deficit to did deals and not at once. scarlet: thank you so much. stockscoming up, u.s. are resilient, so resilient they have surpassed the sentiment measure for the first time since 2014. as you can see from today's mistry chart we are going to reveal it significance, next. this is bloomberg.

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scarlet: this is bloomberg markets. i'm scarlet fu. angie: i'm angie lau. let's head to our markets desk where julie hyman has the reveal on today's mistry chart. switching to a mystery chart from a mistry stock format. this caught my eye. it has to do with the s&p strategists for the s&p 500. the s&p 500 has rallied so much even though it has been moving sideways. it has rallied so much that it strategists average format and this has not happened

since 2014 and is relatively unusual since strategists seem to be relatively optimistic historically. this is the trajectory of the strategist forecasts and you can see it bump up again for the first time since 23rd scene. it's not the only chart i have been looking at. this is part of a theme we have been talking about regularly, the daily percentage swing in the s&p 500. it has been very small. this is the 18th straight session we have seen the movement either up or down of less than 1%. the last time it happened was on july 8. that was the last time we got a jobs report. that causesif another point swing of the same kind of magnitude. another chart has been the price to earnings ratio on the s&p 500 as we have seen stocks climb and

climb, albeit by small increments. this is a long-term historical chart going all the way back to the 50's. we've seen the s&p 500 go higher and higher above that average pe level, going to the 20 level. as we are in earnings season where earnings as a whole have wayined, investors have two are these justified as being yet relatively high above the historical average. always depends on what you compare it to. if you compare it to bonds, maybe not. something dave wilson is doing today. he finds a pe equivalent for bonds and he is comparing all of them. time now for the

bloomberg business flash, a look at the biggest stories in the news right now. we begin with national grid -- it has begun and auction to sell . controlling stake it could value the business at more than $13.4 billion. national grid is selling its regional gas distribution network and is looking to be submitted by late september. buye: tiaa is in talks to ever bank financials. said it was in advanced negotiations to sell itself to a well respected services company for $19.50 a share. reuters says the deal could be worth $2.5 billion. scarlet: walmart is in discussions to acquire jet.com. jet.com has been in business for

a little more than a year. the company may be worth as much as $3 billion. angie: goldman sachs will pay 36 point $3 billion over accusations employees obtained controversial -- controversial documents. andfed is pursuing a fine permanent banking ban against a former banking director against allegedly online disclosures of secrets. and the faa has given the green light for a moon expressed to set a robotic lander on the lunar surface. the federal government approved a private mission beyond earth's orbit. if successful, google could win the google x prize and $20 million. bloomberg business flash. coming up on bloomberg markets, european banks have lost more than 40% of their value in the past year.

this is bloomberg. ♪

angie: this is bloomberg markets. i'm angie lau. scarlet: i'm scarlet fu. european banks have taken a tumble, losing more than 40% of testsvalue despite stress showing the group would have sufficient capital to cope with the prizes. our team spoke with the chief economist at manual eyes asset management. i don't think these stress tests had a lot of credibility to begin with. none of them included negative interest rates which were not even in the stress scenario. that's the biggest problem for the bank. it is eating into their

profitability's. havenk these stress tests not had a lot of credibility. >> shouldn't we start testing for real life that you asians? guest: we should, but these stress tests take a long time to produce. withe time they came up the assumptions and picked a point for data for banks to start supporting -- start reporting, negative interest rates were not a reality in europe, but they are now. so there is a massive lag. scarlet: how should investors utilize these stress test results? stressfulot nearly as to reflect reality. guest: i think the greatest value is that it freaks the stress tests out. they raise a bunch of capital ,nd even if they don't do well

they can say the situation is fundamentally changed and that's ok. this time around european ranks -- european banks could not do it and these stress tests have not had that effect. joe: fundamentally, this is about lack of confidence in bank fund ability. is it about expanding the economy? do we need to see some fiscal action to create an environment in which banking is possible again? guest: negative interest rates have in a disaster in europe and everywhere they have then implemented. we need to see more growth and to have that, we need more fiscal policy. to members of the german government, there is not a lot of sympathy for that argument. much more likely, we will and that having helicopter money. is one of thebank

banks at the center of all of this anxiety. what do leaders in germany, when they look at deutsche bank's marking cap, what do they see as the problem there? sentiment and confidence is the biggest problem. things thatof the became clear was we have these new ranking union rules, but nobody wants to follow them. that's the biggest long-term implication. angie: that was the managing director or and chief economist -- chief economist at -- later today, we will speak with peter atwater who does a great job of intersecting the intersection between political sentiment and she comes equipped with a lot of charts that show it means something for a certain candidate.

joe: there has been some variousing stuff in the things out there -- we had a survey with an interesting divergence and how future expectations say i'm feeling pretty good. things are not that bad but they are nervous about the future and that kind of divergence has been associated time to time with recession and there's an interesting diversions between republicans. -- bothe both bought gone up, but compare that to last year, you see they used to be in the same as edition. there's an interesting diversions between the economic confidence hillary clinton , so yours are feeling

have these headline measures, but within them, there are interesting things going on from the divergences. angie: is that a criticism of the economic factors we are taking a look at? don't think it's ever going to be the right factor to look at. coming up, we will discuss credit showing signs of weakness. what does credit tell us now? that of microstrategy will be joining us to give us his thoughts. this is bloomberg. ♪

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in sanit is 11 a.m. francisco and 11 p.m. in hong kong.

shery: welcome to bloomberg markets. we are live at bloomberg world headquarters in new york. we are covering stories out of seattle in rio de janeiro and london. flirting withocks all time highs right now. investorsts rally as await the u.s. jobs report. and an exclusive interview with the ceo of rio tinto. they are posting their worst earnings in a decade. and campaign chaos -- his refusal to endorse paul ryan and john mccain -- trump continues to make headlines while losing support from republicans right now. how the campaign is hitting back. shery: