jonathan: bring back, pull back. and dollar general breaks back for a hundred. david: fed up. fed president makes a case for a new approach to central banking. alix: and bank plan of brexit. why lenders won't be waiting around to find out what deal the u.k. can get from europe. jonathan: a warm welcome into "bloomberg ." right here in new york city and the highlights in the fx market, a weaker dollar. david: across the board. and yen as it drops below 100. partly because they anticipate the fed is not going to raise despite what people say. alix: the dollar is at its weakest level to the yen since november of 2013. and we did start to see the dollar roll over once we got back from john williams that saying that the old models are out the window. jonathan: some momentum

building. all of this a couple of weeks away from jackson hole. the conversations are really going to build up ahead of that speech for the fed charean net yellen. if she mentions that, we're going to have the same kind of move. david: there's more of a raise than people think. alix: the debate continues and we're going to chris just from energy to opportunity to real estate from sam zell. plus we're going to speak to the c.e.o. of the biggest mining company of the world, andrew mckenzy. there were the fx market, a great market. it's soft on the d.a.x. down by a half percent. and this is the spillover from equity into bonds. yields on treasuries coming in three basis points on a five

year. now just 69 basis points on a two year. we're in three basis points on the u.s. two-year. the big move is you're seeing a weaker dollar on the crosses against every single g-10 currency. dollar yen, the biggest mover breaking in at 100. and historically, here's the story. you've go all the way back to 2013 for levels like this. after thereach of 100 brexit decision but to go back there again ahead of september 21 when you get that b.o.j. decision where the fecks backing off, is b.o.j. going to step off? >> and what can the b.o.j. going to do? they cannot get that hate rate hike? et's go to michael mckinnie --

mckee on that fed falling dollar. i want to start with michael, our editor. mike t not only dollar yen. it's also the swiss, seeing the highest level since brexit. when was the trigger for the weaker dollar? >> the fed is obviously a component in all of those moves john's talking about, expectations and futures trading haven't changed. traders say technical are at work. and a lot of maturing treasuries should put about $30 million in the market because it's not just the yen that is getting stronger today. ut the fed an issue. he thinks the neutral rate has fallen so far that you can't cut rates enough to get the

inflation target of 2% that the fed's been looking at. he says a rethink of fed policy is in order and relatively soon because we can wait for the next storm and hope for better outcomes or prepare for them now and be ready. he suggests raising it to have some psychological impact on the markets. alix: it was a really fascinating essay and he's not only the one. charles evans saying we've got to see the whites in inflation's eyes before we hike. what kind of trend can we see build into jackson hole into the next fed meeting in september? >> the fed needs to rethink. basically it get those einstein comment.

all these central banks cut, cut, cut and it doesn't seem to be working and there is a rethink going on. kuroda saying that bank of japan is doing that and jackson hole s going to be a major topic. what do we do now if it's not producing inflations? alix: off tool. thank you, michael. if you want inflation, just go to the you know. jonathan: absolutely. let's cross over to guy johnson to tuck about post-brexit hard data. input costs surging. import costs jumping. that's the story it seems. >> unsurprising in so many ways. up 4.3%. the headline number .6%. no prize post the brexit and the pound plummeting that we are get these kinds of inflation read. the bank of england expects inflation to reach at 2% target.

will the bank just look through this kind of number. they get any kind of stabilization from here, then the bank can look through it. this is a one off hit. and as a result, the bank can look through it and cut rates further from here and maybe the pound goes down even more on. but we've held around the 1:29 level for quiet a while. the big move came with the euro but we retreated on the become of that. jonathan: the big story last week, guy, one week ago exactly today with the bank of england and uncovered operation trying to buy some long dated guild and failing to buy enough to meet the target. is the bank of england got to pick up whatever it takes to walk away with a target? >> i think there's a number of

things are at play here. last week, most supplies joined. the market is in a better place going into this auction. we also have as you indicate, a bank that may decide that it wants to get this done at whatever cost. the objective is to get money into the economy to get yields lower. so it has to pay up more, so be it. jonathan: guy johnson, the city of london. we'll get more details right here on bloomberg. and to guy's point, david, there is an auction this week, 2055 pounds. we're going to get about 1.25 billion pounds you. wonder if that extra supplies allow the bank of england do what it needs to do. david: we'll see if they pick themselves back up. meanwhile back in the united states, we've got equity markets. yesterday saw new records in all three u.s. equity incease but the question is whether or not

it will continue. mike, i want to put up a a chart that shows that the last four times, the next day, it's sold off. do we expect that again today? >> it's obvious there's a lot of caution a. these record levels. we're seeing the futures weaken a little bit today and that's the pattern we've seen over the last five weeks. it's sort of one big step forward and then another step back and then a step forward the next day. there's tons of caution along the valuations. unless you're comparing stocks to bonds, they are extended. compared to bonds, they look like they're the on game in town. there's a a couple of big trends going on that you talked about earlier that might make people more comfortable with these valuations. obviously, the weakening dollar is one of them. if that trend should persist, that could be perceived a as a a bullish sign going further. and oil is the big question mark, rising above $45 a barrel, almost $46 today.

and that's been obviously the big story around then, session. if we see a strength in oil on the hopes of an opec agreement, the comfortableness around these valuations will get a little bit stronger. eco-data a out of the united states and earnings. wove got home depot who came out earlier this morning, big retail numbers are important. could they affect the marketplace? >> obviously, but i'm not sure if home depot will be able to ove the macroindex too much. eco-data is important. but the surprise index that gauge how much data is beating estimates have come down significantly in recent weeks. we'll have to see how that goes. david: thanks, mike. now we're going to turn to alix. alix: looking at home depot here, yes, the earnings matched

estimates. comp sales were up 4.7% but sequentially, there was a slowing of growth. ame store sales were 6.5%. nonetheless, the company did increase its full year earnings guidance. and you saw things like the average sale per customer rose and the number of transaction rose. those are all things when you see the retail growing, rising home prices. people want to spend more on doing up their homes. a total different story when it comes up to b.h.p., falling 81%. the company is saying commodity price troughed in january meaning that was the bottom and from here, they will move higher. , copperosed to iron ore

and oil. and a truly ugly premarket in the morning. organic companies are delaying results on accounting issues that it's not going to meet its 2016 guidance. they're looking into worries over whether grnt concessions to some distributor and if they booked the revenue in the correct period. they're looking at internal accounting controls. there's a huge number to the downside. emma is here with first word news. >> pennsylvania's attorney general has been convicted in a perjury and obstruction case. catt between kain lost her law license accused of leaking grand jury secrets to embarrass a rival prosecutor. tom wolfe has urged her to resign. more than 20,000 people in southern louisiana have been

forced out of their homes by record flooding. at least six people have been killed. over 48-hour period, over two inches of rain fell. many rivers and creeks are above the flood stage. british prime minister has written to china's president asking to improve trade and strategic relations. it comes a. crucial time. last month, she dispelled approval of a $23 billion nuclear plant which stunned the project's chinese backers. china told the u.k. to reach a decision as soon as possible and said the relationship is at a crucial juncture. global news 24 hours a day in more than to countries. this is bloomberg. john? jonathan: thank you very much. coming up, the big debate of the federal reserve. the fed rethink the central bank targets. we'll discuss the low rate environment with alberta, head of macrostrategy. that's coming up next. from new york, and for our

viewers worldwide, a weaker dollar in the market. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. i'm jonathan ferro. the big focus in the fx market losing ground since june as the probability of a u.s. rate hike this year is below 50%. this is federal reserveback of san francisco president john williams calling it to rethink the way they operate saying america is going to get a new taste of economic normal -- joining now from london is a alberta gallow. the bottom line from john williams over at the san francisco fed is that the neutral rate is lower then what they thought it was.

another interpretation of some of the comments we've had from the fed is that they're failing and they're missing. hat's your take? >> they're looking at increasing -- in the case of the fed, reducing the neutral interest rates and stopping on the path f hikes. and then there's other central bankers are saying this doesn't work. we need fiscal policy. we've seen the australian central bank and even the e.c.b. digging their heels and saying this is not working. we should do less of it. we need help from fiscal policy. but the help is not coming in. so we're still going to see in my view, more easing. we're going to see the fed not

hiking in september. maybe not even hiking in december. it's a very tough call. and the bank of england will look through inflation and will continue to cut rates over the next six months. nd they will release the flexibility. david: on the other hand, we've had people from blackrock and pimlico saying the market is underappreciating. are they just wrong? what is the market telling us? >> i think there is a lot of fear on the market. they're fearful about sitting on the back of the monster. stock market is at a very high levels. so you're afraid that the monster is going to wake up if central bankers change their

ind and decide to stop easing. but it still had to increase its easing because there's no other tool. so i think we are getting closer to a turning point in the fault of central bankers. they're starting to question themselves for the first time. but i think there's still going to be a long delay. and if the fed steps back, these would put a lot more pressure on other central banks in the world to ease. think about new zealand, australia, 1.75%, bank of england. these are central banks which are still in positive territory weak in economy and that's attracting capital flows. alix: alberto, how can we really move those currency hires? can we move the kiwi lower without the stronger dollar? but inflation is at the core of this issue. you have to see the whites of inflation's eyes.

you saw williams saying we can overshoot inflation. how can you position yourself for that fed rhetoric on inflation? alberto: the u.s. economy is one where you can have some inflation because we are seeing a very good level of employment and consumption is strong. retail sales, we're seeing positive quarters from retailers. however, we need to also think about the slack that's accumulating in the economy over the last years. we're coming from 40 years of overinvestment in mining, in the energy states in the midwest where now you have people that have no jobs. and not only that, but they're trained for the wrong types of jobs for half their lifetime. so it's very hard for these workers to find other jobs. it takes a long time to re-train them. so workforce participation remains very low. the quality of wages remains low. so it's a very different cycle. and we think interest rates will stay low.

we're still not seeing a big jump in inflation. there could be a game changer here. so if you have very strong physical stimulus, infrastructure spending, depending on which candidate wins, then you can see a little bit of higher inflation later on. so the u.s. base, the treasuries is the air in the water where you could see some inflation. t it's very hard for central bankers to hike aggressively because bond markets and storkts could backfire. jonathan: alberto, great to have you with us. much more coming up on his thoughts on the market with credit and the b.h.p.'s focus today. rising in tandem with bank. safe haven assets. the big question is as stimulus comes with collateral effects and what does that mean for the

bond market? this is bloomberg. ♪

alix: this is "bloomberg ." alberto gallow still with us in london. yesterday, we spoke to rick rieder who said he is reducing treasure. and moving more into the belly of the curve. what's your in fact investment trategy for credits? alberto: we look only at things which have value in our new macrofunds. we're looking at banks, emerging markets, corporates in the high yield space. we don't have to follow benchmarks so much we don't buy bonds with negative yields. we look at emerging markets but the ones that are not linked to china, we think emerging markets will benefit from a more doggish

fed. and we look at european corporates at some special situations in the high yield space and bank debt. what is happening with lower interest rates would make banks safer from a credit perspective but less profitable. so even though we are in a zero interest rate world, there are a lot of opportunities. the way to capture it is to be very flexible to not follow benchmark. the asset a management industry is not really prepared for this environment which most neutral funds being forced to buy negative yielding bonds. jonathan: yesterday with the story here at bloomberg, the coupons getting priority over dividend payouts. more protection then in the past?

alberto: we think there is a few reasons to be positive on bank debt although it remains volatile and one reason is regulation. it's creating a much clearer level of priority between equity holders and bond holders putting bombed holders first. the second one is banks are adjusting their business models to less volatile mix of revenues. so if you think about deutsche bank, it used to be 50% trading. in the future, it's going to be lower. the same for barclays and credit suisse. and you're seeing capital raising from a lot of banks including the investment banks. and also the commercial banks. and all of these banks would build a buffer before debt which would make it a good long term investment. even though some of these news was already somehow in the market, we are seeing a positive impact from the confirmation of these news from regulators. and they were very positive on

making banks more profitable. in his last speech, because he has realized it's about the transmission mechanism in europe. it's about the banks that have to lead to the -- lend to the economy. alix: alberto, thank you for oining us. a how do you feel if you're a shareholder and you get that cocoa hmm? jonathan: it will just become real. home depot has led the dow since the beginning of the bull market . we debate the company next. this is bloomberg. ♪

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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. jonathan: from new york city, this is bloomberg. a big debate over at the federal reserve but an empty feeling at the markets. we all miss from the main woman,

janet yellen. while this debate continues as to whether there will be a rethink of the policy over targets, there's a void, a vac qume in that debate and that's the thoughts of the only voice that matter, fed charean net yellen herself. and ahead of that speech several weeks away, equity is softer. fine. the ftse down by a third. and the d.a.x. down by .6%. the yields coming in a little bit on the back of this federal reserve debate. we're in by about two basis point to about 70. the big move is in the fx market and a big headlines rise right here with the dollar general ith a 99 handle. the idea for cruteo is if he does nothing, maybe the fed will o something.

you'll see a substantially stronger yen and the big move has been completely erased in a matter of months. alix: unbelievable because that level is the brexit panic level. there was no brexit panic over the last 24 hours. that move is that much more incredible. we have some big movers in the stock market. alynn is in talks to be bought by praxair. it has about 40% of the market share. the issue this may face a anti-trust hurdles. there are only four major global suppliers. that could be an issue with the linde tie-up. talk about tie-up, monsanto, buyer. the deal that cannot get done and will not die. buyers said to be making a decision within weeks. potentially would need raise his

bid from 5% to 10%. it could take that bid to shareholders. it did get inside access to its books in early august. also rounding it out here with one of the energy names and metal names. gold rising. one you have b.h.p. up and rio, glencore, all moving higher. stabilization and oil prices rising. and you have some filings that takes a look at what the big guys owned. it's backwards looking. but the market likes to look at that for what the big players are owning. and freeport shares are added in the last quarter. for now for what you need to know for outside of business, emma is here. >> 15 prisoners at the guantanamo bay detention center has been sent to the united arab emirates. it is the largest release since

president obama tock office. some of those have been held at guantanamo "more talk monday" than 14 years. it's the next step toward hoping coin's $6.5 trillion market to investors. regulators approved between hong kong and the city on the main land overseas investors can trade to china through foreign investor programs. as this summer's olympics last night, high drama on the track. a desperate bid to win the 400 eters and checking the medal scoreboard, the u.s. still in first position with 75. china with 46 and great britain his third with 41. this is bloomberg. david?

david: our morning must-read is brought to you by s.e.c. the filings that give us what big investments bought and sold in the quarter that ebbed june 0. a few things jumped out. one of thames financials. talk about this. >> he took a stake in morgan 25 ley valued about $1. million now. 38 million shares. and yes, it's rare to see an activist in a bank because banks are so big and they're regulated and you have to get government approval in order to buy back or dividend. so it is interesting and it is a stamp of approval with they're doing. he likes that they are moving towards an asset like fee-based business like asset management, wealth management. now takes up about 80% of their

profit. and the idea here is he says that the market just hasn't priced that in this complete reversal in the business. they scaled back their bond trading and their focus on $1 billion cost cutting plan. so it's almost like an insurance plan to have an active investor in there to make sure they stay in line. david: jeff is thought of as an activist. he's saying he likes the way it looks right now. let's turn to netflix. hot stock. we've got the tiger people coming out of it. >> absolutely. absolutely. chase coleman is out. so is julian robertson and tiger management also out. tiger global cut about $2 billion stake in that. and as we saw on netflix, they can't grow as much as they used to. and internationally, they're everywhere they can be. they boosted some prices. they lost some customers there.

so yeah, they're out. but is the fang trade over? not clear because there was a boost in amazon, a boost in facebook. david: subscriber growth has been slowing. and warren buffett is doubling down on apple. >> he is. 5 a 5% boost in his stake there. so it's a reversal from with we saw from carl a icahn. cut their stakes from china. he clear liss is liking the company. the shares fell 12%. took vac of a dip there and revenue is supposed to decline since 2001. that's where a lot the bearish is coming out. and the new phone is coming out in the fall. and the price earnings

ratio is not that high, apple. and warren has decided this is a value play for him. he's in it for the long term. >> absolutely. david: thank you, katia. over to you, alix. alix: following the earnings from home depot, earnings matching earnings rising more than 9% while americans spending more fixing up their homes. companies beasting their forecast by 4 cent. joining us is retail analyst michael lather. there has been concern about home depot's slowing growth. if you look sequentially, same store sales were lower. how did results fare? >> who characterizes this is an inline quarter but that was fully expected. the first quarter was benefited from abnormally warm weather in the spring. so this is more tip kl than with you're going to find.

we're still in the middle stages of the home i want improvement cycle and this will last for a while. and a growth is a a good number. alix: and home depot is looking for a 4.9 comp growth for the full year. from they going to make it? it implies same store sales in the back half. >> everything we saw from today's release suggests that 4 to 4.5% is >> reasonable if not beatable. so we think they will make it. alix: how retailers are managing their inventory. it has drown down so much. how did retail do? >> it's a half the rate of its sales. it's putting up remarkable performance in light of how well it's managing that line item and that speaks to where this business is relative to others in the retail landscape. alix: and you have a buy rating at $so on the stocks.

over the last seven years, home depot has been an unbelievable stock. you look at home depot versus the dow and i normalize basis, home depot is up 661% since march of 2009. can that kind of outperformance continue? >> yeah. we think that given where the home improvement cycle is, home depot can continue to generate mid teen e.p.s. growth for the foreseeable future and that's going to be what drives the stock and it will continue. alix: in terms of the housing cycle, where do you think we are? mid cycle? >> in terms of the home improvement cycle, we're still in the middle stages and home improvement category can grow at a 3% clip for the next year and home depot can grow better than that. alix: where is that going to wind up for lowe's? can you a compare the two? >> over time, lowe's and home depot are going to grow at

similar rates and we probably saw that in the second quarter. lowe's has been an underperformer vs. home depot for some time but it's starting to catch up. and over time, they should grow at very similar rates. alix: when you look at the economic landscape of the u.s., what would be a potential risk for the home i want improvement guys like home depot and lowe's? >> the risks are receiver. one, macro, in particular the housing market but within that, home prices. so what's happening now is home prices are rising and that is both helping the willingness and ability for home owners invest back into this asset class. and the second would be some increase in promotional activity, a rise in competition. we don't think that's going to materialize in any meaningful way. this is a duopoloy which very rational actors. alix: and the third rung of that

would be the jobs market. the job market continues that would lead to more improvement spending. what's the impact of rising wages which we're starting to see trickle through? >> the rising wages should benefit the retail landscape, especially the home improvement category. the question is how does the inner play between wages and rate impact the sector. and, you know, if we start to see some heavy inflation, that could start to put some pressure -- upward pressure on rates but assuming status quo, home improvement is at a very good spot. alix: unbelievable statistics. michael, great to see you. thank you very much. michael lasser, u.b.s. retail analyst. john? jonathan: coming up, the brexit fallout. could investment banks start moving jobs out of london? harvard professor nick burns

weighs in. and for global markets is one story. federal reserve in action. the prospect of no rate hikes and a substantially weaker dollar in the fx market. more from new york city. ♪

alix: the hewlett-packard greenroom, coming up, chairman and founder sam zell will be ere for the full hour. jonathan: this is bloomberg. over in london, bank executives are society be preparing for the worst. they may start the process of moving jobs from the u.k. within weeks of the government

triggering brexit. for more, we're joined by michael moore. there's two camps. one will say isn't that the prupet course of a action? what is the takeaway currently from this story in the city? michael: it's a little bit of both. you work backwards from what the banks are looking at, you know, if there is -- if brexit comes into play by 2019, they're going to need a couple of years to move people to get the regulatory approvals to be ready to go on that date. so it is in that way, prudent. on the other hand, you know, part of the reason they feel obligated to take these moves is they are not exactly thrilled by what they're hearing from the u.k. in terms of the plans to keep passporting. people have held out hope that passporting was going to kept

around for the financial services and that it was a big important part of the economy. but banks are getting a little bit more pessimistic on that in part that the u.k. government seems to think that they can keeps porting without giving up much on the freedom of movement. jonathan: make your. sense. to break them down, i imagine would take several decades as well. just looking at the magnitude of what could happen and who it could affect more. if we break down the u.s. lenders and their presence in london, it seems overwhelmingly goldman seems to be the, most exposed in terms of workers in the city. michael: right. goldman us a a percentage of its size is the biggest. they have a big operation in london. jpmorgan in terms of absolute meme has 16,000 poem here. some, not all in london. some back office jobs. so, you know, depending on how you want to look it, there's

certainly two of the ones that are most exposed. so you have a lot of jobs that could potentially be moving. david: thanks, michael. that's michael moore from london. as attention focuses on how the u.k. will leave the indiana european union and we talk about what terms. before he was u.s. undersecretary of state, nick burns was u.s. ambassador to nato and greece. he teaches at harvard kennedy school and joins us from rhode island. so listening to michael moore pointing at the several conflict of how you keep the passporting on the one hand but have the u.k. have some barriers to entry, essentially, in the free movement of people and goods. how are you going to structure that negotiation? nick: you framed it exactly. that's the real dilemma for the new prime minister. she wants to restrict

immigration. he want she wants to get it down to 100,000 per year. but now it's three times that. she wants to make sure that there's free movement of brits and she wants to protect the financial services territory. this is uncharted waters in the e.u. process. no country has ever tried leave the european union. so if banks are beginning to plan, that makes sense. i would doubt that banks would decide to leave now because we have at least two years to go. the british probably will not open negotiations under article 50 of the e.u. treaty to leave until the very end of this calendar year, perhaps into 2017. then interview years for negotiations to take place and 27 e.u. parliaments have to ratify any decision by britain to leave. this could dwell take years. david: give us an insight a bit into the european perspective.

what incentive do you have cut the u.k. a break on this? nick: the e.u. is in a very difficult position because it doesn't want to set a precedent that would encourage other countries to seek favorable treatment. on the other hand, the e.u. prides its relationship with britain. it is the second largest economy in the e.u. and the british voice has been important. so they'll want to make sure that there are some type of new economic relationship to be negotiated between britain and the european union. so it works both ways. i think at the very beginning, david, just after the brexit results came in, there's a call by the french and the italians, some germans to strike a very tough deal with the british. i think they backed off because they realize a complete divorce is in in their best interest. and negotiation to retain of course from the british

perspective, support for the city of london and for financial services is going to be quite strong. so the you ultimately is going to try to strike a deal where britain leaves but there's a copped economic relationship there from which both sides can benefit. david: what extent to just plain money play a role? one is the u.k. has be a substantial contributor to budget the e.u. could the way a check? on the other hand, france has an incentive to have the banks in the u.k. move to paris or to frankfurt? nick: you've seen over the years, attempts by the french and others to seek to entice some of the international banks to leave the city in london for the con nevent it never made sense on economic terms and in other terms as well. london is the global capital for international finance. there's the english language. there's the rule of law. and so i think you'll see that

competition but i think the british, one of the major goals that teresa is to protect the city of london, protect all the jobs thaw benefit very much. david: how does this affect the united states? the u.k. coming out of the e.u.? nick: it's potentially a game changer for the united states, david. because right now, the united states seeks influence in the european union through britain. and britain, of course, is our closest partner. and so if britain were to leave the european union, we would lose that voice in brussels but you might look at the fracturing of the united kingdom where the scots would hold another referendum to see scotland leave and the irish question of a hundred years ago of being reopened by irish politicians. so a fracturing of the u.k., diminished u.k. of the united kingdom, england and wales. that's the worst case. that would be very bad news for

the united states indeed. david: thanks, nick for joining us on the program. alix? alix: b.h.p. built in london by 4%. we're going to dig deep into their earnings of what happened over the last year and what's ahead for the mining giant. this is bloomberg. ♪

alix: this is "bloomberg ." time now for off the charts. b.h.p. billiton reporting earnings. profits down 3%. three charts that tell the story. you see the profit fall 81% for the company making $1.2 billion. but what i wanted to show is how it tracks the irish ore price. when it hit that $180 at times you saw very high profit from b.p. as iron ore prices fell all the way to $60 a ton, you saw

profit decline from b.p. as well. 34% of the 2015 revenue came from iron ore produces copper and oil. this chart just really shows how closely tied they are related. now the big question for b.p. now is what is it going to do with the money? so basically b.p. says that the trough in commodity prices in january, things are going to get better. they're looking at free cash over fiscal 2017. this is their choice. that purple line is cut by about 42% to just over $6 billion. the white bars are debt. debt totaling about $26 billion. and this is across the board, the question for big oil and for mining companies. as prices recover for the underlying commodity, what do you do with it? paying down that debt and help your balance sheet or do you reinvest it and boost your cap ex and that has implications for the supply and demand picture? does that prolong the oversupply

that we've seen in the market? and i want to round it out and take a look at what's happening to the stocks over the last two years. it's a a normalized baas sis. glencore, rio and b.h.p. you can see b.h.p. has really underperformed vying gone core for the worst. and it's outperformed glencore for a touch. and we will speak to the c.e.o. of b.h.p. later on in the program. jonathan: also coming up next on "," real estate titan sam zell will be with us for the next hour. from new york, this is bloomberg. ♪

green back pullback --

the dollar weakens to its lowest level since june as prospects for a u.s. rate hike this week remain subdued. jon: the case for a new approach to central banking -- the message that is growing again -- amongst policy makers. investors will not be waiting around to see what deal the u.k. can get from your. david: i'm david westin here with alix steel and jonathan ferro. the lead has to be the weakening dollar around the world. or: summer months -- signal noise -- it is renewed weakness for the dollar and you see reverberations in japan. alix: the dollar index falling below technical levels, below the 100-day moving average. all of this triggered by fed president john williams yesterday. david: there is growing sense the fed is not going to move, but that could help the stock market. alix: we will discuss everything in the global economy from

opportunities in real estate with chairman and founder of equity group investment, sam zell, who will join us in just a moment. plus the ceo of the biggest mining company in the world, andrew mackenzie, but first, the weaker dollar is the theme of the market. jon: we begin with equities, which are softer. futures lower in the united states by about .2%. went into positive territory for the first time since january. we retreat by .10%. you see the moves in the bond market. this is where it all begins, the recalibration of federal reserve expectations. is theme, no hike debate. you see the move at the front theof the coverage -- of curve. the fee is straight into the fx market. the weaker dollar story -- softer against every single g 10 currency. ,ook no further than dollar-yen

back below 100 the first type -- for the first time since june 24. for these kinds of levels, you have to go back two, three years. the big story -- easing. the rollover, that is just removing the effort from the bank of japan to weaken the currency. it sets us up for a big central day on september 21 with the boj in the morning, and the federal reserve in the evening. alix: all right, let's go around the world and check in with our bloomberg team for in-depth coverage of our top stories. michael mckee in new york on the latest fed speak and guy johnson in london with u.k. inflation data. uber economics editor michael dollar-in9 handle on -- that was the president handle. what happened over the last 24 hours? michael: that is an interesting

question because fed expectations of not changed. say chemicalsrs have come into it and there is a next nation that is of real interest to a lot of people, and that is that there are a lot of maturing treasuries. $31 billion extra going into the markets. the cost of hedging dollar investments is up. the money is going back up. the pound and the euro are strong today as well. that is something to keep an eye on. the fed comes into play with the john williams comments -- the president of the san francisco fed suggesting what they have been doing is not working because the neutral rate, the rate at which the fed is neither stimulating nor slowing the economy has moved down. that means they do not need to target a 2% inflation rate anymore because they cannot cut rates low enough to get there, and more important, he says, if we have another downturn, we cannot cut rates to help the economy. he says they should rethink their strategies now because they could wait till the next storm and hope for better outcomes, or prepare for them

now and be ready. williams suggests maybe what they want to do is a higher inflation goal because psychologically it will affect the markets, or they could you price level targeting and target the level of nominal gdp. alix: he is not the only one. james bullard saying he will not ot.n bother plotting my d what is the internal conversation at the fat? michael: they're getting back to the discussion of whether this works or not. the bank of japan said they are going to do a review of their policies to see if they are working, because clearly we are not getting the inflation central banks expected. you can imagine the debate at jackson hole will be lively as central banks get together to discuss if there is a better way to pop up the global economy. alix: great stuff, michael mckee, bloomberg's economic editor. it keeps getting more interested -- interesting at the fed. jon: the bank of england gets to

digest post brexit that a. guy johnson is standing by -- an upside surprise, but the breakdown is fascinating. the weaker pound gives you a boost in terms of exports. look at the import costs, and think again. is that the story? guy: that is the story. it will take a little while for the full impact to come through. you get an instantaneous story in petrol prices and food. you see that clearly in the number -- a .6 read on the headline. you look at the import number, and that is up 4%. as a result, you say maybe the negatives are more than the positive coming through. the pound is up versus the dollar, but it has had a topsy-turvy session against the euro. euro-sterling initially spiking this morning. we had light liquidity. came down post the number, but some has popped, and we are waiting for the results and that

could be significant. jon: and uncovered investigation last week. u.k. -- you will get a list of the auction. does that make a difference this week? mean theould just market has enough to make everything work. last week we did not have any kind of supply coming in. this week we have some supply. it just balances out a little bit more. you and i have been talking to people about this story the last week of a sense seems to be maybe the bank just pumps the price. it is reasonably priced sets in. it is putting money into the market. does it really matter what price it pays question like it will be in to see what price the market has to deliver on and how interested the market is in giving some of these bonds back. i think supply could get them over the line. jon: guy johnson, like you very much. it was a big debate last week. you have to imagine bank of

england will come in and make sure this was covered. david: that is a lot of pressure on the bank of england, and a lot of pressure on the dollar. the u.s. dollar is falling to its lowest level since june as residents for u.s. rate hikes this year remain subdued. join us for the entire hour is sam zell, equity investment group's chairman who makes investments around the world. start with the weakening dollar -- how does it act your investment decisions? mr. zell: well, we made a significant investment, or announced one in brazil this week. in january, the brazilian real the dollar. today, i think it is 16, 17. that is an enormous move in eight months. i think we are going to close the deal in two or three weeks, and the question is should we further hedge our position

because the movement in currencies is very significant, just as significant as when it went the other way, and, you know, we sold some assets in brazil a few years ago, and the 1.67, and then it went to 4.14. that is quite a devaluation. david: does the foreign exchange variation play a larger role in your investment today as it were five years ago or 10 years ago? mr. zell: i don't think there is any question the volatility of currencies today, practically since the big recession has been much more significant than in previous -- than it previously was. creation of the , to ,you know, pact 2005-2006, with maybe

the plaza accord being one exception, we had a stable scenario that led to the growth of world trade. since that time, the stability has disappeared, and world trade is slowing down. alix: we talk a lot about how if you hedge your risking euro- yen for u.s. treasuries, it erodes the yield because it is hard to hedge. mr. zell: i think the cost of hedging across the board is significantly more expensive than it was a number of years ago as volatility translates into cost. jon: there are some big companies, multinationals, they swim naked. they are so diversified that is the natural hedge. do you take that view -- a more global view of what you are putting your money into in that respect? mr. zell: yes and no. i think that anybody who does not understand the volatility of

currencies runs very significant risks. on the other hand, there are a lot of people today who, i know, are hedge -- you they hedged over the hill. alix: they are hedge happy. makeell: for example, we real estate investments in emerging markets. we are talking about long term time frames and the potential cost of hedging. that is really prohibited. i think if i were doing a contract that was going to get settled in 30 days, i would hedge everything. year, that, a be up to a that also makes sense. trying to do that, or create -- this is going to go down when this is going to go up -- i do not think there is a very good history. we will be talking more

about your real estate investments late --later in the hour. jon: coming up, climate on the fed --sam zell discusses why he thinks the u.s. could be headed for a recession, and later bhp ceo andrew mackenzie joins us to discuss the largest miners results. this is "bloomberg " from new york city. ♪

alix: this is "bloomberg ." i am alix steel. home depot is out with numbers at 6:00 a.m. -- matching estimates, but they did blow quarter on quarter. ,ig-ticket items house --ac's appliances, that rose over 8%. the coming boosting its full-year earnings outlook for the year.

home depot is only halfway through the home improvement cycle. taking a quick check on jpmorgan bernsteinded over at do to valuation. it basically says that banks will be heard on the downturn in the credit markets. also, a 10-year yield, one point 52% putting pressure overall on the banks. also taken a look at advanced auto parts -- a do-it-yourself auto repair place. it missed across the board on earnings. it got ugly. comp sales down over 4%. revenue falling over 5%. the company saying these results are not acceptable. they say there is a heightened sense of urgency, so wait and see how the company can deliver. jon: topline growth down, margins stronger -- what does that mean for the global economy? sam zell is with us. you said at the back end of last year the u.s. could be headed toward a recession.

i want to dovetail into the productivity numbers we got the last couple of weeks. does that turn the volume up on that call for you? mr. zell: well, i think that -- frankly, i think that low interest rates make general moves in the economy slowing rather than more rapid. if interest rates are 8% today, and you had a productivity number like that, you would have a much more rapid response. when the cost of being wrong is less than 1%, then i think everybody is motivated to say well, let's wait and see. the productivity numbers last week are horrific. those productivity numbers, as far as i am concerned, make the employment numbers subject to question. a lot of people are "hiring two people to do one person's job." form ofanother

underemployment. that is a challenge going forward. you talked about whatever that auto parts company was -- what are the elements? lower margins, lower top-line growth. if you look at, you know, with a few exceptions of some of the very aggressive tech companies, almost every single company is , moreing lower volumes difficulty making the top number. that all translates into confidence within the economy, which, i think, is at less than of the levels. jon: if we were having this discussion with a federal reserve official, we would not be talking about higher rates as a solution. as a management business investments, usa and higher rates could be a solution to this? mr. zell: i am saying, as i said before, that there are times when moving rates is a form of stimulus -- a form of methodology whereby the said can

-- the fed can push outcomes that they think are beneficial. i think we have had low rates for so long that i think we have gone from them being motivating to them being ignored and accepted. is, youresult of which know, if you and i went down the street tomorrow or today and interviewed 50 people, i think 50 of them would probably say well, what do i think rates are going to be next week? low. what are they going to be a year from now? low. you know, we're almost developing a crew of people who have never seen high rates before. 21.5%, i lived through prime rate. not 2.5%, 21.5%. how long has it been since the risk-free rate was 5%?

yet, you go back over the last 10 years, the average cost of capital to the government has been 5.6%. so, you know, how long has it been now that it has been under 1%, and what effect is that having on overall commitment? alix: we see that in a savings rate -- you have to save more because you are scared you're not going to make any return. you have to work the cash. david: exactly, and those savings are not making it into corporate investment. most economists tell us we need corporate investment to increase productivity. what do we need to do to persuade companies to invest? mr. zell: materially reduce regulation. you know, you invest because you precede there is growth. receivehad a tear -- there is growth. we have had eight years of leadership in politics.

redistribution and growth are basically incompatible. so, we have created a situation where the emphasis has been on -- i know and my business i wouldn't be surprised if my cost to compliance have gone up five times in the last eight years. compliance is not productive. the productivity number last week is very much a function of the fact that we are spending a lot more money and we are not adding to our economy. we are just adding to regulations. jon: sam zell, he is sticking with us. one of the solutions is high unit labor costs to get productivity up. david: keep the earnings up cousin is the only way to keep the markets margins -- margins with any to be. alix: all of that leads to washington, d.c. coming up, clinton versus trop

-- the election is just two months away. sam zell weighs in on which candidate is best for the economy. ♪

david: this is "bloomberg . i am david westin. hillary clinton and donald trump have come out with the details of their respective economic plans. one thing they have in common is neither candidate has been pro-trade. sam zell is with us now. you have mentioned your concern about global trade going down. where are you on trade, and how concerned are you that both candidates seem to be, basically, not in favor of free trade? mr. zell: i think they are both misdirected. going back to what we talked 1942 with brenton was in -- 1944. the world was a mess. the world was recovering from world war ii, and ability looked around and said the only thing that is going to ignite growth

is trade. we started out with barter, and went from barter, too, you know, metal coins, to today, currencies. trade isd, growth and what creates positive scenarios on a worldwide basis. in 2015, for the first time since world war ii, we basically of less trade in terms volume by 15%. dollar amount was the same, but the actual, physical trade was 15% less. i think that is a very concerning issue. the growth of the "emerging is very much dependent on their access to markets all over the world, and, basically, you know, trade and world growth

is all about taking advantage of comparative advantage. i think we are moving the wrong way. i think both of the candidates have jumped on what i call a populist approach to trade, when i think the real issue is that we have done all these trade agreements -- it would be very difficult, despite the rhetoric, to claim that nafta hasn't been a huge success. now, maybe if we had done a better job of legislating nafta, zeroedd have zero in -- in the necessary benefits to certain areas of the country that were going to be more affected by nafta than others. unfortunately, we suffer from having a democracy where when the goodies are passed out, they are always passed out evenly.

i doubt that silicon valley needed much subsidy in order to justify nafta, but a lot of other parts of the country did. david: let's turn to something the candidates very much disagree on -- tax policy. in summary, donald trump wants to cut. hillary clinton is more distributive. whom do you favor? well, i think the history of raising taxes is not a good one. to me, the fact that every time they cut the capital gains tax the general revenue goes up, not down. so, to the extent that you cut taxes productively, i think it helps the overall economy. taxes are not always cut productively, and often times too enthusiastic

a fashion. generally speaking, i think that reduction in taxes as a beneficial impact on the economy. david: ok. sam zell, equity groups investment chairman, staying with us for the entire hour. jon: coming up, breaking u.s. data on housing starts, and then opportunities in real estate -- we discussed housing and rental property ideas outside of the u.s. with sam zell. from new york, the markets, it is risk off, the dollar is weakening, bonds are railing, and dollar-in is back below 100. this is bloomberg. dollar-yen is back below 100. this is bloomberg. ♪

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a weaker session in europe as well. the price action in the fx market. a weaker dollar. lower for the first time since june 24. this is reflected in the bond market is well with yields coming in on treasuries by three basis points. we just got some breaking alix: data in the united states. alix:really strong housing starts. down. citation was you had june revised up to over 5% for housing starts. building permits on the softer side, down 1/10 of 1%, missing estimates, but housing starts coming in at 2.1%. in terms of the inflation rate, looking at what the fed is checking out, cpi, if you back out food, backout energy, year on year, actually fell to 2.2%.

on a monthly basis, it was up just .1%. inflation coming in later, echoing the idea we heard from john williams yesterday and you cannot get higher inflation when you have neutral interest rates this low. jon: that is a story in the market, ignoring the housing starts, going with inflation data. the dollar stays weaker. we are trading off the back of that. the rate story and the housing start story are linked. i want to bring in sam zell, still with us to talk about global real estate. --, if you give me low rates you know the story -- if you give a minor and dollar and he can borrow for nothing to do you a whole, what is the story without in market? mr. zell: i think the asus is identical. i think it was confucius who said a builder will build when money is available. and demand and all the other factors are always secondary to is the money available.

right now, we are seeing very significant additions on the commercial property side that are likely to have, you know, significant impact. certainly, we have seen, you know, significant increase in the amount of multi-emily housing under construction -- multi family housing under construction and being delivered in some markets like san francisco and new york. we have seen that impacts significantly because that is where the first new supplier. . i suspect -- supply occurred. i suspect we'll more looking to see across the country as more multifamily housing becomes available. when you talk about office space, i have been a bear on office space for some time. i see a lot of movement in the office space arena, but i don't see a lot of growth, and i continue to see users becoming

more and more clever at having and needing less space, and therefore less demand. on the single-family side, i don't know enough about the numbers you just quoted in terms however, istarts, think the issue on housing starts has been, for the last few years, the fact that there has been very little ability to generate demand in what we call the starter levels. ultimately, our entire single-family system has historically been built on growing -- get a starter home, moved to the next site. well, the starter site has been pretty weak, and continues to be pretty weak. so, i wouldn't take any great comfort from those numbers is, in fact, we are building more

houses for which people can afford to get financing. that i should point out tom baird warned a lot of amateurs are running into the housing market because it is so low. the question, whether investors are coming into real estate because they want yields that they cannot get, for example, from sovereign bonds, and if they are investments that might come to bite them down the road, sam. might lookell, you at supply. here in new york city, we have a 15%, 18%18% -- 10%, increase in the hotel space in a two or three-year period. that has to impact flows. and hudson yards, they are

building 10 or 12 feet of office space. i do not see additional demand. side --n the current currency said -- we had the -- in the war about the dramatic growth -- warned about the genetic growth in the amount of loans, extending maturities -- things like that. do you see there is a credit indication that we're getting hot in the commercial market? mr. zell: i think that kind of assumption might be true of all financing, not just real estate. compareif you were to how difficult terms and conditions were, say in 2009, pretty,016, it is pretty different, and a lot easier. ,on: the question i would ask crossing the wires is william dudley saying a september rate hike might be possible. with that in mind -- we had a

big debate about where rates will go -- but i'm trying to figure out the outcomes. do you get a southern stop, so to speak -- that is what we have seen in the real estate market. the top of supply comes on, and then no buyers. what is the trigger for the sudden stop we have seen historically, or do we get something different this time? mr. zell: i don't know. if i were a good prognosticator like that, i would be rich. jon: [laughter] mr. zell: i am not sure which of those issues will be most prominent, but i think it is very easy to see how oversupply can radically change stated conditions. alix: so, then, where are you worried look for the best investments in real estate -- you are looking at out-of-the-box places like brazil, mexico, china --why there, and what kind of opportunities?

mr. zell: i guess history tends to say you make your money when you buy at the bottom than when you buy at the top. it is pretty easy to say that theil is at the bottom, and u.s., right now, is probably at the top. when you think about the fact that, i think five years ago we sold assets in brazil, and the real was 1.67, and in january, was 4.14. there has been a reduction of massive amounts in the value of the currency. when you have that kind of disparity, you have a lot of opportunity for recovery, and you can, hope fully, do better than -- hopefully do better in a situation where you are dealing with numbers -- than in a situation where you are doing with numbers that are up near all-time highs.

jon: sam zell is sticking with us. coming up, talk more about real estate and energy -- u.s. politics in focus. alix: and where the value is -- with money on the sidelines, where do you put it? while hitting the highest level in months. natural gas extending. sam zell gives us his outlook for energy prices and unveils what he is investing in distressed energy assets. this is bloomberg. ♪

david: this is "bloomberg ." i am david westin in the hewlett-packard energized greenroom. andrewup, bhp ceo mackenzie will discuss his company's earnings and what is ahead in the pipeline. it and then a

tuesday -- movers in the premarket. syntonic is buying -- a commercial services company, restroom supplies -- they are buying -- basically make uniforms, you -- were close for individuals. this deal will be about $2.2 billion. that comes at about a 19% premium. they're looking for earnings to add to their full-year forecast quite quickly. -- theoking at tjx company just out with earnings. the stock is down because it basically raised its forecast for the year by, like, a penny, but that was below estimates, and that is going on sales. in terms of can't sales, they were up. now looking for growth of about 2% 3%. in earnings slight increase, but not good enough to satisfy street estimates. depotaking a look at home . the company coming in with

earnings, raising its full-year forecast if they see bigger ticket sales, more revenue per customer -- so an overall beat for the company. jon: a bit of a turn in the market -- a big debate at the federal reserve as to whether they would change their mandate, the inflation target. at theley is speaking moment, and a headline that has crossed is a september rate hike is possible. that is on the table, as far as dudley is concerned. the moves are clear. let's start with the equity market -- features remain negative, down about 90 -- 39 on theon the dow, but bond market, yields were lower by about three or four basis points. we have had retracement. yields down to just one basis point. dollar-yen was down. the dollar giving up some of the weakness on the back of these headlines that mr. dudley, at

least, thanks a september rate hike as possible. david: a bumpy road till august 24. alix: you think it does dudley, fisher, yellen -- what dudley says has more of a trickle-down effect. david: we are joined by sam zell . sam, ihs has told us there is as the as $150 billion on sidelines waiting to go to working energy. are you putting your money to work, and where? mr. zell: we have continued to be positive in the energy space, frankly as a result of dramatic changes in cost, and dramatic difficulties in the space in terms of debt and overcommitment. so, we find energy to be one of the few areas that is reasonably priced today. david: what -- alix: what specifically are you

looking at -- hard assets, and that, equity? mr. zell: probably a bunch of both. we have certainly been participants in debt restructuring of energy companies. we have also dramatically increase our exposure to natural gas because we think that demand for that continues to grow. generally, we are not as pessimistic about energy as, i think, conventional wisdom. you know, we saw the prices of 30 based on 310 to million barrels a day of surplus. 3 million barrels in a 100 million barrel a year consumption is not really that much. i am not suggesting that it is going to change tomorrow, but i am suggesting that it could change very rapidly. --: your call on natural gas when week about energy investments, the biggest m&a

deal since the rally and commodities has been shell. #--are you optimistic optimistic? mr. zell: if you look at what is happening, natural gas is slowly replacing coal. coal, whether it is good or bad, it is politically bad, so we're going to have less cold. i do not do not know how you are going to come up with a different solution, and somebody has to replace those btu's. they are not going to replace those btu's with oil. it will be a while before renewables replace those btu's, so what does that leave you? it leaves you with natural gas. yes, we're finding a lot more natural gas can we are improving the pipeline. so, we're moving gas more efficiently than we have in the past, but the basic demand continues to increase, and the usage continues to increase.

therefore, if you have the staying power and the long enough perspective, that is where i would make the bet today. alix: i'm glad you brought up moving natural gas around. there are two trains of thought. either you love it, because you have natural gas and you have to move it, and on the other side you see of his lectures at the renegotiate deals and that will wind up hurting these guys in the future -- see guys like chesapeake renegotiate deals that will wind up hurting them in the future. mr. zell: they are occurring across the board -- a lot of midstream contracts were signed at peak pricing that is no longer justified. in some cases, it has led to bankruptcies. in other cases, it has led to, you know, dramatic renegotiations. you have seen, i have seen scenarios where the cost of transportation has been cut in half. that doesn't mean the owner of

the gas is coming out in fact city. that is not the case. there is dramatic change as the demand and movement changes. you know, the country was not designed, pipeline and wise, for fracking. fracking is short-term, loweringd, you know, thereafter. you know, pipelines are made for .ong, continuous streams so, i think there is a lot of adjustment going on in the midstream space and requires attention. jon: talk about your investment -- about 30% of your assets were in real estate the last time you are on. has the investment makes changing any way, shape, or form? mr. zell: now, i think probably the distant -- different since i

was here -- difference since i was here eight months ago is the pace of the investment period. we are investing less today than we did eight months ago, then we did two years ago. when you look at opportunities and see them as less exciting than what we saw two or three years ago. jon: why? mr. zell: well, we started this conversation -- jon: yeah. mr. zell: talking about a recession. i look at what is happening in the currency levels. i look at the continuing lowering of the beta in terms of the ---capital, yet in at the same time, december, triple c bonds were trading at eight. by january, they were trading at 21. yet the risk-free rate did not change. i think you have to plug that

kind of thinking into a scenario that says you may, in fact, have not insufficient supply going forward changing pricing, but not necessarily changing the underpinnings. david: ok, sam zell, equity group investment finer -- founder and chairman. you will stay with us. more thoughts out of you. in the next hour, bhp billiton andrew mackenzie will be here to discuss the company's earnings results. this is bloomberg. ♪

worldwide,r viewers

for man city, i'm jonathan ferro. -- from new york city, i'm jonathan future -- jonathan ferro. he turned the market i want to draw your attention to -- switch of the second order. the price action still there to be seen on dollar-yen with the move of one full percentage point, but it is the turn i want to talk about -- yields were much lower 30 minutes ago, but just a basis point. with the front end of the treasury curve. vista dudley speaking over at fox today making -- mr. dudley speaking over at fox today making reference to the september meeting saying the potential for a rate hike is on the table. look at the turn -- yields were lower on the front end and then they talked to unchanged. the big debate continues with the core of the fed at this point at least putting september on the table still. alix: indeed. a change about from what we saw yesterday. still with us, sam zell, founder and chairman of equity group investments. i want to get your final thoughts.

bloomberg has reported you are in the process of fundraising for a new distrust debt fund. can you talk about that, or what about the market environment is a good idea to launch new funds like this? bloomberg's information is not accurate. that might be heresy on this program. david: that is harris appeared we have to get it right. we zell: the answer is, no, are not doing anything of the sort, and we tend to raise money when we think there is real opportunity, and we tend not to raise money when we don't think there is, as if anything, our andtude today is cautioned, lack of enthusiasm to pile up responsibility. david: blackstone is putting together a very big reit fund. how does that affect your business -- is that a new competitor for you? mr. zell: they are basically

entering what we call the nontraded reit arena. that is not an arena i have been a big supporter of. it is not an arena that i necessarily agree with them on. they are in a very different is this than i am in. they are, more than anything else, you need a u.n. business, -- aum business -- acquiring and controlling assets. this is an attempt on their part to use their brand to, you know, reach the retail investor, and i don't have an opinion on, you know -- that history is really fabulous. john gray is as good as they get. whether this is a direction that makes sense, or whether it is someone calling a comp, i don't know. alix: you mentioned caution as your theme going forward. cashanagers, how much

should they be in right now? mr. zell: a better way to answer the question is what is the cost of having cash today, and the answer is it has never been lower. so, if the cost of option alley is very cheap, i want all the optionality i can have. alix: it sounds like the answer is yes, it is ok to stay in cash because it is cheap to do so. mr. zell: i don't have any problem being a holder of cash today. david: you are holding more powder dry cash for the opportunity? mr. zell: i think that is the case. and certainly, at equity commonwealth, we basically have been turning it into cash, and it is two thirds cash now, $2.5 billion. that is a lot of cash. alix: sam, such a great pleasure having you here. thank for giving us an hour of your time. sam zell activity group -- equity group founder and chairman that i feel caution -- not a lot of optimism from this corner of the table. david: maybe around the corner.

alix: coming up, bhp ceo andrew mackenzie will join us at discuss his -- join us to discuss his company's earnings. down.s a turn the fx market. a weaker dollar story still to yields were not as low as they were. switch of the board again. two-year note yields spiking higher after mr. dudley at fox news says a september rate hike could be on the table. we will debate the fed and global markets from new york city. for our viewers worldwide, this is bloomberg. ♪

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alix: we are 30 minutes from the

opening bell in new york. happy tuesday, everybody. this is "bloomberg ." i am alix steel here with jonathan ferro and david westin. it was all about the weaker dollar. we had williams coming out yesterday same in the central the toolkit, of and have to reinvent monetary policy, but they may have changed in the last 30 minutes. jon: mr. dudley of the new york federal reserve says a september rate hike is still unable. i call it federal confusion and it rains the day in the fx market. david: it shows how sensitive the markets are -- everything is always on the table for the edit. they have said anything is off the table, and this worship the market. alix: they knew -- they do need some type of telegraph. the world implied probability interest rate ca 20% hike in september. david: though the markets always when thus far. alix: that is right. david: the markets always when in my expense. how much does this both have

left to run -- we will have --ask that of ray nolte, who joined us in a few minutes. one stock that has been on a rally of its own is bhp billiton. mackenzie joins us on his company's earnings report, but in the meantime, those markets, jonathan. jon: teachers soft, equities down in europe. we have declines across europe. x down. the big moving the fx market and a weaker dollar is still very much the story. breaking 100ar-yen for the first time since june 24. in the treasury market, very quickly, 30-year yields coming down to, three basis points. we have given some of that up, but the federal reserve still very much continues. our attention in the next hour switches from the treasury

market to the gilt market will he start talking about u.k. debt, and the bank of england comes in with an operation to buy the longer dated guilt. look out for the investment. alix: 45 minutes, the countdown starts, u.k. guilt auction. looking at some of the movies in the market -- home depot and dick's sporting goods. home depot had earnings that came in line with estimates. sequentially, they did fall quarter on quarter the company is raising its full-year earnings forecast. dick's sporting goods store doing better than estimated, raising full-year earnings, raising full-year comp sales. the demise of sports authority perhaps helping to lift stale -- sales. the potential deal in the pipeline -- if these guys merge, it would create the largest supplier of industrial gases, making about 40% of market share. face reg would they

out tory hurtles chine do purchase land? -- regulatory hurdles trying to purchase land? for more on what is happening in the market, abigail doolittle at the nasdaq. in europe, mark barton is in london. abigail, the-- deal getting handled in the markets. abigail: shares of haynes celeste teal are plunging. the organic brand company is looking into accounting concerns around how they traded accounting with u.s. distributors, and as a result, they are delaying fourth-quarter earnings results and abandoning the full-year target. bullish stuff. not surprising there are four downgrades on the street. bernstein put its rating on suspension. however, jeffrey says that could be a buying opportunity. over the long-term, the firm

does think that cash flow potential is very strong. mess couldhink this make a buyout possibility a little bit stronger. right now, absolutely plunging. turning to mna action -- cintas , the uniform covenant, is buying g&k, also uniform company, 497.50 in cash per share. or $97.50 in cash per share. we do have g&k soaring, just opened for trading, alix. alix: thank you. join us from london is mark barton, what is driving the not selloff, but decline in the stocks? mark: we are down for the third consecutive day. it is the longest losing stretch since early-july. it is significant, the highest level against the dollar since

june-20 fifth. that is hurting exporters. only three industry groups are rising -- basic resources, chemicals among oil, and gas. this is why we see minors rise -- bhp billiton, shares up 2.7%. you are speaking to the chief exec it in the next 30 minutes -- executive in the next 30 minutes. it is the world's biggest mining company. it is emerging from the world's -- worst commodities price collapse in a generation. underlying profit jumping 95%. looking forward to that executive interview. shares up by 2.7%. praxair.ed about [ are these companies going to come together? the deal could be a $30 billion deal. raxair has a bigger market capitalization. it would be a bigger part of the consolidation taking place right

now. shares of by 9%. this is the big piece of economic data today. .6%, of expectations of a .5% gain. the number that proves the following sterling is coming through -- import prices 4.2%, ending 32 months of declines, the highest level in three years. that is the big number in today's inflation data. david? david: that is right, mark. the import number really topped out of the summers for all of us. for more on the u.s. equities rally, we bring in oliver renick and ray nolte, skybridge chief investment officer. welcome back, ray. i want to start with you, oliver. put this together -- we have dudley saying maybe september is back on the table. futures slightly down. where are the stock market in the united states right now?

they're in ank bullish place because basically what we are looking at is a fed that while dudley will say september is on the table, that is not a terribly big departure from what the rhetoric has been from the fed for a long time. the market is convinced it is not going to happen, and we have not seen any kind of surprise move from the fed when you have these low chances price into the markets. they watch where the expectations are, but then you also point out that we have a little bit of weakness today. overall it has been very positive -- up, up, and up. what has been interesting is you are starting to see wall street take part in it, along the way up. it has been tough to get those investors excited about the rally, but we see that right now in futures positioning, in terms of asset managers selling treasuries and actually moving into u.s. stocks agreed to a bank of america report yesterday.

a bullish trend is picking up. ray, oliver says it is a bullish trend. are you a whole when it comes to equities -- a bull when it comes to equities? mr. notle: i am a little more neutral. the offset is bond yields are so low that people are buying high-quality, dividend-yielding stocks as substitutes for bonds right now. i also think people are very cautious when we talk to them. you do not have an enthusiasm underlying the market, which probably means you can keep melting up. this is not a we are all in situation. david: when was the last time there was in 20 -- it has been going up and up, and people are not enthusiastic. mr. notle: i think that is why can probably continue. alix: oliver, we have noticed some stagnation. oliver: that is also very interesting -- throughout the january and february selloff,

the o's parts of the market that were surviving, staying afloat, where the bond replacements, utilities, consumer staples. those were leading in the rebound, but post brexit, we have had a different type of market that has emerged and it has been more focused on the cyclicals, more focused on the types of companies that should benefit if there is economic data. i've not know how ray feels, but for a lot of investors, that is a sign that this is a rather we like based on some tentative economic or corporate fundamentals as opposed to a kiwi backstop. -- qe backstop. mr. notle: there is a sentiment that the consumer is turned around. number, whichbs people light off zero, followed by two very good numbers. you have wage growth starting to prevent a you have positive, underlying factors, and that is starting to lift other sectors. as an investor -- the big story of the day, the federal reserve him of the debate over whether they will do something,

not do something -- have you stopped listening to these essays, these speeches, these interviews question are have you given up? mr. notle: look, i think lower longer is the mantra. i see nothing on the horizon that is going to materially change that. september, probably not going to happen. then people will talk about december. look, there is a reasonable expectation you could get one tightening in here. i think the fed would like to do it if they have the runway to do it, and the currency moves may give them the runway that lets them make that move. alix: when you have williams coming out same the old models do not work -- the neutral interest rate might be at zero or even below, how you make investments where -- when you have fed official after fed official not a grain, saying the models don't work, and no one can agree on how to get the models working? mr. notle: you have to look at how far the federal reserve can go -- can monetary policy drive

things -- they are done everything they can. focus will turn, quickly, after you fix are over, to labor day and the upcoming elections, and what are the policy moves going to be, and what is the fiscal side going to do, because that is what you're going to need to drive this to significantly higher growth levels, otherwise we are stuck in a 2% gdp environment, which probably means what we have seen the left the blood of years, you know, continues. jon: ray nolte of skybridges sticking with. oliver renick, thank you very much. alix: is it your birthday? oliver: it is. not good for the markets. alix: happy markets. the let's get update on news outside of the business world. >> hillary clinton has jumped to a 14 point lead in virginia. that shrinks by seven points when third-party candidates are included. mr. trump's negative image is helping clinton overcome her own

liabilities. more than 30,000 people in louisiana have been forced out of their homes due to record fighting. at least six -- flooding. at least six people have been killed. many creeks and rivers are still above flood pages. for the first time, russia has said its warplanes are using a base in iran to attack islamic state and other rebels in syria. the planes attacked targets in the city of aleppo today. presidentssian vladimir couldn't discuss the fight with iran -- vladimir putin discuss the fight with iran's president. alix: coming up in a few minutes, we'll get the u.s. data points -- industrial production, will break goes down as they cross. -- break goes down as they cross, plus later, the ceo of the world's largest mining company, andrew mackenzie, joins us. this is bloomberg. ♪

from new york city, for our viewers worldwide, more data coming up. the immediate -- the median estimate in a bloomberg survey is 0.3%. the previous rating was 0.6%. as we are with the data, let's get to the view. futures soft across the board. looking at the s&p 500 and the dow -- equities down in europe as well with the dax 5.7%, and the ftse down by 0.41%. i will get to the other asset classes -- the weaker dollar still the theme on the back of a debate over the federal reserve, but a big upside surprise on industrial production. 0.7% it comes in at. estimate in median

a bloomberg survey. the previous reading, 0.6. the previous reading gets revised lower to 0.4%. and upside is that -- surprise for factory output as well, coming in at 0.5%. the median estimate was 0.3%. upside surprises across the board, it seems, guys. alix: yes, it does, and taken look at s&p futures, not a lot of, down by 20%. in the hunt for yield, investors are turning away -- by .2%. in the hunt for you, investors are turning away. why the clo market is attractive. >> the clo market is attractive. the underlying market will continue do its job. it is fine. not that interesting. it is at or around par. we would rather own it through the underthrew cielo's in more of a structured form. alix: back with us is rain all tee up skybridge capital. you have them issued money --

ray nolte of sky bridge capital. do you agree with rick? mr. notle: we do. we have started to favor structured credit and some cmb paper as well as some residential mortgage paper. alix: commercial back securities. mr. notle: absolutely. we think we can find yields that are approaching 10% depending on how you are setting up trades and positions. relative the -- relative to the high-yield market, they look inexpensive, little less understood. david: if they are attractive, why is the market fully valuing already -- what is wrong with the marketplace that they are missing that opportunity? mr. notle: they are complex a can they are in the structured credit market. there is not a good retail access point to it. so, i think you need to find specialist managers like rick at his shop who can take advantage of that. they are not generic and stress. alix: cielo was dead in the

beginning of the year. it started to pick up. with you forecast and is there a read through to lbo's? mr. notle: i think there is a little bit of a pickup, and part of what is driving it is equity valuations -- where they are, where you will go for return. corporate high-yield, you would probably pick up a little bit of yield, but still a little bit rich, and then you can move to the structured credit pocket -- more complex, less efficient, and take advantage of those inefficiencies. you will see more of that as you move out through the year. good, structured credit m&a, you are not as encouraged about. why is that? mr. notle: we traded out of that. you start to see alpha get beat up on the back of that kid with valuation levels where they are, they do not have the ability or the catalyst to drive trades

like they had been doing. so, we think there are better opportunities. from david, we also heard rick that he is lowering his interest in his long-term treasuries and moving more toward the belly of the curve to avoid the risk. david: is a interesting question because it seems to be a trade-off. do you share the interest? mr. notle: absolutely. taking duration risk right now does not make a lot of sense. he saw after brexit raise got down to 1.35% in the 10-year. you are now back at 1.55%. 20 basis points might not sound like a lot in these low levels, but the value of .01% is high at these levels, and you could easily see what not a lot of --s, back to 1.70%, 1.7% 1.75%. historically low, no one will get excited, but if you are holding that kind of treasure, you will lose a lot of money. alix: that is the question of the year -- duration risk or

credit risk. ray, the d.c.. thank you, ray nolte. coming up, home depot benefiting from strong among a remodeling last quarter. could that be facing a slowdown? he will dig into those numbers next. this is bloomberg. ♪

alix: this is bloomberg. i am alix steel. well, home depot stands out among retailers with americans choosing to privatize -- prioritize spending on their homes rather than cars and clothing. we will dig into how the numbers reflect a trend in numbers don't lie. home depot comparable sales have posted 22 straight quarters of growth. while the rate has vacillated, it has been consistently above 2%, and has not been negative since early-2012. the impressive run in same-store sales at home depot has lifted overall topline growth coming in at over 5%. revenue climbed, continue to

climb from the bottom in 2010, and may reach $101 billion by 2018. more of that is coming from online. according to the company's most recent report, e-commerce still makes up about 6% of home depot sales, up from less than 2% in 2011. online sales grew by more than 19% in the second quarter, plus home depot is growing that by effectively merging its physical and internet businesses for the large -- as a large portion of online orders picked up in stores. you buy a couple of extra items. it kind of work for jcpenney. while analysts pointed out how much of america is over-stored and over-malled, they have kept their number flat. david: staying on the subject of home depot, we are joined by bloomberg's senior intelligence equity analyst. you have gone over the numbers

-- what pops out the most? brexit straight in the u.s.. it did decelerate from the first in the u.s., it did decelerate. this is not growing stores. how are they doing this -- is it a matter of the overall pie growing, or are they taking share from other people. seema: i think they are taking share -- the high-ticket pros might spend up to $6,000 a year and they see growth in pro category like building materials. flooring. online thousand -- the holy grail for bricks and mortar people. walmart and others are trying to move into that category. it seems home depot is having that success. why is that? seema: they have focused on this interconnected strategy for a long time. in q2, e-commerce grew about

20%. it is still a huge absolute number, over $3 billion, and they have worked on their supply chain. they continue to improve the back and at the structured to improve fulfillment and give customers a choice, which is what they continue to do going into the third quarter. calledthey have a rival lowes? how do they stack up question mark seema: -- stack up? seema: they both are strong operator. depot tends to perform better. they're cops are higher up. they are tried to change that into growth. david: thanks so much. over to jonathan with the markets. jon: think you much, david westin. we are about four minutes, 30 seconds away from the open here in new york. futures are up. dr. just down about 36 points.

in europe, we are lower as well. inis attorney and affects the bond market i want to get to. switch of the board, and i will show you what i am talking about. a debate about the future of the fed to there always is. today, mr. dudley throws his vote into the proceedings. he says september, the rate hike is still very much on the table. the bond market turns. 10-year yields of a basis point. the dollar still weaker. not as weak as it once was. the dollar-yen gets back to a 100 handle. the debate continues with stocks closing at all-time highs once again. will the fed make a move question i call it federal confusion. we will debate that. we will count down to the market open. this is bloomberg. ♪

♪ city,an: from new york this is bloomberg. i am jonathan ferro. here is your global scorecard. future software. up five points on the s&p 500.

-- nearat from near and record highs. the ftse 100 lower. we switch the boards quickly. in the bond market, but now they are unchanged. a rate hike is still on the table for the month of september , so will they or will they not, when we hear from fed chair janet yellen over one week away. the turn in the bond market reflected with a turn in the fx market. it is back to 100 on the session. he gives up some of the gains at 1.2963. let's cross over to alix steel. alix: 20% probability of a rate hike is what traders are looking at. he had record highs yesterday, so some profits today, but you also had federal confusion. yesterday, the san francisco fed

is a john williams said that mutual interest rates will be lower for longer, and that the central bank is almost out of tools and that we need to rely on different ways to jumpstart inflation. diverging views making hay in the equity market, and very much so and the bond market. looking at the 10 year yield, that tells the story. this is what we saw around the comments.dudley's spike in yields. this shows how sensitive the bond market is to any kind of they record as they move forward towards the december meeting. you can also see reverberations of earnings in different areas of the stock market. this has to do with the miners. freeport, u.s. steel, all moving higher.

the hp billiton out with earnings this morning. the story for them -- bhp billiton out with earnings this morning. they call the genuine trough in january, seeing they more -- saying they see more upside. more constructive on copper and oil. that is also helping the group. are affecting home billionaires, though homebuilders kind of drag with the overall market. housing starts were killer in july. they came in at around 2.1%. june was revised up as well. bit soft down by one-times a 1%. as well as westerners homebuilders. speaking of bhp billiton, they reported a while ago. we will speak with this ceo anja mckenzie in moments. i want to give you a taste of the three charts you need to know. this is the net income. at can see it coming down

81%. look at how closely it attracts iron ore. ton, -- in some ways, as iron or goes, so does net income. we will be discussing more with the bhp ceo. jonathan: we can do that now. joining us is bhp billiton's ceo andrew mackenzie. thank you for joining us. let's start with the numbers. by some metrics, the worst number since 2001 for the company. the stock reacted positively. is the worst over from an earnings and dividend perspective? i think for a while, but we live in a very uncertain world. it is important to put those numbers and respect to. wasmajority of the loss

from the stock market disaster for the evaluations of our u.s. shale business and some taxation matters. but when you look through that, you see a strong underlying performance. that is what the market is signaling. the balance sheet is strong. we have reduced costs by 16% in the year. we have done that by being have thecused, as we last three to four years, on simple find the portfolio and the company's processes, systems, and structure to put a real accent on driving profit -- positivity. that is what we are continuing to build. in their current financial year, we look at a further 12% reduction in costs, a 4% uptick willlume, which combined release further operational productivity gains of $1.8

billion. so why things are looking beenrent now is we have really cutting costs the last three or four years. we have driven activity gains up $10 billion, with $2 billion to come. but most of that time, prices have fallen more than we can cut costs. we are almost accelerating and cost-cutting while prices have stabilized. -- ihan: i want you to want to ask what you would do with a free cash flow. what are the priorities for that cash in the coming years? andrew: so i will use my crystal ball a little. i expect prices will trade in recent ranges for a little while. i do not think they will get any higher anytime soon. intos markets comeback

balance, they may price higher. that is why when we look at current prices, we predict that we would actually deliver $7 billion of free cash flow, which will be our highest cash flow yield since we reformed as a company through merger in 2001. we have a very strict capital allocation network, which are used to determine how we use that cash. in the first instance, we will look after important maintenance capital we have to do. just check that the balance sheet is strong. and we have the dividend at 50% of underlying attribute it will earnings. -- attributable earnings. we have put some towards growth in the business, some in dividend, and some in the balance sheet. our preference is to continue to pay down debt, but not to the extent we would not used opportunity, particularly with

$7 billion, to make good on our commitment to increase cash returns to the shareholder and look after long-term growth plans for the company. in maya little speech and outlined a six-point plan to grow the value of the company at the prices that assisted then. jonathan: i love that you got out the crystal ball without me even asking. i appreciate you the -- do that. my follow-up is on m&a. down with someone you know well two weeks ago and asked about the possibility of m&a activity. he talked about the lack of tier one assets and prices that he saw as attractive. the free cash flow -- why not put that into m&a? are you thinking the assets are not there at the price you want to buy it at? andrew: pretty much. our capital allocation

frameworks adjusts that unless we can get the returns through making those sorts of transactions, then it is preferential for us to invest in our own business or even return the money to our shareholders and put it on the balance sheet. that is how the market has panned out. we have a lot of opportunities to grow the business, with the options we have created for ourselves. and this is a six-point plan we laid out, which back in may, which we talked about growing the value of the company 70%, did not require any m&a or any significant improvement in commodity prices beyond what i forecasted. increasingly, that looks more compelling for shareholders than acquisitions, which at the prices they are trading at do not offer the returns, which suggests it was value adding. alix: you seem to prioritize balance sheet but also maintaining cap-x. what are the conditions where you would grow cap-x?

andrew: we may grow it slightly, from the levels this year around $5 billion. improving so good at capital efficiency that we can execute the most all of our growth plans at the current levels. it will certainly go up if we saw a big uptake in oil price and we would want to get going with our own developments, particularly in our onshore business. but relative to the amount of capital we used to stand, we are at least twice as efficient as we once were. so we can do most of what we want to do in terms of capital at levels not far away from current levels. alix: what i was trying to get to is when do you see the market for iron or, copper, and oil start to get tight? they will take time. we see markets coming back into in sequence.

we are starting to see evidence of some rebalancing of the u.s. domestic gas market. that is what we thought would go first. that the cost curve is so flat you do not see a move in price. is next market to rebalance the oil market, that we have seen evidence of. that is probably a year or two off. thereafter, we would have to go to the end of the decade to see a fully rebalanced market for copper. and into the next decade for something like thermal coal. iron ore is likely to be oversupplied for some time, so it is hard for me to predict that coming back into balance. i say the same thing about liquefied natural gas. we are not likely to invest more, but we have conditions at the bottom of the cost curve. so even for iron ore, if the

price comes off a bit, this would be a high-margin business that would offer decent returns and make a significant contribution, even as slightly lower prices, to the cash flow targets. jonathan: final question for you. on the investments perspective, 2015 was outright ugly. in 2016 so far, your stock in london is up around 39% to 40%. our investors buying in to the miners or to the rout last year? andrew: i think a lot of value investors are coming back into our stock, because we see the register. i think what they see as an investment proposition is we have great assets and we are running them incredibly well. we have a rigorous capital allocation process. when we put that together, they see a well-run company which is likely to continue to reduce

cost, improve efficiency, and has an interesting perspective for growth, high-value growth, going forward. as they turned their attention back to the, these -- to the commodities sector, they like what they see in bhp billiton. mackenzie, bhpw billiton ceo. looking forward to seeing you again. david: that was a terrific interview. o>," more trouble for obamacare. this is bloomberg. ♪

alix: this is "bloomberg ." coming up, wilbur ross. from new york city, this is bloomberg. i am jonathan ferro. we have been talking about linde ton talks with create the world's largest supplier of industrial gases. linde now confirming those talks with praxair. more news from that story as it comes. to get you up to speed on the market news, equities in the last 15 minutes -- this how we opened. down by 4/10 of 1% in the dow and s&p 500. lower in europe, down almost three quarters of 1% in the dax. the fx and bond market is the interesting part.

yields were lower across the curve in treasuries. now at one point 57%. the federal reserve bank of new york resident william dudley saying a fed rate hike is on the table for december. the dollar is weaker. we are at 100.29. really, this builds momentum towards jackson hole and the fed. l on thepouring fue conversation. david: just when you that we could not find any more drama in the fed. now will turn to health care. there has been another hit for obamacare. they will pull out of 11 of the 15 states where in thebeen participating affordable care act. this follows united health and humana, who also exited the exchanges. here with more is that trees are. i have two questions.

one is how can it be that aetna -- here with more is zach tracer. i have two questions. one is how can it be that aetna is losing so much? how can i lose hundreds of millions of dollars? zach: insurers have pointed to a few problems with obamacare. one issue is more sick people signing up. and if you worry -- and fewer young, healthy people signing up. the other question is if they charge too little? of those whosome are sticking around raising their premiums. there are a few different ways that they have gone this market wrong and are now paying the price. david: but originally with the affordable care act, it was said there would be mandatory participation to avoid the problem of the cherry picking. what happened to that? zach: that's right. you are required by law to have

health insurance. you pay penalty if you do not. but it has turned out to be such product that people would rather pay the fine then pay what may be several thousand dollars a year. david: so wealthy people are paying the fine and getting out of it and leaving the health insurers with the sick people. zach: that appears to be one of the things happening. david: what does it mean now? in some of those states where it is pulling out, there would only be one health insurance. zach: if you are buying from on the acn individual exchange, you will have to go shopping in november. you have to get health insurance from a new provider. it could mean higher costs and you would not have the doctors you want. david: how bad will this be for obamacare? zach: this could be a real problem. , bloomberg tracer

health care reporter. thank you. jonathan: the bank of england looks to buy larger yields. the results are next. from new york, this is bloomberg . ♪

jonathan: from new york, this is bloomberg. i am jonathan ferro. the bank of england failed to reach their market. they can to find longer maturity bonds again. let's cross over to mark barton. no failure this time. mark: can you hear the siebel relief -- can you hear the sigh of relief? it down.ak essentially, the bank of england tried to buy longer dated bonds today. last week, it was not so accessible. this week, you have to call it a success. 3.1 2 billionof

pounds. as you know, the target was 1.1 7 billion last week. it underperformed and did not receive as many offers and bids. the total this week. it is a bit of a relief. america, -- said it was just getting used to the new supply-balance equation. the bank of england successful in buying longer dated on's. there are three buckets, three to 7, 7 to 15, 15 and above. the three to seven year and seven to 15 year have been successful. there have been three operation so far. three out of four doing well. jonathan: a lot higher than last week. because there was not any covers at all. compared to the other auctions. ofonder whether the supply

2055 bonds will relieve the pressure on the bond market, in terms of supply and availability. mark market -- mark barton coming up on "bloomberg markets." alix: much more uncertainty for the bonds and for the fed. joined now by -- to hear more about the comments by william dudley. the dollar started moving higher. it is lower on the day that backup from a lower dollar. what was so significant? >> dudley was clearly sending a message to markets. that message is "you're too complacent." he was clear about saying that december could be on the table. that the head is -- the fed is still in hiking mode. i think that is why we have seen such a live in markets.

alix: this is very different essay we got from the san francisco fed president john williams, who said we will not necessarily see monetary policy help inflation, that we need to rethink the whole model. how do we square these ideas what williams was saying is that we are living in a world where there is a new normal. where the neutral rate that neither stimulates nor raises growth, it is stagnant and we need to everything our framework, because it may not be applicable in this new world. the way we have been inflation targeting is not going to work. that is a long-term view. what dudley came back with today, which was more of a reframing was in the short-term, we will need to raise interest rates. i do not know if those two things are currently opposed, but dudley's response is definitely calibrated to tell the markets that if you read williams as a dovish statement, you may need to rethink that.

alix: and all of this leading to jackson hole. will yellen beyond the deadly side. thank you. it is a busy day. 11:30 a.m., the u.s. will sell $20 billion in one year ills. will there be demand on the short end of the curve. and lockhart will's speak. so which camp will he be? david: if they were all pointing in one direction, you would think this would be a marketing campaign. williams to dudley to lockhart to yellen. but they are going back and forth. they are negotiating this in public. jonathan: they have been for a while. this started with st. louis fed james bullard, who said that this is an uncomfortable situation, so i will not give you the long-term forecast. i just wonder where fed chair janet yellen sits. alix: so dudley will try to talk

the markets up, will that be what we expect from janet yellen? david: and yellen -- and we have been going on the assumption that yellen has total control of her team. jonathan: there is a lack of formal dissent at least. from "bloomberg ," that wraps up this program. "bloomberg markets" coming up. equities retreating from an all-time high in the united states. the dax down and ftse lower. the fx market -- you know the story. it is a weaker dollar. this is bloomberg. ♪

vonnie: from new york, i'm vonnie quinn. mark: this is bloomberg markets on bloomberg television.

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