david: welcome to "bloomberg markets." from bloomberg world have chris new york, we are covering stories from washington to tokyo this hour. first, looking at decision day for the federal reserve. bank could surprise investors. -- leanneperman joins cooperman accused of insider cooperman leon accused of insider trading. julie hyman has the latest. julie: ahead of the fed commentary this afternoon, stocks not moving much, down off the highs of the session with the dow up .3%. energy shares are getting the most.

look at the imap on the bloomberg, you will see energy in the top spot as oil prices are higher today following an inventory report and the news from algeria that the informal opec meeting my turn into a formal one. real estate allegra today as we watch rates. the various strategies we are seeing, this looks at the inflation expectation in the breakeven in these various countries. here's the 2% target for all of these various areas with that yellow line. we are still below 2%. well below it in japan. despite the best efforts of the various central banks around the globe. matt: has there been any affect

of the news of the charges from the sec versus leon cooperman? julie: we've been watching cooperman holdings. do as lng filing, look up -- up afilings and look mega. -- omega. if you look within the financials, couple of those stocks are being hit. first data is the largest financial holding. let's take a look at those stocks and see how they are trading. targa shares still higher. after therop headlines first came out, but still holding onto a gain of more than 2.5%. -- naviaeing declines we've been watching, first data

we've been watching, and aircraft leasing financing company, all of these turned lower after these headlines first came out from the sec regarding cooperman, regarding omega advisors here. these stocks have not been recovering even as cooperman has come out vehemently denying these charges by the securities and exchange commission. matt: julie hyman with a look at stocks. david: mark crumpton in the newsroom. mike: a new bloomberg politics an alarm for donald shows-- the survey hillary clinton narrowly leading trump among voters with household incomes of at least $100,000. election, mitt won that demographic

by more than 10 points. sheldon adelson and his wife contributed $10 million last month, according to the latest federal election filings. he may only contribute $5 million to trump. he was the biggest donor in 2012. we are learning more about the life of an unarmed black man shot to death in tulsa, oklahoma. after a long history of run-ins with the law, he was turning his life around. the shooting was captured on d ashcam video. five staff members have been killed in attack on a facility in syria. they leveled a medical triage point outside of aleppo. the reports on who was behind the strike.

-- no reports on who was behind the strike. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. matt: should investors start preparing for the end of the credit cycle? our next guest says the answer is yes. oversees $195 billion in assets. he joins us from los angeles with more. thank you for coming on the program. how do you foresee this happening and when? that the view of the last 25 years more or less tells you how this will ultimately end. what we've experienced over the not soof this time is much a traditional business cycle as an asset price cycle. the fed lowers rates, you get a disproportionate increase in asset prices.

you don't get the same type of gdp or growth response. by virtue of the fact that you have a condition in which the higher asset prices have facilitated an increase in ratios.nd leverage ratios. the increase and leverage is not sustainable. inevitably, the collision comes and ends in tears with a significant decline in asset prices and a broad-based deleveraging. how are you building defensive positions in your portfolio right now? it is important for active managers and investors generally to be thinking exactly along those lines. this is the time of the cycle to be building a defensive portfolio. if the story of every business sycle is that 80% i characterized by deleveraging, it is during that

when you adopt a defensive strategy. pre-identify breakable assets come assets that may give you permanent impairment of principal and you try to keep them out of your portfolio. add an open mind and try to so-called bendable assets, including investment-grade credit, aaa rated asset-backed securities, aaa rated mortgage backed securities. thiit mean there won't be an adverse price response. securitiesthere will. but these will live in the next cycle. if i look at u.s. ag come over the past five years, it has gone from $11750 to 2000.

companies are much more leverage now but the act continues to climb. continues to climb. look at the whole aggregate come it is a very broad index. there's a lot of forces and factors that are influencing the pricing. fostered an environment in which all yields have come down, including the corporate yield. you mentioned the increase and leverage in the investment-grade sector. it is a warning, a red flag. if you look at the gross leverage ratio of the investment-grade credit, you are running a bubble's are more like from theimes --

investor point of view, recognize you have certain sectors of the marketplace that have become dangerously exposed at this point. they have created lots of leverage without an extension in income. and there so the case corporate sector when you recognize that we are a good five quarters or so into a relatively broad-based earnings recession. we have experienced year-over-year declines of earnings in the corporate sector. more leverage, less earning. end?does it all not well. david: is that part of tighter credit restrictions as well? tad: so much of the dialogue of the last five or six years has the pointbesides discussion of whether rates should be higher or lower. as if economies don't know how

to grow unless the central banks tell them how to do it . the traditional way we have grown is by allowing allowralized forces, individual businesses and workers to find better ways to do their jobs, to up their game to make their contribution more valuable. traditionally, the way this was done was by allowing the free market to do what it needs to do, to allow a measure of discretion, deregulate it, to lower taxes. not feet in subsidized cheap credit. this idea that cheap credit is somehow better than a higher price is kind of a ridiculous idea. you want prices to reflect proper market level so that you get an efficient allocation of resources. no one wants to hear what my prescription is. you want prices to reflect proper market level so that you

probably that we will have to wait for this regime of zero rates, negative rates for all these various contortion that the central guys are going through for people to feel we have to try something different. of tcw group.lle we will bring you interviews and bill gross, alberta's addus and alan blinder. david:, we will hear from margrethe vestager. -- up next, we will hear from margrethe vestager. this is bloomberg. ♪

matt: this is "bloomberg markets ." david: time for the bloomberg business flash. he was has given airbus to go for what will be a record deal with iran. maker hasircraft received two u.s. licenses allowing it to sell iranians the first 17 jets in the deal. airbus and boeing have agreements to sell iran more than 200 planes. there's a report that apple is in talks about potentially buying mclaren. apple is considering either a full takeover of the company or a strategic investment.

apple has been developing a self driving car for more than two years. in the uk, more feel is being added to the debate over immigration and brexit. the uk is not attracting more trade and technology specialists and engineers. that is your business flash update. africa's most industrialized economy but it has been mired in leadership turmoil and economic stagnation. has been hit by collapse in commodity prices, tighter monetary policy and political uncertainty. how can south africa get back on track? theie quinn sat down with co-ceo of africa's largest lender, standard bank at the u.s. africa business form. she asked him about the role of the standard bank in maintaining political stability. >> as a universal bank, we are

is ourpurpose is africa home for growth. the cost of capital is determined by what happens in a country. the minister of finance -- the labor movement and the government in africa working together. a tremendous amount of work is happening and that work is consistent with the nine point plan announced by the president of south africa. it's all about the structural reforms that are needed to shed -- share growth in the country. is a constitutional democracy with a rule of law applied.

one would hope that the country continues to execute its fiscal policies without hindrance. one also hopes that the laws of innovate in all the organs of african society. that jacobct quote zuma has to go. >> south africa is a modern democracy. it has separation of powers. the ruling party is a strong ruling party. it gets to determine who is leadership are. our role in business and my role is to argue for and i will continue to argue for the space --create a third

>> the timing is important. we were speaking with one of the largest lenders to the south african government quite recently on bloomberg television and he is saying that they will not lend right now. if the outlook is to muddy -- too muddy. >> to the extent that south africa does not execute rational fiscal policy, to the extent that the debt to gdp ratio deteriorates to the extent that population growth is higher than gdp growth, south africa does run the risk of -- we have to do everything in our power to avert that. this is what we are doing. quinn withwas vonnie

the co-ceo of africa's largest lender, standard bank. david: still up, the sec charges was insideroperman trading. we will discuss that, next. this is bloomberg. ♪

david: you are watching "bloomberg markets." matt: leon cooperman is being insider trading by u.s. regulators over his buying and selling of asset shares heore material events -- used to status as one of the largest shareholders to get access to confidential information about those events. for his part, cooperman disagrees with the sec saying he has not engaged in any unlawful conduct. ise with me for more insight

that he oversees hedge fund investment at merrill lynch. he was responsible for managers investing in international and domestic funds. and still advises hedge funds as well. cooperman is legendary. he worked at goldman sachs for 25 years. have big a deal is this? -- how big a deal is this? votto: it is an embarrassing situation. names,een the top multi-billionaire managers at banks inccounts the middle of nowhere. thatreads the notion finance is corrupt across

america and that is a shame. david: in line with what we're is by in the complaint phone come in person, yet close relations with a lot of executives. bio: this is where it gets challenging for them. the traditional situation is what you saw -- the famous phone call between mark and stevie cohen. some 700 million in stock and have a phone call on a sunday and suddenly, the next day, they are short hundred million. -- 300 million. in this instance, the so-called executive one, cooperman receives a subpoena and according to the government, he then calls executive one and says let's make this story up. that creates this element of guilty mind that cohen was in

phone -- the matt: this is what the executive was telling the sec as well. he was shocked and angered that leon cooperman would trade on insider information. also on the is board of publicly traded funds. that's what makes it even worse. the way martha stewart had challenges -- she did have her series seven back before many brownies and cookies -- this is a woman who should have known. board of aon the publicly traded company, it is a challenge to say i had no idea. liam cooperman scheduled to talk to investors at four clock p.m. on an investor call scheduled torman

talk to investors at 4:00 p.m. on an investor call that she has denied the commission's allegations. there are many allegations here. call.estor he has denied the commission's allegations. >> the complaint alleges cooperman took steps to cover up misconduct. to try to gain assurances they would not reveal his misconduct. in addition to the insider trading claim, the commission charged cooperman with violating the provision of the federal security books. matt: it sounds like a serious sting operation was under way at the sec. how intends to the investigations get? -- intense to the investigations -- did the

investigations investigations -e investigations get? >> was it actually inside information? or was it something that he could have said was normal color he would have received on the phone at anytime? report, you might have just been late in reporting a position. i don't think it will be a pattern. since 1992, they have produced 14% a year. well-respected, -- i give him the benefit of the doubt. matt: thank you very much. david: coming up, margrethe vestager. this is bloomberg. ♪

♪ and bloomberg world headquarters in new york, i am david dura. matt: and i am at miller. mark: tensions remain high in

charlotte, north carolina after a night of violent protests over the fatal shooting of a black man police. at least 12 officers were injured with demonstrators who blocked highways and set fires. authorities say the man was armed and posed a threat and the family disputes the claim. both the police officer and the victim were african-american and the justice department is reviewing the shooting. the fbi has released a shooting of two men who took a suitcase holding a bomb that did not explode in new york city. rahami has been charged with setting a bomb in new jersey and two in new york city. the men were seen removing the bomb from a piece of luggage and leaving the device behind while taking the seat -- suitcase. the two men are being thought as witnesses, not suspects. president obama meets with the

today, prime minister the white house says it will probably be the last time they will get together before president obama leaves office. the meeting comes after the u.s. agreed to a 10 year military assistant deal with israel. donald trump and gary johnson are virtually tied among military voters. a new military times syracuse university survey finds trump with 38% and johnson with 37% and hillary clinton is third with 16%. 87% described clinton's honesty and trustworthiness as poor and 68% of you trump's temperament poor. global news 24 hours a day, powered by more 2600 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. matt: quick check on stocks right now.

u.s. equities little changed even as global risk assets rose at the bank of japan meeting. we are waiting for a fed meeting and volume is low, you see the dow almost completely unchanged. the s&p up .1%. the nasdaq is down and i want to go to abigail doolittle at the nasdaq market site with more. abigail: this is the second green to red reversal in three days. we have investor jitters ahead of the fed decision. let's start with a bright spot, adobe systems. they put up a raised quarter. this was described to saying that adobe is floating like a butterfly and the fact that revenues are growing and they finally learned how to sting like an adobe.

margins and earnings are growing as well paying homage to muhammad ali in a famous quote and it has a street high price target of $130 per share this -- stock could rise even on the big gains with the stock at a record this high. an a-do-bee,like it took me a sec. why do we see a red arrow down there? abigail: the second-biggest drag , havingix, down 4.5% the worst day in two months after there was a real ax on the his work said suggested there is a big churn

in july and august and he took his domestic subscriber additions for the third quarter down to zero, well below the street. investors are paying attention to this call, the biggest drag on the nasdaq is apple and the session stock is near lows. the big 11% move higher last month as reactors -- investors reacted to positive reports around the iphone 7 and we have the financial times reporting that they have approached mclaren on a potential acquisition and they would see a strategic investment. perhaps investors do not like that idea. what do you think about that as a car guy? matt: for me it is amazingly exciting because more than half a billion people watch formula one every weekend and mclaren is active in formula one and i love 675 toom the p1 to the

gt. 570 if i had one and a half million pounds i would buy mclaren as well. that as a gearhead, not a business judgment. members of the u.s. senate banking committee are demanding clawbacks from wells fargo bank executives who were in charge during the fake account scandal. accountability. you should resign, you should give back the money that you took while this scam was going on and you should be criminally thestigated by both the department of justice and the seared -- security exchange commission. david: clawback policies have exploded in popularity and they are rarely used an expensive to implement. i want to pull up on the bloomberg the -- john stumpf's

compensation, since 2010 75% of banks have a clawback policy or procedure in place, fair to say not many of them have used it. employeeied to go into bank and brokerage accounts is difficult and they do not have to let you. sometimes you have to go to court to do that and more often than not companies give back -- give up before they start going back into the accounts and rather just cancel or the tip rewards theyted may get in the future and that makes it easier to do, but also lessens the amount of money they could grab. out thatwant to point pay go is extremely detailed and we can go back and look last year, in 2014 he got $23.4 $21.35 -- this

does not count the amount that elizabeth warren was citing, the $200 million that his stock that he holds his value at. caleb: he has accumulated a lot of money and in reference to carry tolls dead, -- carrie to d stedt we heard them site large numbers and they were looking at executive ownership that they have accumulated over a decade. david: the amount she would leave with i think they said it was about $90 million and some people have put it higher. it is definitely closer to 90 million especially when you account for the fact that she has to pay the exercise price for a lot of options that she has an exercise yet. david: you draw a distinction here between bonuses and malice

is. is opposite ofce a bonus, it says if you do something wrong or big -- bring reputational harm your rewards are free for the taking and that is different than the huge swathes of the stock they are to have. matt: have we seen any cases of famous clawbacks? since the financial disaster of 2007-2008, 2009 have we seen anyone lose tens of millions of dollars to clawbacks? caleb: the big one was jpmorgan of thewells, two employees immediately handed over their pay, there was one they had to go to court with to clawback his pay. they settled three months later and the figure for him was undisclosed. the total figure for the three

equaled about two years pay for the three of them. david: so the london wales is the only big one they -- we have heard of so far. what makes the board hesitate about doing this? the legal fees will take up a lot of time and money? caleb: there is that and there is the issue that why don't they do this malice policy and that is the big question and that is certainly available to them to take back at these on invested -- on invested bash unvested rewards. matt: caleb melby from our pay go team on the other side of the bloomberg on the bn side of bloomberg. a pleasure and i love the function. david: margrethe vestager will

join us to talk about other companies eating tax breaks and europe. this is bloomberg. ♪

♪ matt: this is bloomberg markets, i am matt miller. david: and i am david gura. a slow economic recovery have kept the preferred income index 7 youower, looking at 369 can see all is not lost, headline inflation have -- has dropped steady. the statement will include an assessment of the recent prices. joining us for a preview of the announcement is vince cignarella

and mike mckee. let me start with you and see what you are looking to hear today. it seems the consensus is we will not see a rate move today. mike: there is market chatter that they could move, the question everyone has is do they move in december? they told us all along they want another rate increase this year, november a week before the election nobody thinks is on the table. what is going to change in the economy to get them from here to there. they knocked the unemployment thing, it is an inflation question. what signs are they looking for and will they fall back on the energy as the problem or suggests we are seeing a breakout in wages because the unemployment rate has fallen enough? those are the things you want to look for in the statement at the news conference. matt: what you think about the reactions we have seen today, vince, in terms of a little bit

of dollar weakness across the board and a little bit of yen strength after the boj came out in a dip? vince: dollar yen traders are putting little attention on the rate hike. fell a lot lower from yesterday. the traders are basically saying we do not the the fed doing anything surprising. jobs data -- it would be a really big surprise and markets are not expecting this at all. it would cause a lot of turmoil. matt: i believe 95% of the time the market has gotten it right if it is just a week before the decision. >> 100% of the time basically come i think there was one instance where the market expected a 25 aces point increase and it was 50 points. the market always gets it" it is that close.

if you go to -- back to greenspan and before that there were a lot of surprises. the question from the fed is, do i care if you lose money? they have to decide if they will do that does it mean we will get a tantrum in the markets that is lasting and feeds into the economy or does it mean some people have to cover and in a couple of days the market is repriced. do you haveidea that they were paying attention to what happened with the bank of july and how -- bank of japan and how does that loom over their meeting? mike: it is not having a big effect on the currency and you will not have an international .mpact on the fed decision we may see an impact relative interest rates and money that does not want to go into japan may come into the united states. there is not a whole lot they can do about that and they will make their policy judgment

independent and it will be based on u.s. financial decisions because there is nothing overwhelming from overseas. matt: where do you see the most movement? i like to pull up the ecmi. if you look at it here you can euron security, i have the in there, should i be looking at the yen? vince: yes, i think that will be the big mover tonight. fed does no rate hike it will be a serious attack on 100. there is a lot of chatter that it could be below that and it could hit -- get ugly if they hike. sincethank you very much -- vince cignarella and mike mckee covering. --id: margaret bester

margrethe vestager will join us to other companies getting tax breaks in europe. this is bloomberg. ♪

♪ david: you are watching bloomberg markets. the eu competition commissioner is on a trip to you the united states defending -- ireland to collect $14 billion from apple which are taxes that apple did been said thatis a is unfairly aiming her sights on u.s. companies. how much of this censures on -- centers on jurisdiction? what is your role here and what controlled you have over taxation in europe? margrethe: i am not a tax authority and we are not a supernatural tax authority.

what we do is to enforce legislation that goes all the ourback to 1958 because founding fathers thought we andld have merger control saving control in order to have fair competition and a level playing field. david: apple says it paid a global tax rate of 26% and the of aate you have is 5000th percent, why is the estimate so different? margrethe: the numbers we have are obviously apple's numbers because when we do this work we build it on the information we get from the company. i do hope that we will be able to publish as much as the decision of pop -- of the decision as possible. it is now in the hands of apple and ireland if they want to redact some of the things in the decision if they find them to be confidential. i think it is best for everyone to put out in the open the decision because then you can

check as well as anyone else. david: you talk about redaction. how difficult is it for you to get your hands on companies like this? margrethe: one of the ironies in this case is it started with the question asked in the u.s. senate because before then none of this was public. has been public ever since the beginning of the secret was the apple data and the tax question. david: what has the level of dialogue been like between your office and apple? margrethe: i would say it was frank. the case works as a relationship between us and the irs government and actually the corporation -- cooperation has .een constructive and open

we disagree on the result, but to enable cooperation i think they have been cooperating. david: you look at the size of this decision and it is a large one and 90 you are looking into amazon and a starbucks. are there other companies that could face penalties as large as this one or larger? margrethe: i think the size of the unpaid taxes is a reflection of the size of apple. if you had a smaller company of would be a much smaller number even if they had been able to do the same things. we have seen recently deep -- the decision taken on starbucks, some of the european multinationals in the building scheme, the numbers are much lower. the developing scheme was i think 700 million euros and one of the biggest state aid recoveries in europe recently was 1.4 billion euros recovered from the french electricity and energy company.

it is very different and very case specific and this is of course reflective of apple being extremely successful, big, and global in its way of working. david: you met with the treasure terry -- treasury secretary and he said it was a good discussion you had in washington, d.c. they submitted a white paper at a session ahead of the decision and wrote a paper to the commission. are you optimistic there will be middle ground? how would you characterize the relationship with them right now? margrethe: i think we will the -- continue to disagree on this decision and because of the fact we have very different legal traditions. u.s.e learned that in the it is absolutely the order of the day for a is this to negotiate tax rights with the state it is situated and we have had the provision to do that pick -- back cents 1958 so you have the clash of understanding

of how this should be played out and i do not think we will agree on the decision. i hope we stay on the same page when it comes to global tax issues because when you talk to the real tax legislation to prevent tax havens and enable all businesses to pay their fair share, to promote the work done by the oecd who is the leader in global taxation issues, there i find that we have very much on the same page. david: i know you are looking into google with three separate inquiries. by that logic and we expect three separate fines? margrethe: that is way too early to start speculating about that. in the first google case we issued a supplementary statement of objection to straighten out the case and allow google to use its right of defense and that deadline to answer is still running and the same goes for the other deadlines and we take

on the answers provided by google and we analyze those with an open mind because in a statement of objection it is only preliminary conclusions and not final decisions. honor into being opened because our union as well as the united states is built on the rule of law. david: we are looking at this other deal and you have expressed consolidation in the agricultural space, do have concerns? margrethe: we have not started yet and we will do as we always do in merger control. we will look at what will be the post merger situation because it is extremely important for customers here in case farmers to have a choice, affordable prices on innovations in their field and this will be what we are looking into once we get to analyze a merger. david: with the biermann cento deal you have people tweeting at

you, as you way the cases how reaction- does public affect hey you approach a case if at all? margrethe: all of our casework may be appealed and it may have to stand up in our casework may be appealed and it may have to stand up in court. that is one important element to say completely focused -- stake of with focused on the facts of the case and the case law, but in itself it is important to base yourself on facts and not of the pressure from different sides. to do the job the right way. --id: thank you very right thank you very much. this is bloomberg. ♪

♪ tom: i am tom keene. >> i am scarlet fu. >> you are watching the fed decide. >> welcome to special coverage

of the federal reserve announcement and we are one hour away from the decision and 90 minutes away from the news conference. we will have complete coverage on bloomberg television and radio. here is what we are watching. it will janet yellin surprised the markets? a hike today is not completely out of the question. >> japanese central bankers said just the policy is reaching limits. the conversation on our orthodox -- less than orthodox economics. good morning everyone or good afternoon i should say and good morning to all of you i guess in early japan, what a day for the bank of japan and we go in a bit to the federal and will be with you for the next three hours at least.

this is the data i will look at at 2:00 p.m.. the two-year yield backing up dow with some movement and the yen, i know mike was really going to dig into that bank of decision. gold is elevated as well. ofs is just the basic idea where we are dollar 31. $111.16. point $.16 -- initially -- it is firmer against the dollar and almost all the major currency, now to a three-week high at 107.35. if you are looking at the yield on the japanese 10 year it is down. since the yield is negative it is less negative than before, not at -- not yet at zero.

i also included the japanese topic bank index and then the insurance index because all 33 today,y groups climb thank insurers getting the biggest lift. tom: they got the medicine out last night with a little spoon. -->> let's talk about what they did and talk about whether it means something. continuing with japan andy boj shifting -- and the boj controlling the shape of the yield curve and they want to pay the 10-year note at about zero. making a bold pledge to get inflation. they are targeting short-term rates leaving the policy rate at a negative 10 basis points. joining us now is richard clarida.

he has taught at columbia and a former treasury official. it is not in the textbooks what the central bankers are doing at the moment. richard: it strikes a lot of people today that the bank of japan is tacitly admitting it is out of ammunition. what they are doing are putting a floor under things and mitigating some of the fiscal authorities get involved. >> i think they are changing the ammunition and they are moving to a policy that is going to put a ceiling on the yield of the 10 b.ar jg b the u.s. did that to finance world war ii. the question is, will it work? they will not hit their goal of getting inflation to 2%, but to offset they said they want to overshoot and i think governor aorona deserves -- korod deserves credit there.

and ik about comments will have to bring this up in a second. they have been in japan trying to get inflation up to 2% for years and years and have not been able to do it so why is this any different. : before this policy was put in place they had deflation and they moved up in over -- by about two percentage points, but are falling short of the target. >> there is the chart i was talking about. you can see where they went to negative interest rates and inflation dropped. richard: you have to look at the core managers where you -- measures. you are absolutely right and if they stayed on the current path they knew they would get there and today we got the pivot.

we mentioned that they want to steep in the yield curve. way theyi think the would like to have it happen in japan is they would like to get a lot of inflation expectation longer-term. i think they would like bond yields to go up because people expect to the boj to succeed. they have to be careful. what they are hoping for is that this will again to move up inflation expectations and they will take the tenure point anchored and try to get the steepening of the curve through inflation. scarlet: what is your confidence that this steepening of the yield curve will lead to what they are hoping for a increase in -- is there a path to get there? richard: i think the answer is we do not know. i think as mike mentioned they have been trying to reflate and you have a new pivot to get

something that will work and i am certainly hoping they succeed for their sake in the global economy. it is a tough challenge. >> let me bring up one other chart. you are going for your doctorate in bloomberg tv japan monetary policy. what they are targeting is on the supply side, but it is the demand side that is missing. this is japanese bank lending a for the last three years it has flatlined. how do you get people to want to borrow even if they increase surprise -- suppliers? richard: they have low rates, but the japan japanese economy is very soft. you are right, this is a challenge. japan is near full employment, they do not have a huge output

gap. tom: could we talk about summing that permeates microeconomic and all of your work? give a great humility about academics -- and that is the word ambiguity, things cut both ways. what is ambiguous for chair mr. kuroda. richard: let me focus on janet yellen. i think she faces a challenge in that she says her goal is to get to 2% inflation on the other hand she says it should be an average and not a ceiling. the average is they have fallen below 2% for the years and i think she would like to overshoot like governor corona announced and so far she has been reluctant to admit that.

tom: it is critical to overshoot, can you model or plan yourself to an overshoot or is that outside what economists can do or what central bankers can do. i think it is a communications challenge and i think that is why she has been reluctant to go down that road. i think it is something they could do, but they are afraid of the market reaction and afraid of conveying that they want inflation higher forever. themwhat is interesting of -- is the linkage of the financial system. it is not just economists in a vacuum, they have to deal with the financial and investment system. it is -- is it a dead meeting in november? scarlet: the odds are actually very high, 33%. >> i would be surprised if they even showed up for the meeting. the least important fed meeting,

one week before the election. richard: they have said they don't look at the election calendar, but that would be a good want to be at a really boring meeting. i would be surprised if they change a comma from today's statement. scarlet: ronson has our first news headlines -- mark mark: according to a new bloomberg politics survey high income voters are nearly -- narrowly supporting hillary clinton, she leads republican nominee donald trump 46% to 42% among voters with household income above $100,000 or more. since 1996 republicans have .lways won the democratic paul ryan says congress has the votes it needs to override the expected presidential veto of legislation that would let -- he said it would

upset a valuable ally in saudi arabia, president obama opposes the measure and believes it could lead american officials open to retaliation in foreign courts. u.s. secretary of state wants aircraft over key humanitarian rows in northern syria grounded in order to facilitate desperately needed aid deliveries. secretary kerry also told the -- u.n.urity council security council that it could restore credibility to effort to end the five-year war. senator -- secretary kerry blasted the government for violating international law. secretary kerry: how can people go sit at it table with a regime that bombs hospital and drops chlorine gas again and again and again and ask with impunity.

-- need to reach read the documents to understand it is against international law to bomb hospitals. you do not need these documents to understand you do not drop a barrel bombs on children. mark: a u.s. and russian cease-fire that went into effect has all but collapsed. the u.n. suspended aid deliveries after a strike on a humanitarian aid delivery this week. pope francis is offering condolences after the murder of state.ests in a mexican a letter from the vatican says the clergymen are victims of inexcusable violence. on priests were last seen sunday and their bullet ridden bodies were discovered the following day on a roadside miles away. global news 20 brown hours a day powered by more than 2600 journalists and analysts -- global news 24 hours a day, powered by more 2600 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg ♪.

scarlet: we revisit the most memorable fed rhetoric and tomorrow larry think will join 8:40r an interview live at a.m. eastern time tomorrow. this is bloomberg. ♪

tom: good afternoon -- i keep saying good morning. fedo to the 2:00 p.m. of coverage and then a wonderful set of guests. with us today is richard clarida global strategic advisor at pimco. what i was suggest is academic columbia university is really at

the heart of the -- and soul of the debate on economics and i want to go to a quote from clarida and others from a few years ago, i will put 2000 even though it was written in 1999. "involves expected inflation in -- the fedtory adopted a proactive stance toward controlling inflation. can they do that for disinflation? and do thatmmetric amid disinflation and inflation or is the current simply not there? richard: i think the fed is getting close, core cpi is above two. i think the fed is getting there, took a long time given the unconventional policy, but i

think it is on a trajectory to getting back toward something like a normal monetary policy with a very gradual liftoff. the euro zone is a long way away and japan is a long way away. tom cole and are we anywhere tom: are we still thinking deflation each and every moment? richard: i think it depends on the country. the u.s. bond market has been told -- telling the fed that inflation has been declining. it really does look like the bond market is starting to question a little bit the fed and i think if i were janet yellin i would be trying to push expectations up. tom: these are nominal and real this isnce time began, the age 15 series and it shows what professor clarida and

others have lived dan bill gross has invested in and this is the basic idea of the great moderation. you saidi like what about the bond market not quite being convinced of what is going on when it comes to how the fed communicate. greenspan was opaque famously. here is a gem from greenspan back in 1988 "i guess i should warn you if i turn out to be particularly clear you have probably misunderstood what i've said." >> i think what we are learning as there can be too much transparency especially if you have a very divided committee which we do right now. you tend to get 17 different opinions and there can be too much transparency and i think the chair needs to take a more proactive role in the press conference today would be a nice place to start and give us the yellen stamp on the way the global economy looks.

>> how do you decision between stan fisher and esther george? food the u.s. on the most weight to? richard: i actually assigned the most way to john williams. i think he has the most coherent and consistent articulation of the monetary policy he would like which coincides with the monetary policy i like. stan could do that as well, but has been less visible. >> i want to go from what they say to what they forecast. they have been using forward guidance to try to drive the market. larry sumners wrote two things, one that he thinks there is a good chance we get a recession and then he says if they try to fight it i wonder what credibility fed forward guidance is likely to have given the utter disconnect between the fed and market views regarding

future rate of the track record so far of the fed being wrong and the market being right. does anybody believe what the fed is forecasting and if you do not believe it then had you make monetary policy? richard: i agree with that sentiment and i would make two points. the first point i think larry is right. the challenge people have said to me stocks are great, i said the reason they are great is they have been ignoring the fed. at some point there is a price to pay if markets ignore the fed. i think the best example of guidance was actually under a chairrning key -- back in the 1970's. calendar day guidance is away for the fed to be very effective as they move away toward the other squishy or forms. problem with calendar

day dies if it is not working they have to change their mind. what do you think of the forecast we will see a recession? richard: the probability is probably 15% or 20% a year so a recession in the next three years is not a low probability event. tom: we've got a lot of talk about. we start with richard clarida and we have a -- terrific set of guests. speaking of policy, the gentleman from richmond and i mean that with great affection, out brought us will -- will join us -- al broaddus will join us and we will talk after the decision. this is wonderful, smart talk on this important federal reserve moment. this is bloomberg. ♪

♪ tom: our fed decision, thank you for joining us worldwide. erik schatzker in washington and we go to the statement and move on to the important press conference. bill gross will join us later on in the hour. right now the gentleman from richmond, al broaddus arguably made it richmond psychology moot. we will talk policy in the next section. mark and good friend who created, he had a paper at jackson hole that stopped traffic on negative interest rates, everyone is i want toout -- suggest to you that maybe what was missing in our good friend's paper was that marvin said not

that much about the bank. "despite policy being immobilized to near zero, there was no deflation spiral." he then goes on to say the expansion of balance sheets stabilized inflation reasonably well, even if somewhat below targets. i believe that is a victory lap for what you invented and for marvin goodfriend, but what does it mean for the bank should we hit the zero bound or negative rates? i think marvin invented me rather than the other way around. we can talk about that later. i have read the paper and it is a tough taper -- paper. he gave that paper at jackson hole right after janet yellin made the keynote speech, it was in a visible spot.

that paper is basically prospective, it is about contingencies and i think he is focusing on a lot of talk about the new normal. we may or may not be at some kind of new normal and it may last or may not last. if in fact we are in a period in which inflation will he persistently low, same thing with interest rates and that said is that the zero bound with this traditional instrument, the fund rate and they cannot really drop it -- even if the probability of ace and area this is debatable they need to be ready to deal with that if they have to. they have already taken quantitative easing to a substantial extent in the early stages of recovery. what the paper is about is i think the way marvin phrases it is just to get rid of the zero bound. tom: very quickly, what does it

mean for brian moynihan and other commercial bankers? they cannot survive there, can they? adjustment foral banks and their customers and i recognize that fully and i think marvin does. this would be something you only use where you absolutely had to. the bank would have to get used to paying to have their money at the federal reserve and ultimately i think you would be in a situation where they would have to charge customers giving money and deposits. tom: we will come back and we will continue with richard clarida this fed day.

>> we have some breaking news here from bloomberg world headquarters in new york. i am scarlet fu. we are awaiting the fed decision.

cigna.es on anthem and according to politico, they have one another of the merger breach. they are citing letters between the companies in an antitrust filing. cigna, if you take a look at the shares, lower in trading right now. we are talking about a fairly modest move when it comes to the overall market. they have accused one another of a merger breach according to politico. we will continue to monitor those headlines, but we want to go back to the fed and does the advent of monetary versus fiscal stimulus. fiscal stimulus is gaining currency. is we are at the

beginning of what fiscal monetary policy can achieve. the number of times fiscal stimulus shows up in news stories by bloomberg. the white line. the orange line tracks monetary stimulus. stimulus shows it much more frequently. then through the 2000. monetary stimulus had its hay day after the financial crisis. richard clarida is with us still. is on thearida, who vanguard of fiscal stimulus, taking the baton in the current low growth, low rate environment? >> i think we went through a time of austerity. certainly in the u.s. it is not recognized how much fiscal fromrity we did go through 2012 and 2014. we are having modest moves from fiscal policy.

i think in japan, every year there is a new package. i am a skeptic this will be or can be a game changer. fiscal the best case for policy is that if it is done intelligently, it can boost the supply-side and all of that. i am more of a skeptic that we will get a big roost in terms of fiscal stimulus on the demand side. do not think it is a game changer. >> why not? >> i think it will be a modest stimulus. i think part of it is politics, getting an agreement between the and whoever the new president is. paul ryan has certainly signed off on modest school stimulus. the germans would oppose that. point to make and be

a little more contrarian is we do not do fiscal stimulus bury well. the best is automatically stabilize her program. those are not very sexy, but they are very important. one thing that my colleague has brought up several thes, curious how infrastructure investment has picked up steam in the past couple of months, given the economy is doing so much better, shouldn't this have been a bigger deal after the financial crisis and right now? now?an right >> you could certainly make the case that time to do a big fiscal stimulus was in that time. don't get me wrong, we need better infrastructure and more of it. the way the process works in the u.s. does not make me all the optimistic that it will be a

game changer. outwe want to bring in wrought us. -- al rhodus. we have been hearing for years that we need to do more. for the in an excuse fed to do more than it should have? the fact that there is no physical help so the fed can force the only game in town? i think the fed has a valid point. without going into too long of discourse, we have been in the business cycle, and it has been a slow recovery. the fed's job is to be accommodated, and it has been. the fact that it has not produced a sharp upward to deked three, maybe the fed should have been more accommodative, but they have been more accommodative. cycle to them the

other question, the long run trend growth. the job market is ready post to something we can call full employment. the attention will shift to can we have a longer run trajectory of growth? i do not think the fed can do much there. fiscal policy changes and regulatory policy, tax policy -- need some assistance in those arenas. ted tower withnd the young lacquer. the confederacy leaving across the river on the old railroad bridge that is long and gone. what are the shocks janet yellen unorthodox fed strategy. what do you worry about at night? think the worry would be

the target rate for the funds rate. i am not forecasting this, but let's say we get some type of negative shock. it could be any number of things one could think of. a political event, some sort of , whatever itter may be, but you see the fed needs to be more accommodative. that is the big question now. the negative interest rate paper we were discussing earlier is a part of that. someone mentioned john williams earlier. he has an idea where you would raise the inflation target to bring the real rate down. the fed is trying to sort those things out. that will be part of the discussion at the meeting. our conversation today is

one big set of it jobs in -- shocks. things that are outside the guessing. >> you mentioned political shock . there certainly is the possibility of one on november 8 when we have the presidential election. i know, and you have been telling me this for years, the fed does not respond to a political calendar, but you have to think about it if you are in the room. how do you respond if something goes wrong after the election? a good question. you really cannot decide that in advance. i am still associated with the fed, and i want to be very , in terms ofthis the election, what the fed has

to be concerned about, does the uncertainty that seems to be associated with this, which may increase for whatever reason from whatever side of the aisle, if that occurs and begins to put a damper on economic and city and the economic outlook, the fed will need to take that into account in setting short run monetary policy. if you see something like that occurring and get to late november and have a meeting coming up in late december, that will be a factor that will have to go into the decision on what to do. you cannot possibly know because the kinds of things are not known yet. -- these kinds of things are not known yet. have seen business confidence flag in the past couple of months. the election it

picks up. we have a new start. ies that happen this year? >> certainly hope it does. makenk businesspeople who decisions about investments and whatever it may be, and that is , i think some of that , certainly some of it is related to concern about what the environment will be six months or 12 months in the future. had weakly, we have capital spending throughout the economy. it is really one of the that central banks are cutting rates to zero, in negative. not triggering a very robust capitals ending response. response. spending

there is a lot of share buyback financial engineering. do you attribute that to uncertainty leading up to the election? >> i think it has been an ongoing reality for the past six or seven years. i actually think it is a longer-term problem. >> $40 billion buyback. financial engineering? my opinion does not matter, but that is a debate. scarlet: stay with us. we want to get you headlines from bloomberg hearst news. mark: president obama is promoting trade and investment in the united states and africa, speaking at the u.s. africa business forum in new york. saying progress on the cannot --

caught in important to prosperity around the world. president obama: oh africa is on the move here get a middle-class projected to grow to more than one billion customers. mark: the u.s.-africa business form is cohosted by bloomberg atlanta p that manages the work of michael bloomberg, the parent company of bloomberg news. john coughed and is expressing regret to congress for his agency past treatment of tea party groups. he says he has cooperated with investigators and does not deserve to be impeached. he made his remarks today at house judiciary committee. hard-line conservatives want to remove him for how the irs .bjected tea party groups former president bill clinton ofnning to defend the work the clinton foundation today in the final speech to the clinton

global initiative. this is expected to be a personal reflection. reportedlyion will lay off dozens of benton staff at the end of the year. finds widespread dissatisfaction among american voters with the presidential election. a majority, 57%, say they are frustrated and 65% are disgusted with the campaign. only 31% are interested in the election. meanwhile, only 25% of supporters say they feel excited if she were to win, compared to 28% for donald trump supporters. global news, 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. this is bloomberg. back to you. e: i think we all know where

we are on enthusiasm for the election. tomorrow, erik schatzker will be live at the annual ishares fixed income event in midtown, manhattan, speaking with larry think. this is bloomberg. ♪

mike: you are watching bloomberg television. i am looking at the inflation debate. they are waiting for inflation to come up. that has been a real problem for the central bank over the past number of years. does is fed it normally they cut interest rates and ring

the economy back and inflation up. this is what happens over the decades. the red bars are the recessions. the white line is the fed funds rate. you can see in flechette fall and then starts to rise again and then the fed gets back to the business of raising grapes. it is a cycle. until you get to the aftermath of the great recession. when it does not work anymore, inflation rate stays low, even rates.the fed has cut taking a closer look at what they have been doing. they have vastly increased the dollar sheet. the fed funds rate went down to zero and only recently raised. and inflation went down during the great crisis, came up a little bit and then fell back down a little bit. the fed cannot get inflation higher.

this is why they may not be ready to raise interest rates today. take a look at wages. a finalized version of what they like to call the phillips curve. it gets harder to find workers. since the beginning of the move,ry, wages did not even though unemployment was coming down significantly. in the past couple of months, you can see wages are starting to break out. this is the read on which the fed is hanging the monetary policy. then it is time to start thinking about when you raise interest rates. that is the debate underway right now. about theed decided debate. moments away from the federal reserve interest-rate decision. stay with us for the news and

analysis. this is bloomberg. ♪

tom: live on bloomberg television and bloomberg radio. i am tom keene. i am scarlet fu. 10 minutes to go before the decision. i want to give you the update on what traders see it as an option for rate increases. in odds of a rate hike september, 24.3%. e: it was 18% yesterday. scarlet: the end of may was 60%.

the audits for a november rate increase and this comes just before the election, currently 34%. december, 65%. gave it a big shout out when he said the fed wants to assure at some point they cannot be replaced i work. the only way to to this is below 50. they want to show they are not guided by the market. tom: i get it is a parlor game of market belief. >> when they were show up at a firm and use a bloomberg terminal, they would say give me the probability of the fed and screen, and future you would basically figure it out. it is complicated. you have to realize it will end

in the middle of the month. this is why they have invented xl. >> what arthur burns have worried about worp? ?pontificated an increase >> i don't think he did. he left in 1978, a long time ago. on the odds, for me, very unlikely we will see a rate increase. the probability would be lower than what you just quoted. the fed has not prepared markets for a move at this meeting. they do not like to surprise markets. they rarely do. i remember back in 1994, that did surprise a

couple of times, and that did not go over very well. mike: this is what we used to do, the fed funds rate contract payable. you do the math from that. alan greenspan came out and said we had to raise rates. times in oneour year. everyone got hammered. is that the vietnam moment? never going to scare them again? >> i don't think it means there will never be another surprise. you just don't know what type of situations can arise. i think it was a lesson of sorts. there is nothing to be gained from a surprise in markets. you want to have them well-informed going into a decision.

there are issues with that. when the fed is divided about the outlook and where policy needs to go, there will be uncertainty. i think this is a good example still. they will try to avoid that. mike great credit for this. this chart was shown a million times. that red curve down is the yield coming in because the fed is not doing work, they are doing data dependency. they are just looking at the market reaction. clarida wants to jump in here. >> i think data dependency is important. i think the challenge for the ,ed is they are data dependent but they do not have coherent reaction function.

in order to be data dependent, the market needs to understand how the market drives rates. i do not care about the forecast, it is terrible. so i think the challenge is not data dependent. the challenge is common reaction. >> that is a very good point. i think that is a very good point. the reaction function is what matters. they are trying to take into account not just one data point, but a number of different data , and molded and make a reaction about what it should be. >> the dollar is the external factor the fed has been concerned about. 2014-2015, huge increase as

everyone starts to prepare for a rate increase. 2015 through today it has barely moved. trading and a very new row range. the dollar off the radar screen right now. not really a problem with a want to move? less of a it is a constrained than it was. it was affecting exports, and you could see it. a significant reaction was called for. .he dollar is risen relatively lately. .om: talking about brutal moves is that what we have here back go quite i am not sure about that. i would say the dollar does play

a role in monetary policy. traditionally the fed has not wanted to admit that. the fed has also made the point, if the dollar strengthens, that concerns them. i think we're strong dollar, a collapse of commodity prices, and this makes it easy to have a gradual liftoff. scarlet: i like the dollar chart that you showed. back before december. 1.1%. is .ob growth has accelerated the unemployment rate has ticked lower. are the standards different? >> i think the first half was different. have held uplls pretty well.

think that is one reason we went from of four. with. 201. move. we did get slower growth. i think the fed took that into account. what is data dependent me now versus last year? >> the way i would answer this is we will get an announcement in a few minutes. we're pretty sure there is not going to be a rate increase. what i am looking at is the projections for key economic variables. job market gdp and so forth. they will release the so-called. plot. each individual participant expectation we will see over the next three years. to june,compare this

that tells you about where the fed is right now. that is the key thing to focus on, and i am looking forward to focusing on it. scarlet: former richmond head president. richard clarida will join us. less than a minute away from the decision at 2:00. janet yellen's news conference. getting you a market check. paying close attention to the two yield. so much more sensitive to what the federal reserve decides. it is at 80 basis points, basically where it was at when we began the fed special. u.s. stocks moving a little bit higher, but still looking at very little change. the year, doing better than stocks in europe or japan.

dollar-yen, 182. there was a doj announcement overnight in which it weekend but has now rebounded. as we get you closer to the announcement, erik schatzker standing by. no change in interest rates. a strong suggestion there will be a quarter-point hike before the end of the year. you can see it in the dots. 14 of 17 officials expect to end 2016 with the benchmark rate of at least 50 points. here is a direct vote. the committee judges the case for an increase in the federal funds rate has strengthened but for the