the dollar. a. policy decisions by the bank of japan and the federal reserve. david: holding senior management accountable for a scandal of unauthorized customer accounts. alix: deutsche bank is working to securitize billions of dollars of loans after its biggest day -- one day slide since june. jonathan: i'm jonathan ferro beside david westin and alix steel. two crucial decisions, i wonder if they will change anything at all. david: you said it. one is what will they do, and the other is how will the markets react. alix: u.s. markets, investors pulling money out of stocks. you take a look at the 10 year treasury futures market, they are the least bullish. wonder if i can draw a line between these two

meetings and say if we will get dissent. if we do not see process, i pledge another fetched these 42016. monetary policy on wednesday. the second-largest public pension plan in the u.s.. portfolioinvestment value at $193 billion. you don't want to miss that conversation coming up. jonathan: treading water. that is the way things are set up. equities are positive in europe. the taxes moving higher as well. by around .6%. euro-dollar, it is a snooze fest in the fx market. i will talk about that later. positive, but just only by .1%.

in the mind the market, a rollover on crude today. brent: back 7/10. we talk about this stealing of the yield curve, jake peavy bonds, and right here in the u.s. on treasuries. treasuries at the long end, 30 year yields at three basis points. today, central-bank decision. alix: it is finally going to happen. let's check in with our bloomberg team part in-depth coverage. where one day away from that decision from the fact and the boj. iswashington as wells fargo chief executive officer testifies before that senate banking committee. and in berlin as deutsche bank severs its worst three-day slide in three months. we want to kick it off with what is happening on wednesday on the

fat and boj. possibility of a rate hike tomorrow. that is what markets are pricing in. what does the data tell us? >> it is kind of going eh. for the last month, it has been trending lower. until you get to the last week or so. it turns up just a little bit. if you look at the overall level, it is higher than it was earlier in the year. maybe there is a chance that the fed may want to surprise us. bnp paribas is saying that. that the lastid 86 that meetings, all of the meetings under ben bernanke and janet yellen, 10 days out, the future market had correctly priced in a decision. since they are only saying 20%, that suggests if they were moving, it would not be a surprise, it would be shocking. alix: that means we will not see

any movement until december when the chances are over 50%. we have been talking about the boj much more than the fat. what will be the real market mover tomorrow? >> that is the real question. follow the yen. if you look at it over the last six months or so, it is completely decoupled from other risk indexes. it has been behaving currency. why is this? nobody knows what the bank of japan is doing. they could raise their purchase program or lower. they could raise interest rates or lower them. they can expand their bond buying program or contract them. there are so many options open that nobody knows what is going to happen. the yen will be the measure of how investors react to the bank of japan whatever they do. alix: whatever they do is the key phrase. thank you very much. i keep reading research after research report to find out what

the compass is on the yen. one day says laura, one day satire. -- says lower, oneay says higher david: we will find out tomorrow. he centerpieceomorrow willbe the ceo who is testifyg befo a sete comttee. we now go down to erik schatzker down in washington. clear that there are a number of senators who are pretty irate at this point. is there anything he can say? >> there is no sound sweeter to a senator on the banking committee then the sound of a ceo apologizing. i would not be surprised if we hear the words i am sorry several times today. to address your question, that will not be enough. senators are printing this not just as a matter of abuse, because that is clearly what happened to some customers, possibly as many as 2 million, but issue of accountability. we have seen his prepared

testimony in front of the senate banking committee. i will post right now. "i accept full responsibility or practices in our retail business, and i am committed to doing everything possible to fix this issue and take the necessary actions to restore trust." it is worth noting that nowhere in this prepared testimony does john stumpf tackle two of the hot issues that you can be certain will, today. lawbacks on pay, perhaps his own pay or that given to other wells fargo executives, and nothing about whether more heads will roll. you know elizabeth warren will ask that question. david: there will be some sacrifices and apologies going on. will we learn anything new about what actually happened? >> there are a number of days in

figures in this testimony that i had not seen before. about thes a lot scandal we did not previously know. we know it began in 2011. that much is known. of the 5300 people that wells fargo terminated for these abuses of customer trust in opening fake bank accounts and credit card accounts happened over five years, starting in 2011 and ending in march of 2016. what this testimony tells us is that wells fargo did not begin to remediate this issue, which is to say offer customers credits or send them a check or even a letter of apology for five years. that raises a question as to whether this was really an issue of. wells fargo treated it as an issue of ethics. they were more concerned about the fact that these salespeople were effectively cutting bonus checks for themselves that they were not entitled to by

reporting inflated sales figures. they are different things. money or trust. the sense from this testimony is that initially it was more about money than trust. i would not be surprised if we see some senators key in on that issue. david: thank you. from washington where he will be covering those hearings live. breaking, the brazilian state of oil company is cutting their five-year investment plan by 25% to just over $74 billion. it is targeting development and partnerships of over $19 billion for the next year, 2017 to 2018. it is not yet trading in premarket. this is a theme we have been seeing. these they oil companies will ofe cut about $10 trillion over the decade. this is what analysts look to when they say we are going to see $70, $80.

jonathan: they have to cut it so aggressively, it is counterintuitive, but it makes sense. how many years until that case it? alix: we are seeing a rating for lower even longer. we see opec continue to pump. that is cramping the rebalancing of the market. jonathan: this sets up deutsche bank nicely. the bank is set to be offloading risk as it tries to securitize billions of dollars of corporate bonds. here is caroline hyde. the timing is key. caroline: it is because the timing to get this deal done is before they have to file their third-quarter report. they want this done by the end of next week. that is one key issue. the other challenge is they want to reduce their risky assets. they want to have the balance sheet get rid of the risk associated with a pool of loans and keep some loans, that is why

it is a synthetic collateralized loan obligations. they keep the lines but sell off the risk to some of the investors by doing this at a time when they are the worst capitalized under in europe. slapping authorities them with as much as $13 billion in fines. securing their wants has sort. havengent capital, they fallen in price. yields are spiking higher. no wonder they want to ship risk off the balance sheet. jonathan: we have seen this before. i wonder what they will have to do. caroline: we understand the deal will not be huge. it will be less than $5.5 billion of risk. they did a deal that size last year. this is something we have been seeing across the board.

the biggest scandinavian bank has so long the risk associated with some of its debt to tidy up some of its balance sheet. you seedoing the same. this is a way of reducing risk assets and boosting return on equity and smarmy your capital needs. it is something that regulators might like. jonathan: maybe. deutsche bank is down another two or three percentage points. it is hammered by 12.75% in the last three days. some news outside of the business world. first word news. >> thank you. law-enforcement officials say there is no indication that on agronomy was part of a larger network. -- ahmed rahami was part of a larger network. he was wounded in a shootout with police. he was born in afghanistan and is a u.s. citizen. he traveled to pakistan twice in recent years. france has arrested eight people

in connection with that track attack that left 86 people dead earlier this year. prosecutors say the suspect are links to the attackers who were killed by police after driving his truck into a crowd in the city of nice in july. north korea appears that taken a number of steps to developing a missile that could threaten the u.s. they say it was ground testing a new type of engine or long-range rocket. north korea conducted its biggest ever nuclear weapons test. u.s., japan, and south korea are calling for more economic sanctions. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. jonathan: thank you very much. the fed wants to hike local growth slowing. with the mpldebate , howard ward.

ohio senator and banking committee sherrod brown joined us today. from new york, this is bloomberg. ♪

♪ alix: this is bloomberg . i still. analysts see 13% earnings growth next year, earnings for s&p earnings next year is $133 a share, -- 13% growth. joining me is howard ward. are we going to get there? 13% seems like a huge task >>. >>i think that is optimistic. profit margins are being squeezed i rising wage pressures, lack of pricing power, and what appears to be a

slowdown in global economic momentum. i think that will prove to be too optimistic. timesand s&p at 20 presents multiple, that is way too expensive than? , itt is closer to 17 times won a $20 number for earnings. you can spend a number as long as we do realize any percent gain in earnings. if earnings are growing, adding to payrolls, no recession, you can defend that because we are in for a long period of ultralow interest rates. alix: they don't get bad. continue to have this bull market if we do not have earnings growth? >> no. we have had two years of latin earnings. the market is expecting an uptick asked here. i think it will get it. the environment is not getting

better. we are not accelerating anymore. we're pulling back. q3 will see an uptick in gdp. a lot of that is inventory restocking after several quarters of destocking. we can move around that trendline quarter to quarter, but that is where we are stuck. right now, there are warning signs out there. alix: in the beginning of the year, defensives is where you want to be. those stocks got volatile. we saw a rotation in the last few weeks. does that maintain, or are we due for another switch? if you are concerned as i am about potentially negative overngs estimate revisions the next couple of quarters, and if you are concerned about slowing economic growth, i would recommend becoming more defensive even if some of those

pe's remain high, those earnings are more likely to be achieved than those cyclical company earnings and cyclical stocks can really hurt you when they miss earnings. alix: does this not worry you over the last few weeks? >> not really. the backup in yields is so minute. december, the ten-year treasury was 2.3%. today it is 1.7%. in the year after the fed raised rates, the ten-year rate has gone down. i don't see any further upward pressure on those rates anytime soon. david: we look forward to these boj at fat decisions tomorrow. does it make you nervous? >> i don't think this is the time to pile into financials. i think it is a mistake to make that move now. we have been waiting for that kind of higher rates, good

financials. we have had stop and go in that tree this year. i think it is too late. alix: great to get your perspective. howard ward, gamco cio. coming up, the world's second-largest mining company. more optimistic on the outlook for china. we are with their ceo, finding out why he sounds more positive on china. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. the ceo of the world's second-largest mining company has turned optimistic on track. i sat down with rio tinto ceo john jack sebastian to talk about the pickup in the construction market. here's what he had to say. >> china is very important for

us, for the mining industry. it is around 50% of the global demand for minerals. we spent a lot of time in china. i was there two weeks ago. it is sad to say that on the back of the meeting i had with our customers, our partners, our suppliers, as well as government officials, we are becoming much more where we are being described as cautiously optimistic with china. the me give you a few examples. in context of iron or copper, the construction market in china. one of the industries we look at is the inventory of housing in tier one, tier three, and tier four. today, the financial metrics shows that the inventory in tier one -- currently you are below the seven months, which is the

threshold in what we regard as a healthy volume of stop. -- stock. the chinese are looking at the economy, it is not about gdp. they don't talk about gdp. they talk about energy consumption. they talk about railway capacity. they talk about exports. when you look at those four or five metrics they look at, they are all slowly but surely moving in the right territory. the draw of the two or three years of activity said,na -- therefore as i we are becoming more and more cautiously optimistic. jonathan: someone say that is almost sitting on the fence. >> no. you asked me this question a couple of months ago.

as i said, you remember very well, and this current market and government, which is very uncertain, we have to be cautious and conservative in the way we run our business. i'm saying we can see an inflection point. jonathan: let's talk about prices. to mr. mckenzie over at the hp who told me his view on prices. inyou think that will show the prices of things like copper and iron ore in the medium-term? >> winter is coming in china. during the winter, the construction -- in theh it is moving right direction, in the short-term, you expect the severity to come and therefore price in this environment -- we will see the price recovery

in medium-term. we believe that copper will be the first one to come out of the twilight zone. in the short-term, it is clearly -- that was rio tinto ceo john sebastian bach -- john sebastian job sitting down in a sea that interview. the big mind in mongolia, what happens in china is absolutely critical for them. winter is coming. he is more positive on what is happening afterwards. david: it is a fascinating interview. number one, how well he knows china. number two, why he needs to know china that well because so much of his business. i did not understand that large of a percentage of his business is tied up in china. alix: in the short term in the market, there is a disconnect. you have city is very bullish. copper prices about three months

out, that is that blue line on the second panel. that has been going down. that can signal a weaker market. today my cap difficulties. in a few years, it might be a different story. bhpthan: mckenzie over at took that opportunity to take the crystal ball out. it is not all about volume despite price. it is about value. alix: it has to be about those that are or race. -- ore rates. ohio senator and banking committee ranking member sherrod

♪ jonathan: this is "bloomberg ." let's get you up to speed on the market. it positive, equities any in new york. p by-- is up by -- dax is u

0.6%. of twomarket, the head central bank decisions, if you don't know what they are, you need to go somewhere else. market, at this time of the session, we are a little softer in the session. pulling back to a party to handle. over at the bond market, it has been that yield curve steepening. yields are coming in at the long end. we invest three half basis points on treasury, 2.4%. like many, i'm excited for the week ahead and tomorrow. having a great time already. for the fx traders in this market, it has been an absolute snooze fest over the last year. if you are trading one of the most liquid currency pair in the planet, that is your pound-dollar.

-- euro-dollar. you see it on the bottom left. the lowest since going public back to 2014. -- all the way back to 2014. when do we get some volatility? i don't know. alix: after brexit, huge amount of volatility. here's what else you need to know at this hour. we are just one day away from those all the decisions by the fed and the bank of japan. barclays and bnp paribas is betting against their peers. canada's auto workers union has reached a tentative agreement to alleviate concern about the potential for a strike or closings. wells fargo ceo john stumpf struggling to quell a scandal

plans to tell lawmakers today that the bank failed by reacting too slowly to sign that employees were opening millions of unauthorized accounts. he will appear before the senate banking committee at 10:00 a.m. eastern right here on bloomberg television. now for more on that story. david: thank you. one of the senators who will be questioning john stumpf shortly is sherrod brown, the ranking democratic member on the banking, housing, and urban affairs committee. it begins less than 90 minutes from right now. thank you for joining us. sen. brown: good to be with you. david: what do you already know about this scandal, and what do you need and want to know? sen. brown: we know that over 2 million accounts were opened , openedand unasked for

by the bank, 2 million customer accounts that customers did not ask for. esstomers got dinged for fe that could and did it affect their credit ratings. this went on for years. by thousand 200 employees, 5300 employees were fired. these were tellers making $12 an hour. personal bankers making $15 an hour. some branch members -- managers. the woman in charge of this part of the bank, she is just retiring with up to $125 million in bonus as she leaves. fargo isow that wells apologizing and saying that they are going to make all of these customers full. -- whole. we don't know what that really means. how can this happen? 5000 employees fired.

executives getting bonuses. no change in policy over several years. where was the ceo? it is reported that he is the highest-paid bank ceo in the country. someone was not doing their job. david: what do we know about what the ceo knew? what did they know and when did they know it? do you know the answer to that question? that they: we know knew a lot of this and did not report to the board or the ceo for some time. that is curious. ceo had toure the know by those 300 people were fired for doing things that were 5300 people were fired for doing things that were unauthorized. where was management? when the l.a.s times was reporting and the consumer bureau came in with a $100 million fine that wells

fargo is actually paying attention and is looking to do restitution for these hundreds of thousands of customers that unauthorized accounts were opened. david: you are one of six senators who has written to wells fargo asking about the so-called clawback. where are you on that issue, and stumpf to agree to that? sen. brown: i don't know what he will agree to. he is the chairman of the board. the board can require the clawback under doctrine and previous provisions. was given up to seven years ago, that is the way the rule is written now, they can do a clawback of this executive compensation. he is responsible and can do that. -- messagee notions

this sends. all of these are low-wage workers. an additional number because they did not want to do this. knows, refused to do it. 5300 fired. the head of that section of the bank gets millions of dollars in bonuses. what is the country supposed to think about these banks that are too big to manage and too big to fail? david: if you do not get satisfaction today, do you anticipate further subpoenas for more people to testify to get to the bottom of this? sen. brown: i would like to get more. i'm the ranking member, not the chairman. senate goes democratic in november, which i think is likely, i will be chairman of that committee and these investigations will continue. whether or not we need subpoenas i do not know.

we need to know more. most banks in my state are not doing these kinds of things, but we know that banks too often build risk in their management structure instead of having a risk officer looking out for these kinds of problems, and it causes people to do things they should not do for compensation regions. -- reasons. thousands of bank employees are making $11 an hour, which is what the tellers make, something is wrong. david: what legislation do you anticipate coming out of this? there are already regulations proposed about affecting competition. sen. brown: it means the agency's need to speed up a little bit about what they need to do about executive compensation. not what needs to be done with the law. it is that the republicans in the committee voted to undermine the consumer group and --

consumer bureau and undermine these protections. that thethis thought bank crisis did not happen. the consumer bureau, i don't know if wells fargo would be doing any of this restitution they say they will do if the consumer bureau did not find them for $100 million and shined the light on what they are doing. it took a newspaper and the consumer bureau to step up and do this. they were not coming out themselves and showing any remorse prior to that. contributions, wells fargo has made to various senators. it turns out there are 14 senators on the committee will receive campaign contributions. you are on the list. you are on the bottom of the list. 10 republicans, four democrats. what potential problems does this create?

sen. brown: you will have to ask each of them and see what kinds of things they do today at this hearing and beyond. nobody has stood up to this industry and its malfeasance and problems like i have. a number of the committee members, a number of my colleagues have been strong standing up to wall street malfeasance and illegal activities and will continue to. david: would you expect to continue to receive campaign contributions from wells fargo? sen. brown: i have no idea. i would assume not. it has been minimal. up on wall street issues and will continue to. i have no idea what wells fargo will do in the future. my first responsibility is that wells fargo makes these customers whole who they had cheated. they had cheated those customers. about this, if they open another unauthorized accounts and ding

with a fee, that affects the credit rating. so that customer has the worst credit rating, borrows money for a mortgage, then paste $20 or $50 a month more exist something wells fargo did. the company has to make these customers full. that means looking at what it has done to credit ratings and all that. david: thank you senator. coming up, bloomberg will bring special coverage of john stumpf's testimony before congress. alix: the oj and the fat the wildcards for the market. -- boj and the fact are the wildcards for the market. i need to get my yield and hit my liability stream so i will go down the credit spectrum.

if i can do what i need to do by buying 10 year treasuries, i will do that, but you cannot today. is paamcoing me managing director. she oversees $10 million in assets. is it duration or credit risk? risk certainly on the fundamentals, especially if you have an alpha player was good at looking at the fundamentals seems to be a better bet. jonathan: help me understand what is important from tomorrow's decision? is it critical to what is happening in the market? >> that is what the bank of japan is trying to do. they are trying to stephen the yield curve. we are seeing some of that coming into the u.s. treasury as well. when it comes to credit risk, it is all about growth and fundamentals. u.s. growth, although nothing to write home about, is fairly good.

jonathan: we have not talked much about fundamentals, it has all been about a reach for you and flight from zero, you think the market is pricing fundamentals right now? >> it has been more about technicals, not fundamentals. the smaller credits have been more about fundamentals. there is some yield to be gained there because a lot of the capital has not come to the smaller names. the more liquid names have been the beneficiaries of this search revealed. -- four yield. alix: if you look at this spread, the 230 year yield spread versus inflation expectations, i chose that because it is shorter-term. inflation expectations have gone nowhere fast. typically, this is a growth and inflation story. not seeing it has implications. >> this is a relatively new phenomenon.

much of the recent move has been driven by central bank actions, not by -- but by the bank of japan. alix: if it is not actually growth, does the curve has to flatten? jonathan: you think that will happen? why japan is trying to do one of the options on the fore, reducing the support long and bonds and adding more support. with their trying to do is prop it by government action, not fundamental. i don't think that will happen in the long-term. jonathan: if that is the move they make mark, is that positive or negative for risk? quizzically, nobody knows. even if you did, it would be hard to protect what the market move would be. is it positive or negative for

risk? >> it is positive for financials. for everybody else, it really distorts the incentive to make money. it is not based on the metals. alix: yes and no. good to see you. paamco managing -- jonathan: speaking with erik schatzker on how barbie is ready to go for correction in brazil. two big central decisions about 24 hours ago this is bloomberg. ♪ -- away. this is bloomberg. ♪

alix: this is "bloomberg ." i am alix steele. tune in for a special session when the boj and the decide tomorrow.

♪ city, i: from new york am jonathan ferro. ,utures in the united states about an hour and 45 minutes from the oven, futures positive. frankfurt, the attention is still on the deutsche bank. down 13% over the last three sessions. the ftse up .6%. switch up the board. yields coming in on the 10 year down to basis points. dollar yen stable. story been a stronger yen are the last couple of days. euro-dollar at one point 1180. david: are probably erik schatzker interviews the new

president of brazil, michel temer. the widespread accusations of corruption going on with to the top of government all over that so-called carwash scandal. beasked about what needs to done to put the issue of corruption behind him. aboutlet's talk operation carwash, the investigation into corruption. atter ofa simple m black and white? the more corruption, the better. is it more gray? is it a point where it becomes destabilizing? know, there's some division around this. some people seem to think there

is some exaggeration. ed,have not at all meddl nor do we interfere. there is no interference whatsoever. providesrecisely what stability in brazil. case duringwise the the impeachment process of the last administration. institutions in brazil are working very well and properly. the carwash investigation will continue. erik: i would like to know how far you are willing to go to anticorruption in brazil -- end corruption in brazil? told you offer immunity

lawmakers and officials? >> we had done that already. recently, i sanction a bill of law providing for a sense of morality, if you understand me, in appointment of persons to hold key positions such as directors in state corporations, which is not mean that the political class cannot possibly , butnt political people only people that have some experience. this is the established were good as a result of my lawioning a recent bill of while in office. : does that address the question of immunity from prosecution for elected representatives, lawmakers? >> the question of the

congressional community, that is something we will not change -- immunity, that is something we will not change because immunity has been a traditional form in brazilian law. as is always the case in the united states. as regards the potential for a criminal action being perpetrated, not even members of congress are at all protected from criminal procedures. this kind of procedure is underway in brazil. david: that was brazilian president michel temer in an exclusive interview with erik schatzker. show you projected plans from the boj to buy even more of their own debt. this is bloomberg. ♪

♪ alix: this is "bloomberg ."

i am alix steele. the consensus is that the boj needs to do something. what that is is a question. there is a scarcity of what they can actually buy. this red line here is how much the boj owns of jgb. the blue line is where we are right now. purchases for other non-central banks at 60%, whereas the boj is that 30%. hsbc crunched the numbers and with that projection out there that by 2020 they will be at 60%. the non-boj will be 40%. where will these come from? it means investors actually have to start selling. this chart shows that issue as well. holdings in five pounds. you have it coming in at about

645 trillion yen. it has been down in the past few years. you can in theory just keep selling. hsbc says not so fast. they say it leveling out in this red line. that means there will not be the sellers to give the boj the bonds they need to hit their target of ¥80 trillion each year. who would be some of those sellers? you have banks and pension funds and other households. boom, the oj, the really big buyer. the issue is that some banks cannot sell any more of these because they have to hold onto it for collateral. about 15i will hold trillion in collateral.

the boj needs to do something to do with that scarcity issue because if investors stop selling to them and there is not much more in the market, how do they even complete their bond buying program? that is front and center tomorrow. we have seen many theories about what they may do to combat that. jonathan: no one has a clue what is going to happen either way. chris ailman will join us. hiswould he set up portfolio, and how does he manage risk? this is bloomberg. ♪

. .

david: one day to go -- the

dollar holds steady and bonds rally as the countdown to crucial policy decisions by the bank of japan and the federal reserve enter the final strap. jonathan: well-deserved -- wells fargo holds seniors -- senior staff accountable. alix: deutsche bank is working to secure corporate loans to offload list after reporting its biggest three-day slightest hint june. david: welcome to the second hour of "bloomberg ." i am david westin along with jonathan ferro and alix steel. we do not know what the bank is going to do. jonathan: we would expect the cut to be negative for currency. we have seen it again and again doj.e i wonder if they can make a move. alix: part of the story is they

cannot prevent the strength no matter what they do. i like the view saying the bearish view as lazy. that said it all in the market. david: as you pointed out, even if they want to keep going, they will run out of bonds at some point. alix: right. we will set you up for the big boj decision. we have the cio of calstrs. chris ailman will join us. jonathan: a positive tone -- futures up one-third. london, more specifically, the ftse up six point and. -- 6.10. the story continues today. marginally positive, marginal dollar strength after a day of weakness just yesterday. brent,comedy markets,

the vti, retracing some of the gains we saw yesterday. the story in the bond market today is actually a rally at the long end, with yields coming in at about 3.5 basis points. what happens in japan -- does that drive everything else -- bonds, treasuries, guilds, the whole lot? or does it disconnect from the rest of the bond market? i wonder if it does and if you can make a trade on that. alix: or if it is about 2:00 p.m. tomorrow. carl riccadonna is in new york looking at key policy decisions schatzker asik testifies, and steven yaccino. it is about the central banks. jonathan: it very much is. we kick it off with the fed. carl riccadonna. we do not kick it off with the

fed. we kick it off tomorrow with the boj. how critical is the decision for the federal reserve -- it used to mean something about a year ago. does it anymore? carl: absolutely. the state of the japanese economy is critical. it is one of the largest economies on the globe. there are real questions about whether japan has additional, effective ammunition they can fire at the problem. as you highlighted earlier in the segment, you mentioned the snooze fest in fx markets, and some uncertainty about how we can gauge how effective any policy changes will be. what i will be doing as soon as the rate decision comes out is focusing on dollar-yen and seeing if it strengthens or we can. unveiledkens, boj has strengthened policy. upathan: to switch things and go to the fed, it is being called a non-decision if you

look at implied fed futures. there is a narrative on the margin evolving -- barclays subscribing to it, bnp paribas subscribing to it. for the first time in recent history, the fed could discipline the market? really? carl: i say not really, jonathan. i think, perhaps going back to bank of japan, this could be the best news for bank of japan and the most effective policy tool, that being that the fed takes a hawkish hold at the september meeting. meaning they pass on rate increases now -- still too much uncertainty -- but nonetheless lean strongly toward the year-and rate increase, showing the fed is in the game, pushing toward monetary policy normalization. jonathan: carl riccadonna, a big event tomorrow with big decisions coming up. a special report tomorrow at 1:00 p.m. on bloomberg tv and bloomberg radio. --x: callaghan is buying

allergan is buying -- therapeutic. $20.35 a share. tobira focuses on therapeutics that treat liver diseases and other information, fibrosis, and other viruses. will beat what the deal based on, certain milestones on the development of the drug -- it could be a deal of about $1.67 billion, $1.69 billion of allergan to buy tobira. tobira is halted, and allergan is down slightly. erik schatzker joins us on wells fargo. the ceo john stumpf will be testifying before the senate banking committee. there are distinct is we need to make on the cost -- the cost we have seen so far, and the overall total cost that will be haunting wells fargo.

erik: absolutely. i have been digging about this. we know john stumpf, the ceo will be contrite, apologetic, and take full responsibility in his testimony before the senate banking committee, but the scandal continues to metastasize. to your point, the actual cost to wells fargo thus far is quite low -- $185 million in settlements, and the cost of reimbursing these customers, you know, for whom fake accounts were opened in their name. investors, of course, are trying todiscount the ultimate cost wells fargo, and in that discounting process, they put at least four variables. will john stumpf eating ceo of the bank, and can his heir apparent, president since long, run wells fargo profitably? that is number one. number 2 -- legal liability. potential class-action lawsuits from investors, and further steps by regulars. those are possible as well. number three, unexploded bombs -- we know about fake accounts,

but what other abuses may have been encouraged by what appears to be a toxic sales culture in wells fargo, and perhaps in other parts of the company's business? fourth, and perhaps this is most important -- brand and reputational damage. i have been thinking about the fake account scandal in ceo's -- cdo the scandal at goldman sachs, and the london well at j.p. morgan. they are three very different beats. in the case of abacus and the london well, we are talking about scandals that emerged in the whole business, and we know, of course, they did not really damaged the business those can banks did with host -- those banks did with wholesale customers. this is realty -- retail -- a completely different animal. i am calling it the chipotle syndrome. if you walk by chipotle knowing what you know about chipotle, you might ask yourself, if i eat

there, will i get sick? what john stumpf has to be worried about is people walking by a wells fargo branch, asking themselves if i bank there, will i get ripped off? alix: that is a great point, though some analysts are upgrading the stock -- saying it is not worth a $20 billion it raised of market cap that we erase of these -- market cap that we have seen. coming up, john stumpf's testimony. david: we'll go now to the presidential election, joined by steven yaccino. the biggest news has been this -- these terrorist attacks in new york. tothis point, is it too soon tell how it will play out in the election? of an: the prospect

terrorist attack in the final week of this campaign would define the race is something people have been talking about for months. this week -- i am not saying this will define the race -- this week we got a glance of how the candidates would respond to such a crisis in those final weeks, and what we learned is they are really doubling down on the messages we heard in the past, and these are the messages we can safely say are going to be their closing arguments. donald trump responded to the attacks by saying we cannot afford the status quo. we need to close the borders, he is trying to tie hillary clinton's policy in the middle east to the rise of isis. he is strongly doubling down on that front. hillary clinton is taking everything now cap says about the attacks, the way he responds, and try to turn it back on him, talking about character, temperament, can we afford a risky donald trump? having 48think about

days left before the election, but that is not quite right. on bloombergece talking about the early voting. some of the reaction might be affecting voters right now. steven: that is right. this week, minnesota starts, next week, iowa, and that we are off to the races. it is important because democrats have been traditionally better at turning out voters, and it is something clinton needs to do if she wants to tap into the obama coalition, young voters, minority voters that she is seen and enthusiasm gap with so far. it is also important for trump. if he is going to persuade voters he is a safe bet to be the next president, his timeline is closing state-by-state rapidly. david: steven yaccino, we appreciate him being here. now for more on what is going on outside of the business world, we turn to, chandra. : officials say there is no

indication that -- is part of a larger network. he was arrested after being wounded in a shootout with police. rahami was born in afghanistan and is a national i citizen. he traveled to pakistan twice in recent years. france has arrested eight people in a -- in connection with the bastille day truck attack that left 86 people dead earlier this year. the attacker was killed by police after driving his truck into a crowd. islamic state clingers possibly for the attack. the obama administration releases proposed guidelines for self-driving cars. automakers will need to meet 15 benchmarks, among, how the virtual drivers will function, what happens if they fail, and how much -- how they have been tested.

global news, 24 hours a day, powered by 2600 journalists in 120 countries. jonathan: you know, i still need a drivers license. alix: i just got mine. i am 35. i just got mine. jonathan: i am waiting for it to happen. coming up, the boj is the main event -- what is up their sleeve. ther, the cio of second-largest pension plan in the u.s. -- calstrs, the cio joins us from new york. this is bloomberg. ♪

jonathan: from new york city, this is "bloomberg ."i am

jonathan ferro. the expectations for the shale -- for the boj are right up here. is, no oneoblem really knows how, and how long we have to wait until they actually do something. joining us from london is geoffrey yu, ubs wealth management, head of the uk investment office. help me out -- expectations for the boj could not get higher. what are we expecting --that is the question i do not have an answer to. yu: thisnk this -- mr. time around, we expect more from the execution rather than what they actually do. they first went to negative rights, it was poorly executed, poorly lamented, and sometimes you do more harm than good. second, what is the marginal done -- downside to the

credibility? there is talk about losing their credibility -- some say they have to go all out to regain credibility. some say they have to do nothing to regain credibility. i think that is where the volatility is going to be when the decision arrives. jonathan: i will take you back to your roots, deep in the weeds in the fx market. possiblyme, what could come out of the boj tomorrow that will drive dollar-yen higher? they want clarity, and execution -- extension will do more from a portfolio effect to get dollar-yen higher, more so than negative rates. we know it is a big context -- it will take time for the markets to digest. they will look at monetary base expansion first. if we get something like $10 trillion or $20 trillion, like some are suspecting, dollar-yen

will react. alix: or you go away on vacation, come back at 2:00 p.m. tomorrow eastern time as the fed hike includes. i say that because if you look at the historical correlation between dollar-yen and two-year yields in the u.s., the correlation is .56. if you get to 1%, that means they are moving in lockstep. mr. yu: this is probably where the boj will get some help. what the fed is trying to do is they willsingle that inject some volatility into the markets, and acknowledge the u.s. economy is healing, strong enough to take a hike. at the same time, they will not try to push the backend to much. as long as a signal that the next meetings will be toward the upside in u.s. rates, that will help dollar-yen, and the boj

will appreciate that. jonathan: would you make of realized volatility and some of the currency pairs in the market right now? we is it a snooze-fest when have key event risks on the agenda the next couple of months? mr. yu: do you want to take on central banks -- that is the first thing. the second thing, we have had brexit. you realize something, let's say there is going to be a balloon, one way or another -- central banks have compressed volatility for so long, but once in a while, you're going to have that one-off event that will release compressed volatility, which we saw with the swiss franc move and the sterling move. also, some people will be looking at that u.s. election. help me understand -- you set things up for investors wealth ubs in the management division. what happens in japan -- we get the steeper yield story, what does it mean for bond markets and what are you telling clients? mr. yu: clients are worry -- we

have seen steepening in the yield curve. will it be a global phenomenon, and more poorly, what is that signal -- more importantly, what does that signal? you are seen wage growth in the u.s., and the economy recover. that is a healthy steepening. elsewhere in europe, japan, if it is stupid, even though policy is trying to push the other way, that might be something to -- deepened, even though policies tried to push the other way, that might be something to worry about. hear a hawkish tale. is that a reason to buy the long game? mr. yu: what i am more interested in is the term rate expectations. short-term, they might be higher, but over the long war medium-term, will they signal seen the fed funds rate end at 3.5 or four? probably not. the risks are to the downside. jonathan: geoffrey yu, great to have you with us. alix: how can you go long

duration at the end of the day? the fed and the boj taking center stage -- investors taking risk off the table. morgan stanley upgraded the behind that analyst adam jonas, will join later in the program. this is bloomberg. ♪

. ix: this is "bloomberg am alix steel. " the fed and boj are certain to dictate market action tomorrow, but with so much uncertainty surrounding the events, is it time to take risk off the table? bnp paribas -- joined us yesterday to state where the impeccably. less risk, equities coming up, the best way to play that would be short the u.s. dollar, the -- australian dollar, the new zealand dollar, rather than the euro or the yen. alix: i charted the aussie

dollar versus the msci world index. dollarhave seen, aussie continue to rise, it you have seen risk allies -- rallies. now that it is starting to roll over, what does it mean for the aussie dollar. geoffrey yu is still with us. i expected steve to say i am msf, but hehe focused on the aussie dollar is where the risk impact will be. where do you see it? mr. yu: i would be some aesthetic to the view -- the aussie dollar has proven difficult to short of late. in fact, steve mentioned the yen versus the aussie in terms of class -- cash allocation. you can see where our exposure is. i think australia, though, i am not sold that is going to be a and global growth beater

especially when you look at the chinese property markets, for example. you might get hit in the face. on the other hand, it is clear the rba does not want to see the aussie aggressively stronger. i do not know if these are the right entry levels yet. jonathan: it is been hard to make a play whether it was chinese commodity or risk more generally -- how do you set up tomorrow with that in mind -- do you want to move away and take risk off the table for the next couple of months? mr. yu: on the contrary -- especially when it comes to the u.s., we thank you still want to be invested in -- think you want to be invested in u.s. equities. however, the japanese head, that is where i worry a bit more about the global volatility. 20 trilliona expansion in their monetary base, we will potentially have $200 million worth of allocation to go to japan. that is the effect the boj wants

to achieve. that could cause volatility. if the fed ships signals, not only short-term heights, but higher terminal rates, that will be going against longer-term its location that could bring in more volatility. i do not think anyone is priced for that. does the fed want to inject that amount of uncertainty -- i highly doubt it. alix: if we wind up seeing a yield curve in japan and the u.s., eventually there is a rotation of curve where there is money coming out of risk assets and into bonds? mr. yu: i think so, especially in places like europe and japan where you do not have enough confidence that escape velocity will be achieved anytime soon. --met the ecb forecast looking at the ecb forecast for inflation, of course the yield will pick up. again, it is the u.s. where we would advocate there being more ripples. alix: great to get your perspective -- geoffrey yu, ubs management. what doesn't this guy now?

everything. jonathan: that is why they moved him from fx to the web management system, i am sure. coming up, meeting pension obligations in a low-rate environment. thechief -- the cio from second largest pension in the u.s., chris ailman from calstrs. of 55.uture s&p 500 futures are positive seven. in europe, the deck is up. similar move on the ftse. andar-yen, ahead of the boj the fed, trades with a 1.01 handle. this is bloomberg. ♪

hey how's it going, hotcakes? hotcakes. this place has hotcakes. so why aren't they selling like hotcakes? with comcast business internet and wifi pro, they could be. just add a customized message to your wifi pro splash page and you'll reach your customers where their eyes are already - on their devices. order up. it's more than just wifi, it can help grow your business.

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 . let's check the markets. futures positive, up about 57 points on the dow.

decent rally shaping up in europe ahead of the fed and the boj. treasuriesed states, are in focus. yields come and three basis points. -- dollar-yenle stable. for augustng starts down by about 5.8% month on month. building permits down .4% month on month. a weaker read when it comes for housing for august. not a lot of surprise because aggregatestruction hours worked actually fell at 1.3%. the construction guys working less in august, so you can imagine permits and starts will be slightly weaker. looks like is up he futures are around the highs of the session per the two-year yield is moving higher. housing starts coming in down 5.8% in august.

david mr. ailman: it is an important number because it drives a lot of employment -- david: it is important because it tries a lot of employment. biggestng with its one-day gain in two months. adam jonas is the head of global auto research at morgan stanley, and he made the call of the target price going up a full eight dollars. that it wasur note because of china. how big could china be for gm for the future? adam: china is already very big for gm and the present, could sure getting around $2 million of cash dividends are they pay out around 90% of the prior-year earnings. chinese net margins for gmr in the double digits. well positioned. so it already is big.

what investors are concerned with is, how sustainable is that? to assumption to bring it up market, it has been outperforming our expectations throughout the year. through a joint venture in china. how much does that limit them? adam: it has not limited there ability to repatriate cash or have control over the portfolio and the platform engineering, which has been important to them. but these are good times and china. perhaps your question could yield a different answer if and when the chinese market starts to contract. to this point, the 30 -- the 49% ownership has been harmonious, to say the least. david: gm has not traded as high as they came out the first day. the price has been done, despite

earnings. to get a sense of your call at r chart toe the a& show this is a big bump up. if you go up to the far right, you see the blue triangle at the top, the diamond shaped thing, and you see how far above the white line is, and the white line is the present price. what else caused you to put this kind of target price in? adam: this is a big call for us. theave been critics of gm, strategy and cycle and the efficacy of the credit cycle, in particular, and the threat posed bytechnology disruptions autonomous vehicles coming from outside of the industry. we think those arguments have become fairly consensual in the market and in some cases have washed over us and become even more critical. so the stock trading around five

times earnings, the market is telling you that the auto cycle is an imminent risk of collapse or that they have near zero terminal value in the not too distant future. what we're saying a key driver hashe move up is that it 110,000 miles and a tape deck and no software, so before we taxis taking us around cities without steering wheels, we have to replace all the cars on the road probably cars or four times with that are three or four times safer than the cars on the road, maybe not 10,000 times safer. that transition will be really interesting for gm, even if it is a legacy company. david: how much is based on your assessment of the management and what they have done in recent days? adam: not so much recent days, that mary, and her first year,

obviously, she had a lot on her plate with the recall crisis and all the testimony and distraction around that. we felt in the second year, she was able to get more of a strategic field to the direction of the company, to assess areas assess areas and not to invest in and cut off. capital allocation, when trading at such a low valuation, what you put in and what you take out a the business, to make significant difference -- we have confidence in the team at gm. are they part of the very long-term future of the auto industry 20 oh 30 years? perhaps no auto company incumbent is. but we think the market and suzman or indictment of the valuation of far is far more draconian than that. david: is a fair amount of your projection is based on a longer cycle before we have autonomous

vehicles, what does that mean for other people, such as tesla? takeit really make you down your estimates on tesla? adam: tesla is in a bit of its own world. we think tesla, given their software and data capturing, the qualities of their cyborg swarm, they're connected cars, we think tesla is an important part of the future of the auto industry. the question they are facing now is, can they navigate the present right now, particularly with some of the strategic activity and the funding? an important part of the future if they can navigate the present. david: do they have the capital to get them through? is there burn rate too high? adam: when we downgraded the company to equal weight earlier in the summer, we highlighted the risk coming from the solar

city transaction as one of the primary ingredients for that not just in terms of accelerating cash burn, which we have not modeled and at this point because the merger is still under discussion, but it was mainly a move on governance. we felt the cost of capital and the trust that they have with public shareholders, there were enough questions raised about that to get up concern. , and iins to be seen will not comment on that any further. david: thanks so much, adam jonas, head of global auto research at morgan stanley to is facing alpers widening funding gap, according to the cio. he said the gap grows over time. i return less than 7.5%. now is a man that knows

something about this situation, the cio of the second-largest public pension fund in the u.s., christopher ailman, of course of calpers. thank you. this goes back to the 1980's with the 30 have near treasuries. the yield goes from around about 14% all the way down to a two-handle to where we are now. is that a problem for you? mr. ailman: it is the backdrop that has impacted our life. iopouloso think ted el and calpers for making me talk about them first. the question would be, i agree with ted's comment, but the question is, how are you doing on your funding gap with your mortgage? it is there. you will probably not pay it off for 30 years and we have said very quickly -- very clearly that we will be fully funded in 30 years. calpers and calstrs were

underfunded in the 1980's and 1990's, and they'd moved up quickly. we have had more of a volatile market in the 2000's tiered we're back to where we were in about 1990 them in 1980. most plans about 80% funded. but they have a 30 have in your forecast to be funded. pension is a long-term game. i'm not surprised by ted's comment. i think it is achievable over a long time period. this year and the next week, no. jonathan: we are going to talk about the investment strategy in a moment. where there any lessons for the public pension funds in the united states and japan, and what are they? mr. ailman: i would not say lessons, i would say nightmares. the lost decade of no gdp growth, i do not see that happening in the usa. we are far too impatient. we are unhappy with 1% to 2%

growth. take, ashe u.s. will it has, monetary action. i will bet on the fed over the boj any day. problems been a mental that the u.s. does not. we have immigration. they don't. alix: for now. we have the chicago pension funds coming out. at what point do you feel like you could reach a crisis level? mr. ailman: the whole key to a pension plan, and i want to emphasize, does not mother -- matter whether it is a defined pension plan or your 401(k) or dwell matters is you are investing over the long-term. you have to put money away on a consistent basis over time. if you look at chicago or some of the midwest plans a crisis, they did not fund them, even in the 1970's through the 1990's. they have not put the money

away. it is like trying to save for retirement when you are 55. it is too late at that point. you will not have time to invest that money. we went to the governor in california, and they increase the contribution rates to our plan over the next seven years, because retirement has a cost. in a definedou are benefit plan or 401(k), longevity is actually your biggest challenge. we are all living longer. when you look at a 1980's and the forecasts, the big thing that changed was not the investment rate of return. it was the longevity. we have over 350 teachers in our plant -- features in our plan that are over 100 years old right now. a situation you see where you will have to look at assets to meet current demand? nearu see that in the term? mr. ailman: in the near term, not at all. and we're talking about timeframe here it i talk about

timeframe's in decades, not just years or even a five-your segment. we already have a negative cash flow, so we pay out more in benefits than we get in in contributions. but our investment firm makes up the difference here it for us, instead of a net cash buyer, like an endowment and contributions, we are actually a net cash seller all the time. we use what we call the smart rebalancing. alix: and calpers had to sell about $2 billion in securities a year to help close that gap. david: it is not just like a , can you project that ramp productivity? mr. ailman: we went through a

huge boom in the 1980's and 1990's, and i do not think those are likely to repeat good but we go all the way back into the 1920's. i go back to the 1860's. yale university has charts that can help you take the s&p back that far. so you have the different economic environments. i am willing to say the u.s. will have innovation in the future. you were just talking about a thomas cars. maybe not now that maybe some are in the 2020's -- you are talking about autonomous cars. we're not just a u.s. investor. we are invested in the emerging markets. we are at different spots around the world. i think global growth can get back. it will take time. europe is a mess. japan is a mess. the chinese economy will come back. emerging markets are continuing to evolve and improve. beingan: thank you for

with us. alix: coming up, investment return -- where does chris find it? we are going to look at where he finds investment in a negative fielding world. this is bloomberg. ♪

david: this is bloomberg . catch special coverage of the fed's decision tomorrow starting at 1:00 p.m. in new york, 6:00 p.m. in london on bloomberg television and radio. emma: the ceo of wells

deeply sorry the bank took so long to recognize employees were opening millions of unauthorized accounts here john stumpf texas fight -- testifies before the banking committee today, laying out a to preventimeline employee misconduct. employees may have opened over 2 million accounts without customer's permission. a pharmaceutical, has agreed to buy at their pew dexcom binet at the price of as much as $1.7 billion. rgan says it will do treatment for nonalcoholic liver disease. the u.s. music industry is on track to expand for a second year. it has not done that since 1990 nine. retails putting on recorded music rose 8% in the first six month of the year. sales are being driven by the growth of paid streaming service just such as spotify an apple

music the music business has been hurt by two they get the piracy and falling prices. that is your bloomberg's newsflash. alix: thank you. back with as is best for ellman, cio of calstrs, the second largest public pension fund managing over $190 billion -- christopher ailman. what is your return deception? 7.5 percent long-term. alix: how do you do that with negative yields? mr. ailman: we did not do it last year. we probably will not do with this year. it is early in the year. but we have said, this will be a low growth cycle in these couple of years. we are not surprised here at one of the ways you do it in a low yielding or negative yield environment, you avoid negative yield. our allocation of fixed income has been coming down steadily over the last two bob decades. we are now down to where will will probably be 12% or 13%

income. i need to get my allocation somewhere else other than fixed income. alix: where do you get it? you are in bonds and stocks could so where you normally go is no longer the place to get those returns. mr. ailman: we have been doing a lot of work on that. the innovation team, they have been working on it for a while. their real focus has been on 30 having your government bonds. in a crisis, people flee to the government bonds he would we have looked at interesting trading styles that are allowed to go long and short. economies, currencies, different types of strategies. we think is holder value and do a little bit positive in a negative return environment. if we have good growth, they actually will not do that well. i am not counting on them for return to miami counting on them for when markets are negative and drug, and these will hold their value and give us the balance we are used to add a fixed income. jonathan: you were not making

return assumptions last year or this year. when do you have to think about changing the business model in some way? if this is the new normal, low growth, low yield, and it stays with us for decades, what does that mean for you? mr. ailman: every time you say new normal, you have to pay a dollar to pimco, just saying. we are in between a demographic bubble. you have the baby boom. we are all aging. and the millennials have not really started buying homes and doing all that activity we would see out of a generation. so we are in a low growth period. i do not think it is a whole new normal that will last forever. for us, we still can invest the portfolio in lots of different areas to find growth. we still think you will see growth in parts of the emerging market. i think is -- infrastructure can come on as a nice steady cash flow return on investment. so we really balancing the portfolio between investing for at real estate

well last couple years, great double-digit returns, but it will be a challenging environment to generate that. i think that could last for about three years. when you ask about when do we discuss the structure of the portfolio and the mechanics of the pension plan, every meeting. that is an active debate time i board about what are the right numbers, but again, you are looking at over 30 years. so you can say, ok, i think i have a feel for what this year might do or the next couple of years, but when i think out 30 years, it is tough to say that things will radically change from the way they have been, say, the past 60 or 70 years. alix: fair, so not new normal for 30. david: coming him, the fed does not need to raise rates since rates are already rising -- that is one economist's argument. we will show you why that might be right. that is next, and this is

bloomberg. ♪

battle of these charts or maybe battle of versus surveillance. unseen like what has come from london to do battle with our partner alix. -- francine has come all the way from london. francine: i know we're looking at the boj, and alix is probably looking at the fed it's oh i will focus on the boj. boj is the problem with the , and it has nothing to do with the yield curve. my problem is this church, the employment, unemployment figure for japan. it is below 3%. alan'ss is the boj sheet. the matter what it does with negative rates, the problem is structural. that a lot ofing

european countries and the fed would dream about. you have to get immigration through and put women back to work, and it is structural, taxes. you have to make sure that the economy works. more important. it is structural, get people back to work. david: immigration in japan is a tough one. alix: rates are going up. this is one-month libor, that purple line. these are kind of interchangeable. the blue line is prime money market fund assets, and the white line is government money market fund assets. a huge they versions in selling. new regulations coming in mid-october. that has put a lot of up pressure on libor, a two-basis point move and libor can be as much as $14 billion in extra interest payments for companies, according to goldman sachs. some of these guys are already

feeling a 25 basis point increase. david: so the control room has changed the rules. chris, you get to vote by yourself. mr. ailman: i love the boj story, because i think it is very profound, because it is structural. they can't grow the balance sheets through the roof and it would not grow the economy does you could grow the balance sheets through the roof and it would not grow the economy. david: alix wins. we have: coming up, from president barack obama live from the u.n. general assembly it we're counting you down to the open, 34 minutes away. ♪

a jonathan: 30 and it's away from

the opening bell in new york city. this is bloomberg . we set up for the boj and the fed decision. markets treading water. alix: any clarity? a little bit of risk taking on it to the markets into the big central-bank decision day. highs of thend the session. no big positions being taken on her jonathan: no, volatility is right down there somewhere. the fx market today, the dollar, marginal strength. you see it in the bond market, yield coming in at the long end, the reversed of what we have seen the past couple weeks. alix: weaker housing starts. not a lot of movement. in the commodity market, another day of weaker oil. on, ports coming reopening. that becomes more of a supply story, rather than a dollar story. jonathan: the expectations for

the boj are what? i still don't know. futures, arms of similar story to what we're seeing in the euro. dow jones, as of he, and nasdaq right around session highs, all of around .3%. individual movers, a little bit of m&a action. therapeuticsng at committee for $28.35 a share. they make a drug that helps against liver disease for people who are not alcohol abusers. if they come through and have tests from the fda and have trial phases, they will pay an additional $49.84 a share. that is why you see such a dramatic move in the price will stop in terms of community health systems, this committee operates hospitals. apollo global is in talks to acquire some assets, according to reuters. this would add about $19 billion of revenue for apollo in this

space. it has been a crazy couple days for community health, up and down by about 10% monday, 15% friday, and following the upward trend. abigail joins us at the nasdaq. mark barton joins us in london. abigail: advanced micro devices shares higher. and analyst is throwing in the towel, upgrading shares to market perform. july done great of underperform has lessened. amd is one of the nasdaq's top stocks. plunging is seen a retailer -- cena retailer. it is at 2016 lows. the company reported fourth-quarter earnings that missed estimates by 50%. forecast.ed a weak

it looks like slowing traffic is the culprit. there is a 16% bearish short interest. abigail, fromu, the nasdaq. mark, we are around the highs of the session, but not a lot of position taken into the central bank. mode.wait and see volatility down four days in five. we are awaiting the big central-bank meeting. big decline or, regis, shares down about 6%. solder and chief executive 37 million shares. proceeds a roughly 100 million pounds. shares down today. a sales forecast being raised for a drug. medicines, and one

could generate up to 10 billion from in annual revenue, up the previous estimate of 7.5 billion. shares are up 1.5%. the big story is they are -- bay monsanto.over inverse correlation between the pound and ftse 100. it has broken down for five consecutive days, meaning the ftse rises, the pound rises, and reverence. us investors have stopped focusing on the weak pound to boost earnings of these types of companies. beenhe economy itself has showing strong signs of resilience in recent weeks. ftse on track for the fourth monthly gain, the longest stretch since 2013. jonathan: thank you very much. my education continues. the federal reserve

non-decision, but why? the market is not pricing it. a probability of around 24%. the market would be in shock if they did make a move. here is the why. this was pointed out earlier on. meetings, march 2006 to july 2016. the probability of a move was approaching 90%, so if history is a guide, the fed moves when the market is prepared for it, and right now the market is not primed for it. the question for investors, are we really going to get a federal reserve surprise tomorrow when investors are not primed for it? david: that is a pretty dramatic chart. we want to continue our discussion about what the fed is likely to do, what we will hear from the tomorrow. jenna inned by washington. ailman is still

with us. a markets really do not believe there will be any hike tomorrow. is the fed following the markets on this? historically, the fed does not like to move if the markets are not pricing it in, as such are demonstrated. part of that is because we really do not want to see another temper tantrum or something a little more jim attic, were we really surprise the markets. chris, we had just today two of the primary dealers for fed bonds come a barclays and bnp paribas, said they're predicting an increase tomorrow. could there be, if not a black swan, a sort of dark gray swan? mr. ailman: my reaction is, give me a break. aey're only going to tighten quarter, one-quarter, so will they go up a half? it is not that bald of a move.

i'm disappointed the market is so convinced they will not make a move. -- we have to get back to normal interest rates, which are 3.5%. at this pace, it will take 14 years. this is crazy. the fed needs to reload the tools and shrink the balance sheet. honestly, if market is not expecting it, i do not expect them to take any action tomorrow. it is right before the election. they will probably look of their data and stay quiet. david: where do they need to get the expectations to before they can make the move without disrupting markets? looking forward to december, it is about 57% right now. what do they need to say to get december in play if that is where they want to go? mr. ailman: they need to have some hawkish comments. they are data-dependent. you are going to have alan greenspan on later this week.

the markets really never could predict at all, he would say, so this is unique to the fed suddenly has to worry about the market expectation about an increase or not. i think they just have to get back to their business and not worry so much about the market. but the market react to them. they should not be reacting to the market. david: we have had an array of fed presidents coming out and saying quite different things. i think most people thought they were really disagreeing with each other. are they going to have unanimity tomorrow or could there be a dissent? is a good question. we have heard a variety of opinions. some have come out with a really dovish tone, urging the fed to be patient because there is no reason to move any time soon, and we have heard really hawkish comments. assuming they hold, i would look for that from esther george, who has dissented in the past because she is quite a hot. at the end of the day, we might

see language that is a bit more hawkish in the statement to keep those people on board. that is the thing to look for. david: thank you for joining us from washington today. i want to continue with you, chris. was a dissent, how would the markets react? how would you react? mr. ailman:, personally, i would applaud because i think the fed needs to raise rates. the market might gyrate. the bond market will react the most. there is not a lot of news for stocks right now, so you could see some thing this week. pretty soon, we will end with this quarter, and then we will get back to earnings, because that is what really matters, corporate earnings. the fed, they have got september and then december. if they do not have anything now, that will be looking to december. for years, they were looking at the dot plot, the that has been off the table.

david: does the fed need to be thinking about what the other central banks are doing? you can get the dollar driving up pretty dramatically, and that could hurt equities. mr. ailman: with a central bank diversions was going to be the same when we started this year. we thought we were going to see the bank of england and the fed raising rates and the boj and ecb easing rates. we anticipated that. now we anticipated that. now we're seeing the movie little bit and concert. i think the fed has to pay attention, but they only care about the usa. their job is inflation and unemployment in the usa, not around the rest of the world. they will worry a little bit about china and the currencies, but the factor that in. they are data-dependent on the usa only. david: chris ailman will be staying with us. -- naturaling news gas prices breaking above three dollars for the first time in 16 months. yes, oil has had a tremendous rally. natural gas prices, since the

getting of june, are up 278%. we have a little warmer weather heading our way over the next couple days, helping natural gas get that extra boost. inventories are still high. natural gas over three dollars for the first time in 16 months. outside the business world, let's go to emma for the news. emma: law enforcement officials say there is no indication omicron rahami was part of a larger network. he is named the connection with explosions in new york and new jersey and was arrested after being wounded in a shootout with police. rahami was born in afghanistan and is a naturalized u.s. citizen. a federal official says he traveled to pakistan twice in recent years. billionaire george soros pledged to invest more than $500 million job refugees and migrants. the investments will be owned by soros' nonprofit organization. use the owner of a $25 billion family office fund management.

soros was born in hungary and emigrated to the u.k. after world war ii and later to the u.s. in a little under one hour, president obama will address the united nations for the last time was up he speaks at 10:00 a.m. eastern. yesterday, role leaders attended the first ever summit on refugees and migrants. they proved a declaration to provide a more coordinated and humane response to the world's 65 million displaced people. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg david: coming to the wells fargo ceo heads capitol hill, planning to apologize for his bank's recent misconduct. but how far is the bank willing to go in addressing the problem? this is bloomberg. ♪

alix: this is bloomberg . pension funds going green or california's two public pension funds dropping their holdings because of any state law requiring them to drop those positions in coal by july of next year. back with us is the cio of calstrs. are you done selling coal? mr. ailman: it is thermal coal, and 50% of revenues from thermal coal. you still use it to make steel and other materials, so metallurgical coal. more toermal coal is heat your house. mr. ailman: you got it. are we done selling coal? no. we're looking at non-u.s. coal, and most of that is in emerging markets. the dilemma is you have about 400 million people in india with no electricity at all.

they are burning wood and animal dung, which is worse. so how to's india get electricity to this people, and do we invest in part of that or not? we will go to the board in november and talk about non-u.s. coal, emerging markets, and try to figure out -- we may end up selling it. it is not a big exposure in our portfolio. cole has been dropping in value. alix: what about other areas, like oil? upre is a lot of heat coming on earthquakes. are you getting pressure from those type of energy investments? mr. ailman: it is not energy alone. we look at e, s, and g, environmental, social, and governance. everything i said class of mine g factors when looking at investments. they do traditional analysis, but they're also looking at forward-looking issues, trying to figure out how sustainable the company is and if it will

survive. when you look at something like fracking, that is great today and has helped oil companies today, but obviously, it has theound questions about long-term. cutting corners in the ghort-term and taking e, s, risks for us is not the right thing to do for a company to we are a long-term investor. we will hold a company for 30 years. so why want consistent sustainable return. alix: exxon is not going to be going anywhere continental in the next 10 of 15 years. mr. ailman: exxon is a very favorite targeted company. people love to hate it because 1970's on work in the climate change and science, and and they buried it. that is problematic. the good example. we will be burning oil and carbon for a while. a lot of people think carbon needs to be closed down, and it think the world has to establish a price on carbon. then that will affect companies like exxon.

for us, is it tough? yes, because it is a balance come and not black and white. investments is an art, not a science. alix: you're looking about potentially selling overseas coal in investments in emerging markets. what about energy? are you going to sell them longer-term? mr. ailman: we have been trying to evaluate it. calpers is trying to measure their carbon footprint, which is a tough thing to do, and their equity portfolio. we have been looking at energy investments. in terms of, do we want to hold them? do we increase them with prices so low, are they likely to go higher? or are other places like oil service in those areas we would rather invest and because they are more consistent? i am not trying to make a short-term profit. if i make a short-term return this year at the expense of something 10 years from now, that does not do me good. i am trying to be a long-term investor and look at all these issues. alix: chris, thank you so much

for your time today. cio of calstrs. jonathan: rio tinto turns optimistic on china. we highlight an exclusive interview with the ceo of rio. from new york, this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. agenda is set with big guests, and the ceo of the world's second-largest mining company is one of them. he has turned optimistic on china. i sit down with the rio tinto ceo, jean-sebastien jacques. here is what he had to say in an exclusive interview. china is very

important for us, for the mining industry, around 50% globally. turnover, as60% well. we spend a lot of time in china. i was there two weeks ago come we it is fair to say that have partners and suppliers. and there are government officials. we are cautiously optimistic in relation to china. let me give a few examples it what is important for us with copper is the construction market in china. something we look at is the inventory of housing for sale in through four cities. of tiershow inventory one and tier two a dropping.

if a look at this or look at where the chinese are looking at not abouty, it is gdp. officials in china do not talk thet gdp or the talk about railway position, exports. lookingics they keep on at, they are all moving slowly but surely in the right territory. , the drop ink terms of activity in china seems to plateau. it will reach a floor. are becoming more cautiously optimistic. jonathan: some would say that is somewhat sitting on the fence. mr. jacques: moving in the right direction. if you estimate couple months ago, i was slightly concerned.

i said that in this current market environment, which is very uncertain, we have to be very cautious and conservative in the way we run our business. we can see an inflection point, and we will make the most of it. jonathan: i offered up the --ortunity to a member of are cautiously optimistic view of china, we will -- will we see that show up in the medium to short-term? mr. jacques: remember, something that may surprise you, but winter is coming to china. during the winter, it reduces construction activity. in the very short term, we would , andt stability to plummet prices will be volatile in this environment.

but yes, we can see the price recovery. we believe copper will be the first one to come out on top. and the very short term, clearly, volatility will remain a key feature. jonathan: that was the rio tinto ceo, jean-sebastien jacques and you're not going to find a minor who is over pessimistic on china -- you will not find a miner who is over pessimistic on china. he is a little bit more optimistic. he thinks we have plateaued. that is significant. david: he was clear he is moving his position. i want to talk about the transformation of the chinese economy to a services line. that will affect commodities. alix: my favorite indicator, chinese electricity consumption. white line,, the versus the copper price, blue line. it is not a perfect correlation,

but you see the increase if you are building, living, working, so turning on the lights, and you are not seeing that reflected yet in the copper prices to support that. jonathan: and you look at volume, volume, volume, really pivoting away from that. the question is whether they will learn lessons of the last decades based on that. movedks like they have away from that volume, volume story towards a little more of that value. alix: of the hold has to be good this time around. jonathan: it makes a difference, apparently. we will bring you the open, just over four minutes away, just under, rather. futures positive across the board. ♪

jonathan: this is bloomberg from new york city. i am john barrow. teachers up 51 points on the dow

. positive points on the s&p 500. up .6% on the dax and a similar move. dollar yen with a 10 one handle, and marginally stronger japanese yen ahead of a big decision tomorrow with the boj. range bound and a snooze fast. the lowest since 2014. the 10 year at 1.69% and crude, so uti with a 42 handle. let's get you up to speed on the open. >> yes, you're seeing equities move a little higher, the stille he up 4/10 of 1% not a huge move headed into uncertainty, tomorrow with the boj as well as the fed here the s&p down about four of the past five days, a little bit of a

relief here. today, 500starts points away from the record high they hit five weeks ago. there has been risk in the market. in terms of individual names, chesapeake energy down over 1%, carl icahn with half of his stake in the company. he has been hit very hard on energy investments. the company specific, new orders in the last earnings. they missed estimates plus, weaker housing numbers. starts down by 5.8% month on month, punishing some of the homebuilders. last up is the office furniture maker down huge after earnings over 15%, pulling drivers -- rivals down.

forecasthe full-year also getting downgrades by analyst's, particularly -- what willwill be happen tomorrow and how the markets react here and i want to look at the dollar yen and a two year yield, looking at historical correlation. day about the all boj but it is the fed that can move the market. that is dollar yen versus two year yield. a one to one correlation. though we are focused on the boj, we could move that currency there. >> is correlated with the rest of the bond market and now we have dollar yen correlated. >> all about the short and and not necessarily what is happening over in japan. much less correlated than the yield curve in japan.

>> all eyes are on janet yellen once again the way she likes it. for more ahead of the fed and the boj, we will be joined by a roundtable. this is the bloomberg u.s. stocks reporter and lisa abramowicz, we will start with you. andwere our stocks reporter you announced how stocks are doing compared to bonds. a couple of good charts. >> yes. we are transitioning from very low volatility to one that is a little bit higher. they have been trading to gather. we have been talking about this and they continue to be a story against the backdrop and what we're looking at right here is a chart showing the s&p 500 on the top panel versus the treasury yield on the bottom, futures

positioning and trying to get an idea of where this and on the two groups. what you saw in the last months, you can see the contract on a 10 year treasury and the s&p 500. people are getting bullish and we have a little bit of a jump , as well aswn language as well. you little bit over the course of a few days. seeing how the investor positioning will affect rates will be a big deal. >> you said in the introduction this is because volatility has been introduced but that is reasonably recent. this looks like a longer trend. what caused it to pick up before that? >> for a very long time, this was a bull market. a lot of people were hesitating to take part. that is a story that continues to be one of the goto's when you explain why the stocks keep up.

there is not a lot of euphoria in the market. we saw longer produce -- positioning through the volatility over the past couple of months. they exacerbated the moves in the past couple of days. it remains subdued on a -- a about two basis, trading weeks or so, figuring out where the volatility goes is definitely what people will watch next week. whether or not the vix will get up to a higher level, we know it does come with a lower stock market. we already talk about the fx market. what happened to that? >> we traded places. it is scraping the bottom. echoed complacency being most verbally -- most notably --

traders not pricing and major expectations from the fed. >> why do we have such a range down market? we have had an incredibly rent down market on the stock. what is the story there? euro due to monetary policy with the u.s., it has been held up against the exit against a european asset versus other classes. to this forces are moving the euro. 14 and one against. they kept it in a tight range for quite some time. options traders do not see a reason for volatility. >> it was knowing -- nowhere in the corporate on market and you did not see them widen at all. what does the bond market tell us about tomorrow? >> they had been saying tomorrow and tonight was going to be something of a change

particularly with the bank of japan, which arguably has the greater ability to shock markets and the fed in the longer term. the bank of japan completed a study of the stimulus and if they give any hint that it is losing efficacy, that it cannot go further, that will cause a big move in the markets. a suggestion, but the bank of japan would do some kind of reverse operation twist, by fewer of the longer dated andnese government bonds preferred to buy shorter-term bonds instead. you see investments backing away twist.reversed there is a possibility japan could provide the real shock this week. you remember the central bank coming into it, where you could get an ease rate tightening?

>> the problem with the boj and i do not inc. they will give up , they can't, the problem with the boj and just about every central bank, the notwithstanding, is that you cannot keep telling people, markets, we are going to hit and inflation target when you have a flat yield curve. it implies absolutely no inflation expectations and negative rates say you are losing the argument completely. story. complete tothey have not been enough hold the situation for the holy grail has to be inflation expectations and the yield curve. >> this is the conundrum investors have, canada bank of japan stephen yield curve without backing away from the stimulus effort to some capacity as they run the bonds?

investors are struggling to make sense of it. >> the more credibility you have, the less you have to do with it ranked. we are completely at the opposite end of the spectrum. a good point, can you take a look at the potential lack of credibility in japan? how do they anticipate the longer term? >> stick with what you know and we know that policy has not adversely affected u.s. equities. .hat is the fallback unless there is a clear pack in terms of higher rates, you think about the impact and i think that is the story in the past five years or so where you turn .o equity right now the u.s. being the best on the

block. you look at valuations in the u.s. right now and look at forward 12 months earnings, the becausepretty cheap there is so much growth being priced in. a lot of investors cannot put their money in cash and a cat it got to do something with it. it does not me a lot of it is coming back and it does not mean we have not seen outflows for a fair portion of the last 24 months or so, but that is the case. much.nk you very up, wells fargo ceo expected to be grilled over recent misconduct. details next. this is bloomberg. ♪

>> coming up later, oracle's co-ceo. ♪ jonathan: this is bloomberg and we are 13 minutes into the session. a day of gains potential he up .4% on the dow and the s&p 500 about one third. the nasdaq gaining as well. stocks on the move, abigail. abigail -- abigail: sharply higher, soaring on the news that they are buying ats for 40 to 50 per share in cash.

investors must be pretty happy the stock is up more than 85% this year also higher on the open, iac, and upgrade on wells fargo to outperform. and analyst citing valuation does not fully reflect other assets. finally lower on the open here, st. clair broadcasting group after the company preannounced the downside, they cut the view and are citing -- being less than expected. that heing just told us is calling this the trump effect, that child is spending a lot less than previous republicans and it is hurting all tv stations. minutes, johnw will be facing the senate banking committee in washington over the unauthorized accounts opened by bank employees. we spoke with senator sherrod brown of ohio and he is a ranking member of the banking committee.

classic we know they knew a lot of this and apparently did not report it to the board or the ceo for some time, which is areas. we also figure the ceo had to know 5300 people were fired for doing that were unauthorized, illegal, or whatever. we are with management during this. >> the hearings will start in 15 minutes. a fee -- it appears they know more than we do. >> some very good questions. how long does wells fargo know this was going on and what did management do about it? they knew up -- as early as 2011 at some of the employees worth creating fake bank accounts and credit card accounts for customers and yet it took until 2016 for the bank to issue

reimbursements to those customers and apologize for their behavior. it is fair to assume senators will be wondering, asking point -- pointed questions as to why it took five years for wells fargo to get its hands around the problem and acknowledge that existed to regulators and customers. focus onl be a accountability from elizabeth warren and the republican senator of louisiana who has about the questions manager's ability to run banks as large as wells fargo, accountability in terms of whether a very were be -- there will be callbacks, is anyone going to lose their jobs, those are some of the questions no doubt we will hear. wem the testimony and q&a, will find out how deep the problem was and whether wells fargo has in fact figured out how deep it goes, if you will. >> there is no question he will have an uncomfortable time in front of the senate panel. sense of how this

is to the bank operation? this is the leader in retail banking. do we know it is affecting customers? >> we will probably not know whether it affects customers and masse. en the soonest we will at about this is one wells fargo files its earnings report for the work order and that will be made public for the middle of october. it could take time to play out because we're talking about a retail business, we're talking about potential damage to the brand and reputation. is this chipotle system. it is probably fair to compare the problem wells fargo faces to the problem chipotle continues to confront than it is to say the problems with goldman sachs and jpmorgan -- jpmorgan because those were wholesale scandals

and not retail scandals. the difference between wholesale and retail banking is retail banking is highly commoditized area citigroup, bank of america, theorgan chase, suntrust, list goes on, they do it wells fargo does bear to does not take a secret recipe to offer someone a checking account and it does not take a secret recipe for someone to offer a credit card. it is relatively easy to switch from one bank to another. the concern for wells fargo is what happens if those deposits get up and walk across the street and into another branch? regulators love deposits because they are among the lower costs and stable sources of funding. fargo, which has done much better than other banks in gathering deposits, proves to lose deposits, it could force down to to trim its cheat and if not, find other that may beunding

expensive and that would have an impact on the wells fargo .ndustry-leading lending market this is very much immaterial? it for the bank but we will not know for some time whether it is an act a material issue. >> thank you. the committee hearing is only 12 minutes away. haved top of the hour, we bloomberg markets to looking closely to the q&a in the 10:00 hour. onnie: we will be with him capitol hill for most of his testing -- testimony. he will stay very tough and we will also stand our time at the united nations general assembly. president barack obama will give his speech and we will take that live as well. as we get a chance with all of the major speakers, we will look

ahead to the decision tomorrow as well as federal reserve decision tomorrow and perhaps an interview with dennis o'brien, they have mobile assets in about 32 different countries and we will talk to him about the state of the global economy if we get to him. >> thank you. >> maybe i should be counting. ?he clock all right. shares, 667% on the session. details are next. from new york, this is bloomberg. ♪

to $1.7deal valued up billion, take a look at the rally. of over 670%.

for more, elizabeth joins us. the premium is striking. right now, 500%. it could be as much as 1500% premium. >> right. this is a big market opportunity and that is what they are going after. would build a franchise out to such a large opportunity. a big opportunity. basically a fatter you -- fatty liver disease caused more on the genetic side. leading cause of liver .ransplant -- transplant the deal is really structured smart because they had done it so they are paying one third now and years later, they are successful. >> this is not surprising in that this is the seventh repose at decision so far this year.

we have to go keep buying basically. >> yes. at the company, it is an amazing transfer just transformation. sell off their generic unit and now they are a powerhouse, yet they are positioning themselves as an innovative company, want to focus on r&d, so more like a biotech. this fits nicely. >> will that be the case going forward, look at niche drugs? >> they are definitely looking done, sos that are they can bring it to the finish line. exactly. that as a strategy. they can see through the regulatory pathway, still invest in r&d, but they are not starting from square one. >> it is the premiums we wanted to highlight. they the 1500% premiums if

pass all of those hurdles. thank you very much. >> obviously, we are looking for the bank of japan and the fed. also watching the hearings in washington, it occurs to me it is not just wells fargo. another major bank, that is -- this is not good news for you. this brings it all right up to the front again. they are going to have control to ask him questions. >> and not justified $20 billion market caps, $83 million.

in the equity market in the united states, futures positive and stocks are up. the bonds are rallying and the dollar is stable. that does it for bloomberg . coming up, president obama will address the united nations for a time before he leaves in january. we will bring that live next. this is bloomberg. ♪

welcome to breaking coverage on bloomberg television. president obama is set to address the united nations in

new york and you can see the brazil president is speaking. president obama is focusing on the refugee crisis and urging leaders to do more to help families displaced by war and persecution. we will bring you that live when it happens. >> and the wells fargo chief executive is about to testify before the senate banking committee after they agreed to pay a record $1.5 million to authorities, including the consumer financial protection bureau after a review found employees may have opened more and 2 million accounts credit cards without consumer commission. a five-year timeline will be to prevent attempts misconduct and we will cover this over the next hours. let's head to the markets in new york where julie hyman has latest about a