>> nasdaq hits another record high, oil has the best week since april. joe: the question is "what'd you miss?" . does this rally still have room to run? salesisappointing retail numbers cast doubt on a fed rate hike this year. how economics is playing into this year's election cycle. americans may be planning to vote against their own self-interest. we begin with our market minutes. the nasdaq has closed at a record high. u.s. stocks closed next.

the dow and s&p 500 retreating from records yesterday. group in the best in s&p 500 after a 3.5% move wti. joe: energy the best performer. telecom and materials laggards today. >> i want to talk about nordstrom's. there has been doom and gloom around retailers. this morning, a disappointing piece of retail sales of data. however, look at what has happened to nordstrom's. this is on the back of a better-than-expected second-quarter report, reporting $.67, $.10 better than analyst anticipated. nordstrom's has been able to reverse some leakage to places like amazon by stocking its rack

with more attractive merchandise. they held this big promotional event, anniversary day. we should look at the major health insurers. these stocks have taken a beating since before the doj announced it would block mergers between anthem and cigna. have recovered a bit today. indication that they might the willing to make concessions to allow consolidation happened. joe: on the government on front, yields lower. policy sensitive to year yield. you saw expectations of a fed rate hike a decline. bottom line, lower yields.

>> let's talk about the dollar. we have seen dollar weakness. there is a growing expectation that perhaps the dollar will continue weakening between now and the election because of all the anti-trade rhetoric from donald trump and hillary clinton. that is some people say a trade, short dollar come along latin american currencies. the argentine peso has been one of the big losers against the dollar. there is a new president and power. -- in power. in fact, latin american currencies are way up this month. list,ia is the top of the

unleavened returns in excess of 4%. joe: oil having a strong day today, up 2.7% weekly gain. oil had been in a rare market, but starting to pick up some steam. having a wild day after usda reports. you see the drop after reports that there would be a huge supply of corn, but traders reevaluated that data. >> those are today's market minutes. let's take a deeper dive. joe: i want to look at retail sales. we got that overall weak retail sales report. , the white line is

the percentage of retail sales at nonstory retailers, internet is a big part of it, over 10% of all retail sales are nonstory now. the blue line is department stores. it is a beautiful crisscross. standpoint,ar trend charts don't get much clearer than that. not much more to say. >> it helps to illustrate why the nordstrom's numbers were so surprising. joe: the fact of a had any growth at all was a surprise. >> for my deep dive, i want to first introduce oliver renick. my deep dive has to do with my meeting with one of the kings of private equity. , but he was him saying how striking it is that the ua should from a private

equity perspective are getting awfully high. what is a private equity valuation? enterprise value against the cash flows that support it. let's look at enterprise of value against price to earnings. going back to the beginning of 1990, we know that in 1990, early 2000, the market peaked from a price to earnings perspective and from an ditdaprise value to an e perspective. tda isrise value to ebi almost at record high. that may raise some questions about the sustainability of this rally. oliver: i love it. this is really important. this is ultimately one of the big questions. how to determine if stocks are

overvalued? is there any predictive are you to the metric you are using? bank of america surveys every month 20 different valuation metrics. the one we charted recently is the price to ebitda. wellng at debt levels as in addition to market cap, but they are very high. tdan you break it down to ebi earnings, you're basically looking at the highest ever. key point.ed a how much predictive value does this have? joe: we have been talking for a while about high valuations. it is all expanded valuations, so what are strategist saying in

terms of their forecast for the rest of the year? oliver: they have come down a little bit. the average estimate for strategists has come down. it usually goes up and up, but this year has brought it down. >> unless you are tom lee long and strong. oliver: he is standing by that number, 2325. i want to go back to this idea of predictive value. let's go back to that chart about enterprise value against ebitda. now i am looking at it against the s&p 500 price. the red lines are selloff going back to 1990, and what you see is that every single major selloff in u.s. stocks in the broad market was precipitated by a run up in this metric.

past is not prologue necessarily, and as you can see, there has been a long run up without anything in the way of a significant selloff in the s&p 500. that could mean we are due. oliver: i like this chart. when you drill down to the different types of valuation ,etrics and look longer-term they are not very predictive when you look at ons. -- at bonds. that chart, if you look at where those red lines are, those violations do get high and drop. however, on the way up, there are higher points. the higher valuations don't necessarily beget a market downturn, especially when they index andcing the

earnings are a road it. >> one thing is the question about the credit markets and the relations between high-yield's and stocks. the credit markets are supposed to be smarter than the equities market. what has been happening in high-yield? spreads have continued to compress. again, you can choose which relationship you want to put stock in or credibility and come but that one is not sending a signal right now. you have a reverse situation with the stocks and bonds, we talk about this a lot where you have investors going , bondsks for the yield for the capital appreciation, so a difficult time for investors to wade through this mock and figure out what is a meaningful signal, what in the past cancer for prologue. so many of those previous

indicators are breaking down because you don't know where you are in the economic cycle, where you are in the business cycle. >> and whether those cycles even matter anymore because of the distorted value and extraordinary monetary policy. while all sorts of indicators correction,shing investors are on this hunt for return which may drive them into stocks. joe: people feel they can't go anywhere else so they go with u.s. stocks? oliver: there was one of those stories we hit on this week. it may be broken, it is certainly justification that investors use. a person from j.p. morgan ask , she said we are hesitant and encouraging people to get some protection on the s&p 500.

at the same time, they are aware it is considered a safe haven. with an 11 vix handle, that protection comes cheap. oliver: you look at that volatility and think do we have to get a correction to bring that volatility back up. when youretty hairy use things like the vix as a predictor. there are a lot of questions with people trying to figure what kind of effect that volatility will have on the market. >> oliver, thank you for joining us. coming up, what is behind soft retail sales. we will get some insights for you. this is bloomberg. ♪

mark: let's get to first word news. rnc chairman is on the road with donald trump. he introduced donald trump at a campaign rally today in pennsylvania. thatd trump told the crowd his lack of campaign ad spending does not matter. and one in ass landslide. other people spent much, much more, and they came in seventh. want to havedo you as your president, right? right? right? . mark: donald trump's campaign has placed strong infosys on winning pennsylvania. polls consistently show him trailing hillary clinton. mrs. clinton has widen her lead

in three battleground states. finds clinton with a bigger lead in colorado, virginia, and north carolina, while maintaining her advantage in florida. to 32%.ado, 46% virginia, 46% to 33%. north carolina, 48% to 39%. fox, -- 20th century box, copresidents named. ill the leadership voids after roger ailes step down. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you very much. "what'd you miss?" perhaps cooling consumer spending.

u.s. retail sales flat last month as americans cut back on discretionary spending. what is driving the weakness? let's check with the chief economist at the national retail federation. as i say, retail sales flat for july if you take out autos and fas, down .1%, but the nr numbers paint a different picture. what are you seeing? take out autos, gasoline, and food services. expected weaker than today, but i don't think it signals a transition to a slower consumer spending. in fact, one of the things we have in front of us is data that has to be seasonally adjusted. july tens to be a difficult month in some ways. this year, we had 54 weekends and the fourth of july on a

monday. a differente had scenario, and that causes a different pattern for spending. the adjustments for the seasonal factors can play into this. another issue is these are not adjusted for prices. we have seen some deflation in retail sales over the last couple of years. it is mix-and-match depending on the sectors. we have to look at the consumer and the fundamentals. they are good. we have seen payroll growth, a rise in wages. wealthly there are some benefits from the rise in equity and homes and the stock market. i think consumer fundamentals are here. the pattern of spending, i think we have to sit back and not be able to suggest we will see this

fall back on ourselves. the rise intioned wages good for consumers, clearly it is. how does it affect your constituents in the retail margins, ad their tighter labor market where they might have pay workers more? that is certainly an issue. we did see today some good numbers from retailers. at nordstrom's, macy's, so a large part of their expenses are labor costs. that is only part of the equation. we have to understand what is going on in terms of inventory, inventory management, the use of technology, and where they see themselves in terms of competition with one another and with e-commerce. what about pricing power? some economists say retailers like pricing power now.

perhaps that is underscored by what we see in some of the earnings reports, with the best-performing parts of their business being the off-price stuff. >> that's true. index look at the monthly , june for instance, there are sizable differences year over year. down 5% on as year-over-year basis. clothing is the same, may be off a little bit, but starting to stabilize. a lot ofsee there is price deflation in retail. i'm not surprised to a certain arent, because consumers looking for value and good prices. we condition them in many ways. it is often times difficult for retailers to get out of that mode. a chart here, the percentage of retail sales that are non-store retailers, largely

internet versus department store sales. going in opposite directions. from your perspective, how should we look at retail sales numbers and try to figure out how much of what we see is the result of secular shifts in the way americans consume and how and is cyclical changes where we are in the business cycle? >> that is a good question to let's talk about e-commerce. it does represent somewhere around 8% to 9% of total retail sales. it has been growing. our forecast for the rest of the year is up on a year-over-year basis. our overall retail sales forecast for the year, we bumped it up from 3.1% to 3.4%. companies are adjusting. we have heard about macy's yesterday in terms of how they

are closing stores, but they are one of the larger retail internet companies out there, so it is a matter of adjustment that is occurring. i am not surprised. the companies are making the best of it and trying to apply what they think is the best technology for customer needs. if i knew what amazon was going to be like nest year, i would probably be a rich person in all honesty. player and have influenced pricing. the ability for consumers to go online and be able to price shop easily has changed the complexion of retail overall.

i can't predict the future in that regard. i think we will see more of it, but if you take the largest supercenters that exist in terms of brick-and-mortar, they are still two times the size of all internet transactions. rick and mortar will not 00 way. it will adjust. >> good seeing you this afternoon. this is bloomberg. ♪

♪ "what'd you miss?"

how about one of my favorite charts? thatad heard over and over this is the most hated bull market ever. says this chart, courtesy of jim chanos. datates federal reserve equity holdings as a percent of household assets and net worth are higher than they were in the depths of the crisis when they bottomed out at 12%. now they are 20%. the caveat is stock holdings are largely held by wealthier americans, so this is not -- aggregateom an standpoint, it has rebounded, but it is skewed.

in the late 1990's when stock investing became this huge cultural thing that everyone got into it, and even after all these years and this rally, it does not feel as though people are into the stock market. money away, but the relationship between people and stocks is quite different. that is fair. also people's relationship with the stock market is changing because of the products. when you own an etf or index fund, increasingly popular if you have a 401(k), you really don't feel that connected to the stock market, do you? up, how will economic status play into next year's election? we will examine the numbers. this is bloomberg. ♪

i am mark crumpton. let's get to first word news. islamic state leader in pakistan and afghanistan has been killed, citing the afghan ambassador to pakistan. he reportedly died in a u.s. drone strike. military has not confirm the report. out an a u.s. drone took afghan taliban leader. embassy will make it up to advertisers who have seen olympic tv ratings fall short of expectations. advertisers will be given free time during the games.

nbc will not say what size audience of promise, but it is down from the 2012 olympics. presidentialon's campaign says she and her husband made 10.6 million dollars in 2015 and paid a federal tax rate of 34.2%. they donated 9.8% of their income to charity. is trying to undercut the trustworthiness of donald trump. he says he will not release his returns until the irs completes audits. the clintons have shown returns for every year since 1977. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. i am mark crumpton. thank you very financial markets closed the week in north america. here is a quick recap. points,closed down 37

more or less. stocks were mixed. the s&p down as well. the nasdaq extending yesterday's record to almost 5233. a standout performer was nordstrom's, which reported better-than-expected numbers, defying the trend from retailers. got that weak retail sales report, but some retailers doing well. one economic data point, rig , it has been up seven weeks in a row. the red line is total rig counts. you can see it coming there in may. the white are chart is the weekly change. 2014, 2015, a relentless grind lower, but that has turned high. as we have had this come back this year, we have seen rig

counts pick back up and a selloff. is what it's supposed to happen. the fracking industry is supposed to be able to respond much faster to the rise in oil price. joe: "what'd you miss?" the brexit vote and nomination increasedtrump has and interest in who is losing out in the economy. while much of the world got wealthier, the middle class in the developed world has stagnated. thank you very much for joining us. as you state in the beginning of your book, you are 31 years old. not many people write memoirs at 31, but you did. what made you write this book? i was consumed by this

question i encountered at law school, why aren't there more people like me here. yield law school, surrounded by elites, not sure why the white working class was not more well represented. thatlize there were things were relevant about my family and community that help to answer that. that is why i wrote the book. joe: when you say people like me , what do you mean by that? >> tell us a bit about yourself. a town that has been hemorrhaging jobs and hope for as long as i can remember. i grew up in a relatively poor family and i was raised by my grandparents. my life story is very characteristic of what people call the white working class, increasing joblessness, decreasing hope, and an increasing social crisis from

opioid addiction to rising mortality rates. kind white working class , not having term had the chance to read more than a small amount of your book, it is really as much about the poor as anything. is about the aspirational poor, people who want to work but aren't. those who are working, but can feel the pressure. this is not just those out of work, but those who see the writing on the wall. in my have a chart terminal, total u.s. manufacturing employment. thecan see it peaked in 1970's. it has been in this long-term decline. donald trump making it a centerpiece of his campaign, more manufacturing jobs. how much of this decline is the result of policy, economic

policy decisions, and how much do you think a change in theomic policy, ignoring rhetoric around manufacturing and donald trump, could contribute to a reversal of fortunes for the people you grew up with? >> my sense is the economic policy probably does not have a lot to do with this story. this is the way the modern economy is going. increasing white-collar jobs as opposed to blue-collar jobs. that is just the way the economic wind is blowing. the question is how do we better equip people for a white-collar economy as opposed to going back to a blue-collar economy, which is probably not going to happen. >> one of the big questions is how these people will vote in november, and whether they will vote at all. i asked that question because i looked at some data that show the poor as a group tend not to vote.

apathy tends to be greater in non-presidential election years, but the data aren't that different from 2012, 2008. from what you have seen based on your own experience in the research you have done, has donald trump fired these people up enough to get to the polls, and will they be voting for him? >> that is a really good question. it is true that the poor vote less than other people. there are two things going on with donald trump, he is firing the poor up in a way that is unique good he is also appealing to those who may be working or middle, but feel very insecure. joe: i showed that elephant chart earlier on. we have a lot of gas to talk about globalization and say globalization works, free trade was not the big error redistributing the wealth from the people at the very top to the people on the inside. they say everything would have been fine if we had been more

progressive about redistribution. in your book, you are skeptical. >> you read it? joe: i read it. aboutpress skepticism social programs, in particular food stamps. what is wrong with that simple story they tell and how is it that the crisis is deeper than mere economics? is that theem problem is more complex. it's not just that the economy has gone south, which is true for these folks, but it is also a serious social crisis. the white poor and the black poor, the white port still make more money than the black poor yet the white poor are much more likely to die from heroin overdoses. >> isn't there also a deeper irony, at least in the way we

are talking about this, inasmuch views point out that the of the poor and disaffected working-class have about government are themselves complex and often conflicting. they want government to help, but at the same time reject government. >> it is partially because of what they see. it is impossible to grow up in a community where you see the people who need the help and who deserve the help, and you also see people taking advantage of the system. i think it is very hard not to live in this world and see both the good and the government system, but also the bad and the government system. that is why it is so complex. joe: fantastic book. >> it is getting great reviews everywhere. coming up, we will hear from pimco on where we are in the credit cycle. this is bloomberg. ♪

>> "what'd you miss?" is it u.s. corporate and emerging-market debt the two sectors with the most upside? forgetst said to government bonds even the global demand is so high. >> some of these investors are buying treasuries because they are trying to get dollar exposure, so it could be a currency play. look at the alternatives. in japan is -10 basis points, in germany, -10 basis points, european rates

have come down significantly, u.k. rates have come down 100 basis points. 50ernment bonds are now basis points. the 1.5% in the u.s. looks good on a relative basis to what is out there. at the pimcog total return holdings of government securities and related debt, they are now 50% of total assets. if you make the case that we have had weaker auctions and there are other places like emerging markets, are you going to reduce holdings? deemphasize risk and develop markets and tilt our portfolios to taking credit risks. we are seeing significant opportunity in credit markets. u.s. credit markets can still yields. to 6% we like emerging markets.

emerging-market bonds can offer 5%, 6%, 7%. credit and emerging markets a very attractive. >> does that mean you are backing off u.s. treasuries and changing allocation coming out of those? >> we have been deemphasizing rates. our view is the fed will move higher than what is priced in. rateirst 25 basis point hike is not projected for another year and a half. we think that is too pessimistic , that the fed will lift rates. because of that, we don't want to take interest rate risk, particularly the front end of the curve. we are seeing good yield and opportunities in nonagency mortgages, corporate bonds tied to the consumer, and recently we have increased our emerging market exposure. , takethe issue of credit a listen to this. a to borrow a phrase from

couple of great singers, it is feeling bubblishes. saw pre-financial crisis, it is something that does not usually end well. >> the question was not how this ends, but you can't take a view on treasuries without taking the same view on credit. selloff, credit goes down hard to it what is your view on that? >> that is true. the beta is there with rates to spread. if you look around the world, corporate bonds are the richest in the u.k. because basically now you have a central bank said to buy corporate bonds. corporate bonds are rich in europe, where they have already started to buy. they are buying $8 billion per month now, the ecb. the fed is not buying corporate bonds. if you look at the difference

between credit default swaps and spreads, they are richest in europe and the u.k., and actually still cheap in the u.s.. if you want credit risk, the u.s. and emerging markets are going to be the most attractive place to get credit risk today. >> talk about that credit risk and where we are in the credit cycle. some people are saying the cycle could be coming to an end. >> our view is that the consumer u.s. is 70% of the economy and the strongest it has been in 10 years. 3%,have wages rising over adding 2.4 million private-sector jobs, the unemployment rate hitting new lows. the consumer has delivered significantly. there has been no overinvestment on the business side and banks are healthy, so the catalyst for a domestic recession in terms of services businesses is low. having said that, we are tilting our exposure to where the

fundamentals are most healthy. we think housing is midcycle. the economy is more late cycle, housing still has a runway ahead of it. we are still significantly under building in terms of demographics and household formation. that cycle can continue. there are other areas such as cable, telecom, and gaming, so there shifting to where fundamentals are strongest and towards emerging markets, where we think the fundamentals are improving. i want to draw everyone's attention to something else they might have missed that is going on in the european rates market. here is the problem with negative yields, they were brought in or at least they came in with the ecb moving to a

negative deposit rate in june 2014 to incentivize bank lending and distance and devise thanked deposits at the ecb. this was not supposed to mean anything for depositors. the banks were not supposed to turn around and charging depositors, but they are. a german cooperative savings is charging its wealthier clients for depositing 100,000 euros or more. are not used to a negative interest rate. it raises questions about how much tolerance there is going to be for negative interest rate policy if it begins to leak through effectively to the consumer and also raises questions as to whether this is a slippery slope. how long will it be before it non-net wealth

customers? joe: coming up, three charts you might have missed today. this is bloomberg. ♪

joe: i am joe weisenthal. "what'd you miss?" we have three charts to explain today's lackluster data. bring us interesting stuff. the chart you are looking at our restaurant retail sales. down,looking at the break restaurant sales had a boom last year when consumers were able to capitalize on the declining gasp rices. year over year in early 2015, and now has come

back down, so restaurant sales are growing at the slowest rate in a most two years. 5% growth this still pretty good, but we are coming down from where we were when we got that boost from the low gas prices, so it will be interesting to see what happens here when gas prices continue to go up. joe: people were saying that this is really a good sign for the consumer. don't go out to eat unless you are feeling really good. does it represent something about the consumer? the prices have an going up, the gap between eating at home, inflation has widen out, what does this symbolize? one of the more off-color explanations was from the windy ceo. he said the election was starting to impact people coming to wendy's. you are right. the bigger explanation is that

grocery prices have been going down, so it appears consumers are eating more at home than going out. >> i want to make intercession to your next chart. -- make a transition to your next chart. numberst the scourging on income growth expectations. -- they asked consumers every month what is the probability that your income goes up over the next year. see their incomes going up over the next year, so that is not good news. it comes when we get these weaker than expected spending numbers and you have to wonder where that spending is going to come from if consumers don't expect the wages to go up. of athis flies in the face lot of people feeling good and wages about to accelerate. we are finally seeing acceleration and wage growth that we have been waiting for for so long. >> isn't it going to take months

of strong wage growth before the insecurity that people feel with the hangover of the financial crisis goes away? >> that is exactly what we are seeing right now. ofhave had so many months accelerating wage gains. as not gang buster, but relatively speaking, even where we came from, still pretty strong. according to official data, wages are growing at the fastest haze of the cycle. joe: the final chart is how consumers feel about their own financial condition versus the future. what are we seeing here? >> the orange line shows you the percentage of consumers who fe el they are better off than a year ago. the orange line is more cyclical , but the white line has been in a structural the klein. -- structural decline.

line gets to the orange line, it is almost like a limiter. it makes you wonder if there is some structural limitation where we won't see more consumers who are optimistic about the future. line feels like this ongoing decline in optimism. it is the same insecurity story. folks don't know how long they will have their job for. they don't believe they can negotiate for higher wages. the historical line says it all. while have gotten better they expected them to flat line. all about expectations about the future and has an impact on real economic growth. we will see what happens there. joe: always awesome to talk. >> coming up, what you need to

know to gear up for next week. this is bloomberg. ♪

miss this, folks. we are approaching the end of earnings season. before that, walmart, cisco, and home depot. joe: on the same day, housing should learn a lot about housing that day. be inwednesday, i will

washington to bring you the minutes from the last fed meeting. risk abated, according to the fmo

>> i am donnie deutsch. mark: taking the boy out of queens. >> go home to mama. go home to mama. and your mother is voting for trial. >> will now you brought my mother into it. ♪ mark: happy friday. the end of the we could not have come sooner for donald trump. it has been one of the worst in his presidential campaign, although