that's according to people familiar with the investigation. mueller is reportedly turning to the washington grand jury in addition to one in alexandria, .irginia the use of the grand jury suggests his team of investigators are likely to hear from witnesses and demand documents in the coming weeks and months. says heime minister hopes european union leaders will see enough progress on some of the challenges facing northern ireland as britain exits the block. before he attends a summit. belfast.today and >> we need an answer to a very simple question. who do i and who do we in europe speak to? who will speak for northern ireland and her 1.8 million people? time is running out. i fear no extra time will be

allowed. progress must be made on resolving issues around the irish border and the status of eu nationals in the u.k. before both sides can begin working on their future economic relationship. the tele-band stormed a market today in the southern helmand province in afghanistan. prompting a response from afghan army forces backed by u.s. air support. the market was closed because of muslim we can. there were no initial reports of casualties. it was the scene of fighting in recent weeks. taliban who now control roughly 80% of the province. depicting president trump on israel's security barrier. a cartoon bubble next to him

reads, i'm going to build you a brother. the president hugging and kissing an israeli watchtower that makes part of the wall. a passerby took immediate interest in the image as they take photos by the wall. in over 120 countries. i'm mark crumpton, this is bloomberg. ♪ live from bloomberg's world headquarters in new york. joe: julia chatterley is on assignment. we are 30 minutes from the u.s.. scarlet: stocks inching toward record highs. joe: the question is, "what'd you miss?" scarlet: martin shkreli found

guilty on three counts of securities fraud but acquitted of five counts. >> we are delighted, in many ways, with this verdict. it was the government's attempt i robbedze that peter to pay paul. u.s. of lawyers added 200-9000 jobs in july with record stock prices and low inflation. u.s. employers-- 9,000 jobs in july with record stock prices and low inflation. joe: what'd you miss? martin shkreli was found guilty of defrauding investors and to hedge funds in a pharmaceutical company he cofounded. he faces up to 20 years behind bars.

outside the courthouse in brooklyn. thank you for coming on and helping us understand what happened here. found guilty on three of eight counts. what is the difference between the counts he was found guilty on and the county was found not guilty on? a sickly, martin shkreli has been convicted as a felon in the eastern district of new york courthouse. the jury delivered their verdict to the judge charging martin shkreli with securities fraud. he deceived investors and the hedge funds he ran, lying about how much money was in the fund. he boasted he was managing upwards of $100 million when really, brokerage records show the balance of the funds was -$.33. lied about independent

auditors that were supposed to be there. he lied about attorneys, administrators, and he also made a mission -- omissions about his track record that other hedge funds had blown up. and for that, he is being convicted and faces up to 20 years in prison. as you heard earlier, misyrlena, they were not displeased with the verdict. they want more than they lost. lost. more than they how did the prosecutors and up helping the defendant? misyrlena misyrlena: martin shkreli founded retrophin. it was his piggy bank to pay back investors. investors made a lot of money. they took to the witness stand, they called him a visionary, a genius.

the smartest person they ever met. they even called him the hermit scientist that spent two years sleeping in a sleeping bag inside his office to bring retrophin to life. the jurors heard a lot of good things coming from witnesses called by the prosecution. it weighed very heavily on their minds when they were making the decision about whether to convict martin shkreli for the rest of the charges. joe: fascinating stuff. i can see why some of those backfired. bloomberg reporter misyrlena egkolfopoulou, thank you for joining us. jobs numbers slightly better than expected. the economy is not yet at full employment. expected job gains which suggest fundamentals of the u.s. economy remain on solid footing. jackson hole will be the highlight of the month for fed watchers. vice chairman of fixed income at credit suisse securities, great to see you. thanks for joining us. we will get to jackson hole in a

minute. jobsinitial take on the report if it changes the balance for anybody looking for what the fed does next? >> no. 30 simple. it is almost unadulterated good news. in mindral reserve has that they want to change the size of their balance sheet. raise short-term interest rates, low inflation, and even the wage figures today were, in this scheme of things, on the low side. scarlet: there were difficult cops. mr. soss: put that in the stew. will they raise interest rates and cut balance sheet at the same time? probably not. i think that is something that is all new. joe: you mentioned wage growth in the grand scheme of things, not that great. and at this point in the expansion, they were still .dding 200 k jobs are month

kind of an extraordinary fact in its own right. where is full employment? could it be we have a long way to go or a substantial way to go ? more peopleere are out there presenting themselves to work and finding jobs then you might have expected. and that is good. it should be encouraged. the federal reserve has every intention of encouraging it which is not the same as saying they want to leave policy as accommodative as it was before. a real communications challenge for them. we still have our foot on the accelerator. we are not pressing is hard on the accelerator. let's talk about jackson hole. we know mario draghi will be attending it and he made waves in 2014 when he spoke about how

inflation expectations had fallen. kind of setting the stage for the bond purchase program. -- is he going to make some kind of announcement this year? mr. soss: he hasn't shared his taxes with me, so i would be speculating. but i don't expect very much. it strikes me that the story in europe is well-known now. it had much better growth than widely expected. they were growing above potential as witnessed by the fact that their unemployment rate is starting to come down. unemployment rate has only recently gotten to be single digits. and they are very far away from their inflation target. someo i think draghi has kind of communications issue to say, of course we want to still be supportive. but we may not need to be quite as stimulative as before.

is a normal phase in monetary policy. and when it comes to jackson hole, there is lots of speculation when it comes to who is succeeding janet yellen. what are your thoughts on the gary cohn adventure? you pick any time someone who's got a deep academic track record in this regard, like bernanke, like yellen, it's kind of a predictable setting for monetary policy. they have written academic papers for long stretches of time telling you how they think monetary policy intersects with the economy and what important about that. we heard a lot about the phillips curve in recent years. bernanke he was a big student of the great depression, kind of a credit channel.

gary cohn doesn't have that kind of grounding. for the point of view of fed itchers, and initial phase, is a less predictable figure and a less predictable policy stance. joe: that's where i was going to go. the existence of business experience, not the same thing as a published track record. does it imply anything of the wall street perspective about how we might see monetary policy? mr. soss: i don't think so. that's entirely the point. is this people haven't thought about monetary policy, per se. of course they think about a loan from the bank and what interest rates are doing. it's a method of indifference, but they don't think about it as much on monetary policy. exactly what level of excess

reserves does the system want to permit the bank to have? mr. soss: -- joe: they have good staff at the fed. scarlet: we will be discussing the president's policies as the debt ceiling deadline nears. from new york, this is bloomberg. ♪

scarlet: what'd you miss? president trump congratulating himself for the better-than-expected jobs report. movement back to usa. we ask what kind of credit he deserves.

>> he hasn't done anything on economic policy. the economy is performing well but it was performing well before the election. can impact over many years but in terms of momentum, that policies, even if they were enacted, those things take time. >> the markets are benefiting from enormous liquidity. it comes from central banks, ecb, the bank of japan, the corporate sector. and then share buybacks, high dividends. it comes from households. peopleinequality means invest in the market. as long as the markets are comfortable about this liquidity, they will fade every single pullback based on politics. >> regulations have been cut, they've been cut significantly.

there are regulations and the regulations. hasn't been from any of his policies that have been enacted yet. scarlet: still with us is vice chairman for fixed income at credit suisse. joe: right after the election, we still -- it seemed to be premised that we will get stimulus. , it has drifted lower. what, at this point, our rates market saying to you regarding policy? mr. soss: rates markets and the configuration of securities markets -- we are not going to get a lot of tax reform. we are not going to get a lot of infrastructure and development in the short run. toa run that is relevant

what investors actually apply to the market. they are not predicting 10 years of policy? mr. soss: precisely. that vision that you might of had last autumn and early winter ofut a quick enactment infrastructure programs and the experience isence that legislating this stuff. scarlet: is the president lucky we are at a point where everything is firing on all cylinders? mr. soss: and it's always a good thing to be lucky in that respect. we have president to take office just as the economy is doing poorly. it gives the appearance that they are responsible. you have some very good speakers already on the subject pointing -- it isconomy was growing at the same pace now that it has been growing since 2009. joe: is the debt ceiling on your

radar? does it give you anxiety? mr. soss: very much so. when a lots a moment of things could come together to upset this low volatility environment we've been in. the risk of the government shutdown. if a debt ceiling issue related to that. the risk of some kind of disruption of normal flow of payments. i don't know if you could have another run of health care somewhere along the way. you always have the risks associated with opec and so forth. period of lown a volatility for a lot of reasons. it will not all be going away. but this is some very material risk -- it is premature for the market to worry about now. on the horizon, at the moment, it's labor day. joe: here is a question i always

have. people buy treasuries as safety. what if the crisis is related to payment on treasuries? mr. soss: the immediate period where there might be some kind of brief interruption or it is aon of payments, somewhat higher required yield. we saw this with treasury bill auctions little while ago where a bill was associated with late september and little higher in yield than they might otherwise be. similar to coupon payments being due. i think anyone was taking seriously the government would default. the burden of which is, as you point out, quite often, except , the treasurykles is rallying. is there money to be

made of positioning for and investing in an area where the risk of a default could rise? yeah, i find it very difficult to take seriously the idea that any government would permit -- any administration in the united states would permit treasuries to miss a coupon payment when due. the last time we had such an episode for real, it was associated with the downgrade of the u.s. by one of the rating agencies and the stock market took it on the chin. all this stuff put together between the ego data, the fed, policy expectations, the debt ceiling. where do rates go next? mr. soss: i'm inclined to believe they are not going to go very far in any direction overall. may sit a rate change in

september because of other issues. their stated goal, goal with respect to the balance sheet adjustment is that it will be as boring as watching paint dry. initially, i think that's right. scarlet: eel sauce, thank you so soss, think you so much. has the company's exposure benefited from trump policies? i bond -- ironic since warren buffett backed hillary clinton. this is bloomberg. ♪

scarlet: it's time for the bloomberg business flash, a look at the biggest business stories in the news right now. wells fargo is expanding a review of fake accounts and could find significantly more. the bank also says legal charges could top $3.3 billion as of the $2 instead of billion.

blue apron closing a jersey .ity, new jersey facility according to a public notice, the move will affect 270 workers. half have agreed to move to the new location. shares have dropped significantly since the ipo in june. and that is your bloomberg business flash. we are looking at berkshire hathaway ahead of its earnings, the stock up for the 15th straight day to an all-time record, and the longest winning streak in history ahead of earnings. joining us now is oliver renick. oliver: you may want to stick with the little folk. a lot of things that will be read through here, huge companies have a lot of things

to parse through. we want to see what is happening with spending, the infrastructure element. let's look at what they need in terms of the stock. beats. at the earnings check out the red on the supplies column. the shares move down, it's been several quarters. it hasn't been where investors wanted it to be. they have overall been good on that and this will be very good about it. joe: not surprised that analysts are bad at estimating berkshire. berkshire trade with financials and industrials? some people called it a glorified hedge fund? what is it most similar to? oliver: there is something

interesting right now about what they will do with their money. the companyge how is viewed fundamentally. that is the big takeaway. it is roughly $33 billion in cash. and i willreal quick click through on the cash flow. it's a nice little chart. it goes up. they want to put in more investment. it looks more like a big investment firm, which is largely what they might be doing. they of their cash allocation. a little bitve more investing to do. julia: oliver renick -- scarlet: oliver renick, thank you for setting up berkshire results coming up after the close. we have less than four minutes to go before the close.

that jobs report that basically beat on all fronts. from new york, this is bloomberg. ♪ we check our phones 85 times a day.

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scarlet: "what'd you miss?" u.s. stocks coming out record highs. the dollars also getting some relief, avoiding a fourth straight weekly decline. i'm carr scaramucci. joe: and i'm joe. if you're tuning in live on twitter we want you to welcome to our closing day coverage every day from 4:00 to 5:00 p.m. eastern. scarlet: we begin with our market minutes. it looks like another record high for the dow jones industrial average up by 59 points, almost 60 points, holding well above 22,000, the s&p and nasdaq gaining modest advances on a pretty solid jobs report. joe: yeah, not a huge move but a solid report and more green across the board. scarlet: more green across the board am when i look at different sectors, you have eight out of 11 investigator higher. the more defensive groups -- utilities, headquarter and staples. the materials and the telecom

stocks. let's get to a couple of individual names here. a.d.p. moving down by .3%. bill ackman's company said it would only seek a minority stake after a.d.p. refused to extend the deadline for board nominations. wells fargo took a leg down in afternoon trading after filing that the bank's reasonably possible legal charges could surpass its reserves by $3.3 billion. wells fargo, as you know, still trying to recover from that scandal over fake accounts that came about last september, and in fact a review of that issue has now been expanded by three years. and gopro surging after surprising wall street analysts. that's a gain of more than 19%, almost 20%. joe, as you mentioned, this is a stock that had really taken a big, big hit from its hay day a couple years ago, now trading below $10. what was it at at one point?

joe: i am looking at it. it is close to $100. scarlet: gopro coming out with second quarter results better than anticipated. its forecast was better than what analyst has expected. and yelp gaining 28% after selling to grubhub and coming out with recent results. joe: let's take a look at the government bond market. yields up in the u.s., again, following that solid though not amazing jobs report. 1.35% on the short end, 2.26% on the 10-year. a little bit of a jump day. intraday chart of the u.s. 10-year you can see that pop at 8:30 a.m. on the report surging a little higher and then leveling out ending the week at 2.26%. scarlet: stronger dollar is a theme after the better than expected jobs report. jerry cohn confident tax reform can be accomplished at year end. you look how the dollar is higher. it's higher versus all the

major currency except the korean currency. the jobs rate falling to the lowest since october, 2008. there was a pullback in canadian exports and a wider trade deficit in june. when you look at the dollar, though, over the longer term -- and this isn't that long. this is the past 12 months. yes, the dollar moved higher but it's against a backdrop of weakness in 2017. the bloomberg dollar index is down more than 8%. or, yeah, down more than 8% even with today's recovery. had to mentally do that math again. i am also keeping an eye on the czech corona. the central bank raised rates on thursday, as you know. there is a big move in the euro versus the crown. that's the first hike in almost a decade. back in april, the czech central bank got rid of a swiss style cap to limit its appreciation. the central bank governor in the czech republic has remained pretty vague about the scope for further tightening, so we will be keeping an eye on that. over the last two days, little

change. joe: finally on the commodities front, not a ton of action. oil up about a percent though still below $50. west texas intermediate. silver getting hit down 2%. and gold down modestly under 1% d those are today's market numbers. scarlet: what did you miss, a barely stronger dollar. paul is an investment director of u.k. based asset firm manager and leading manager on bond and currency, hedge fund strategies. he joins us now. joe: paul, great to have you back on set. your area is loved. everyone's into ementaling markets these days after several years of underperformance. seemed pretty -- very strong performance. can it continue? paul: i think it can. ementaling markets are the major growth asset class. you have if growth in europe

you have growth in the u.s. as we saw from today's jobs numbers. as long as the world is growing, e.m. is going to benefit disproportionately. joe: so when the fed getting the tightening cycle going, that was one reason why people thought that would cause for concern for e.m. the fed is obviously not tightened as fast as people might have expected earlier this year or even last year. is that a significant aspect of the e.m. story or just a modest boost? paul: i think it's a modest boost. there are different parts of e.m. if you look at hard currency sovereign, treasuries, i do the local currency side is more about the dollar. obviously to the extent that the dollar's been on the back foot for the past few weeks, that's been great for g.a.m. the fed is one of the big central banks that's in play now. i think if we did see inflation in the u.s., and think we're seeing a little bit on the wage numbers today, then i think it becomes a little bit more challenging. i mean, e.m. finds it very hard to cope with a stronger dollar.

at the moment, this kind of goldilocks economy which is a phrase with a bad history, it's pacific northwest for e.m. scarlet: the weak dollar is good for e.m. especially when it comes to debt, but is it good for their exports? because don't they need that weaker currency in order to manufacture and be price competitive? paul: i think people pay too much attention to e.m. exports. the trade -- what is important is imports. the reason why we've seen this big recovery since 2013, e.m. has brought credit growth down. imports has been pulled down a lot. even while china hasn't been pulling in the commodities, growth in europe has been pretty indifferent. it hasn't been an export story it's been an adjustment story. joe: i was just going to say, it seems with e.m. there are a lot of these stories people tell. maybe the fed tighten is not as big of a story as people think. maybe the weak dollar or the weak currency is not as important. what about china?

because that is one of these things that people always talk about, well, china is doing good, it's good for e.m. is it that straightforward? paul: it's not quite straightforward. it would be interested to see what your president wants to do with the world trade organization. scarlet: we do too. paul: commodities, with the exception of oil, china takes vastly more iron, more coal, more cement than does the u.s. or any other place. so we do need decent growth in china to support in particular the commodity exports to south america, south africa, indonesia, places like that. china, we have a little bit of surge in credit going on and that's very supportive. further down the line, there's an awful lot of debt there. scarlet: when we talk about china, we think ahead to the congress and how the government has incentive to keep things smooth up until that point. where are we in the cycle of taking money out of the developed markets and moving it into the emerging market?

are we in the first half, the second half, the first third, second third? paul: emerging markets funds. scarlet: so you are going to say -- paul: it's very early in the process. historically, e.m. currencies don't start to decline until you see imports, the trade balance begin to deteriorate. we are not there yet. until you begin to see too much credit growth, we're not there yet. so rather than trying to time it in terms of periods, i think you sea there are things you look for, a surge in credit and a surge in imports. until you see those you can reasonably confident. joe: you are here in new york, i assume you are meeting clients there and you have been traveling. on this question of sentiment, does it feel like people have moved in or are people skittish and potentially could move in? paul: sentiment is very positive. we've seen very strong in-flows this year, but the questions flick very quickly from e.m. is doomed to is it too late to put

your money in, so i keep coming back to this idea, just watch imbalances. as long as trade is in surplus you should be ok. scarlet: so when you look at e.m., which markets or which products is the enthusiasm a little too overheated versus where there are opportunities? paul: it's a little bit early to talk about overheating. i mean what we divide is one side you have e.m. currency and equities and those are the emerging markets asset classes. as they grow and adjust those do well. whereas you hear e.m. debt in u.s. dollars, but that's really overwhelmingly a u.s. credit story. the correlation between that stuff and u.s. high yield, u.s. investment grade credit is almost 100%. so i think it's currencies and equities which is the best way to position for the continuing e.m. growth story. scarlet: all right. paul mcnamara is sticking with us because coming up we are going to take a look at some specific e.m.'s like turkey and where the value is. and also brazil.

from new york, this is bloomberg. ♪

mark: i'm mark crumpton. it's time for first word news. attorney general jeff sessions said he's stepping up efforts to investigate and prosecute leaks of classified information with help from a new counterintelligence unit at the f.b.i. sessions spoke at a news conference with director of national intelligence dan coates. mr. sessions: today i have this message for our friends in the intelligence community. the department of justice is open for business and i have this warning for would-be leakers -- don't do it. mark: sessions said justice is taking a stand because, quote,

he culture of leaking must stop. the trump administration is asking congress for a so-called clean debt ceiling increase. that's according to white house budget director mick mulvaney. he says the administration won't ask for spending cuts or other provisions that might set off an extended fight. congress needs to raise the debt ceiling by the end of next month. israeli media say prime minister benjamin netanyahu ex-chief of state will turn states witness and testify in two corruption cases against his former boss. he reportedly reached a deal with prosecutors today after israeli police revealed the day before that the prime minister is suspected of fraud, breach of trust and bribes. mr. netanyahu had dismissed the accusations as a witch-hunt. a russian court today extended the probation of opposition leader by one year. he rose to prominence with his

investigations of official corruption and he led a series of anti-corruption protests across russia this year. after the decision, navalny told reporters, quote, we understood very well this court needs to keep extending my probationary period just to prohibit me from taking part in the elections. end quote. global news 24 hours a day powered by more than 2,700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. scarlet: there might still be room to run in crisis emerging countries. paul mcnamara with us. he oversees $8 billion of assets for the firm. joe: paul, thanks for staying with us. let's talk specific countries. i feel when we talk to e.m. people, don't talk about a whole class, talk about specific countries. let's start with turkey. hasn't been in the news as much lately probably because there are a bunch of other stuff going on.

what do you see as the opportunity there? paul: we think turkey is absolutely an accident waiting to happen. there's like a checklist of things that you worry about. too much investment in property. the construction sector is same sort of share of g.d.p. we had in spain just before the crisis. huge demand in borrowing by the banks. especially people trying to fund property investment out of dollars. so you have a shopping mall in ankara, you don't have a stream of dollars coming in but you have the debt. we are really very worried about turkey. we're keeping our exposure there to an absolute minimum. scarlet: i like to say an accident waiting to happen. so far no accident has happened. why is that? paul: we'd love to know. what the government -- this stuff usually rolls over when growth slows. then the banks start to show bait of distress and investors start putting money out. what we've seen this year is the government, even as they hiked interest rates and they have allegedly tightened, they

launched a big guarantee scheme to guarantee loans to the banks to provide a backstop. and you know a couple months ago growth was going -- sorry -- loans were growing 40% annualized. that's not sustainable. what's kept things going is this bank guarantee scheme to keep the lending bubble going. joe: let's talk about brazil. i think you made a really good call maybe a year ago and said brazil's turning the corner, especially atlanta trade stuff. right now the real is close to the strongest level in a couple of years. there's still all kinds of corruption issues but it looks like for the moment, nothing is going to happen. is there still upset in brazil? paul: there's plenty of run on the currency. it's a 9% type yield in today's world not to be sniffed at. in terms of rates, we are very ambitious now in terms of what the world is pricing. we're looking at a terminal rate at 8 .25% next year. we could get there but there is

more risk to the upside than the downside. i think they're running a trade surplus. i keep coming to the trade surplus idea. i think the real looks interesting. scarlet: what about the prospect of more political turmoil? if there has to be another election, is this something that should derail -- should detract investors from looking at brazil even though there's good opportunity? paul: i think the politics really does matter because they have very high level of government debt, but doesn't everybody? the difference is brazil has high interest rates. whereas the u.k., which is very high level of debt, we're paying almost nothing in interest so there's no pressure there. but when you're paying 6%, 7% real rates you need to start running a primary budget surplus and that's where the politics becomes a concern. joe: a country where the politics does matter because it seems when most of these e.m.'s you're talking about, you are

being attractive carrier but you have to weigh it against a political risk. it's not just brazil but south africa, it's in turkey, it's in malaysia. is brazil a particular risk on that front beyond sort of the others? paul: i think in brazil, yes, because this budget situation that needs to be fixed. where turkey can go along or poland where the government is very populist can trundle along for a long time. but i think brazil is much close to the edge than most of those countries. scarlet: speaking of budget and countries where politics matter, let's talk about the united states for a while -- for a second, because some people say in many ways it's behaving like an emerging market where you have to take into consideration the political machinations. this shows the five-year credit default swap on treasuries. what i want to show you here is this big move up of late. of course, this is, as investors take notice of the fact nothing's been done yet to raise the debt ceiling. of course, when you look at the cost overall, it's not that high. we're just looking at the movement there. if you look at it over a longer

period, for instance, back to 2011, unsee we're nowhere near the levels we were -- you can see we're nowhere near the levels when the s&p downgraded. what is the risk of a spillover to emerging markets if there is any concern in any way the u.s. may not make good on its obligations? everyone's going to go to treasuries even though that's the one thing people think may not get -- if they're betting there's a default that may not pay off, how does that impact emerging markets? paul: the whole debt ceiling is a game of russian roulette. e.m. needs the rest of the world to be stable. i think the u.s. missing a couple coupon payments would be pretty desperate. not so much in terms of the immediate impact of missing the coupon payment but what it says about the u.s. political setup and that it's more of a priority to kind of grandstand in front of the press instead of keep paying your debt on time. joe: bigger picture, though, as someone studies e.m. six months into this new

presidency in the u.s., you hear the charge all the time that the u.s. is becoming more e.m.-like in its government -- in its governance. scarlet: that's a polite way of putting it. joe: i am trying to be smart how i'm framing this question. is that fair? paul: to be honest, i think it is. a lot what we're seeing in the u.s. is reminiscent of emerging markets. to be honest, i'm british. after brexit we can't throw stones about politically deemented things to do. -- demented things to do. there was a discussion we were having earlier maybe there would be a clamp down on e-commerce because they own the "washington post" which is opposite to the presidency much that's a very emerging market way of looking at things. what you need is the u.s., u.k., europe to be institutionally strong, the rule of law, and anything that undermines that is dangerous for anyone investing for a longer period of time. scarlet: all right.

paul mcnamara is sticking with us. 'll take a look at bloomberg and russia.

scarlet: all right. we have some breaking news on apple. apple is planning to release a version of the smartwatch late they are year that can connect directly to cellular networks. this would be a stand-alone device. this will reduce the alliance on the iphone. all of this according to people familiar with the matter. bloomberg's apple reporter mark had the scoop and he joins us from san francisco with the latest. so mark, tell us what we need to know here? mark: this is --

scarlet: so, mark, tell us what we need to know here? mark: apple is breaking ties from the iphone to the apple watch. they will sell cellular chip sets. you can leave the house with your apple watch, leave your phone behind charging or whatever you want to do with it, put it on your kitchen table, go out with your runs, stream directly from the internet, open apps and i-messages without needing the phone. joe: in theory could it be a phone if you had headphones, could you talk into it dick tracy style? mark: yeah. over bluetooth you can sync your , ibuds in order to listen to music. it's to be seen if you can make phone calls on the go. this will be similar to the approach apple uses for l.t.e. data on the ipad. it doesn't turn the ipad into a phone but uses all the functions on the go. it's likely apple will have a

similar system for the apple watch, allowing you do the most things like apps and messaging, the key things without taking your phone with you. scarlet: ok. all the apple fanboys are gearing for september, october, when the latest versions of the iphones will come out. will this come out then or is this something for 2018-2019? mark: so last year apple introduced the series 2 with g.p.s. and waterproofing alongside the iphone 7 and 7-plus and they hold these big september events to introduce new products like the iphone and apple tv. it's likely when apple introduces the new iphone this fall -- they will introduce three new phones -- they will have a series 3 alongside the phones. they are planning to do it this year. they delayed the l.t.e. apple watch model launches in the past, but we're hearing it's planned for this fall. joe: mark, this new edition of the wire -- of the watch aside, how does the watch business doing these days? mark: you know, on tuesday

apple had its third quarter earnings calls and the watch grew 7% year over year from the june quarter in 2016. he called the smart watch the number one selling by a very wide margin. smartwatch on the market. according to reports from strategy analytics, the match is behind. but when you are looking at multifunctional smartwatches, things that can do apps, music, fitness, the apple watch is ahead of the pact in terms of sales and functionality. scarlet: yeah. that's my question because it seems like there's a lot of fanfare when apple unveiled the apple watch but it doesn't move the needle for apple. it's hard for the product to move the needle for apple except the iphone. it doesn't seem the way the industry looks at apple when it comes to smartwatches? mark: no, it hasn't. to your point, since the launch in 2015 has been an accessory glued to the iphone. the market, the potential market share that apple can get

on these things are based around who owns an iphone, who's on the latest models and they will start breaking away with that. we won't get the full separation where you don't have to connect it with an iphone. but l.t.e. is a big step in that direction in order to make the apple watch its own big category for the company in the future. joe: so apple believes there would be watch customers who aren't iphone customers? mark: yeah. it doesn't seem like they will separate the watch to connect to android or not ever need to set it up with an iphone. it seems likely you need to pair it with an iphone at least initially but eventually apple's goal, i have been hearing this for years, you can go to a store and buy this thing, never touch it to an iphone like you can just by a mac or ipad. scarlet: mark gurman, thank you for the scoop on the apple watch, said to be with a cellular connection this year. all right. from new york this is bloomberg.

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mark: i'm mark crumpton. it's time for first word news. white house economic advisor gary is suggesting the u.s. must cut its corporate tax rate by at least a third in order to compete with other world powers. in a conversation today with bloomberg, he didn't mince words about his objective. gary: my priority is taxes. if you're confused my second and third priority is taxes. mark: i think we got the message. the u.s. is the only industrialized country that taxes its companies on their global profits regardless where it's earned. the white house released a tax outline that set a 15% goal for

corporations. that was in april. vice president pence has turned er emails from a private a.o.l. account to conduct official business while indiana's governors. he provided 13 boxes of paper copies of the emails in march. he was slow to provide an easily searchable electronic database of the emails which its successor requested months ago. venezuela's controversial constituent assembly got to work today with its first official act of business. the 545 delegates unanimously selected a former foreign minister to lead the new body. he's part of a close allies who resigned top posts to run for the assembly. it will have sweeping powers to rewrite the constitution and go after political opponents. soccer star neymar made his official presentation on the turf the stadium today. the appearance was the first since his $262 million buyout

clause from barcelona was activated yesterday. later at a press conference, neymar called the decision one of the most difficult of his life and that the move was not driven by cash saying, quote, what i think about is happiness. if i was following the money i would maybe be in some other country. paris' owner said the value of the club soared overnight ollowing neymar's signing. i'm mark crumpton. this is bloomberg. scarlet: let's get a recap of today's market action. the dow closing at a record high. stocks rising all around. the dollar also strengthening after a better than expected july jobs report. joe: and we have some breaking news. united technologies is the big defense company weighing a possible deal for rockwell collins. similar industries, avionics

and such. rockwell collins surging after 7%. u.t.k. not moving a lot. no guarantee a deal would get done. scarlet: you have to add that disclaimer. [whistle] -- congress is beginning august recess. on monday, the president's new chief of staff john kelly began his tenure with a bang. literally. he fired anthony scaramucci, president trump's director of communications. yesterday, we learned that special counsel robert mueller has impaneled a grand jury in washington to investigate aush russia's interference in the 2016 elections. here to wraup the week that was and what we can look ahead to is bloomberg's anna edgerton in washington. anna, the big news i want to focus on is robert mueller impaneling a grand jury in washington. we got a per functry response from the white house yesterday. has there been any kind of behind-the-scenes response today? anna: no. what's going to be most interesting is to see how it impacts both the legal process and the political process.

the more this investigation is in the news, the harder it's going to be to keep the focus on legislative priorities like tax reform, on other things the president wants to accomplish. the given theme for the week so far -- there was infrastructure week and american heroes week, but it seems like almost every week ends up being russia week. and the more that this investigation comes up, the harder it's going to be to actually get to the business of governing. joe: anna, it was literally right here exactly a week ago we were on this show and that's when the news broke about the change in the chief of staff. this is the first week under john kelly's white house, so to speak. is it -- maybe there are some signs they are a little more buttoned up. the tweeting seemed a little less dramatic this week. is there anything to read into that? anna: you said it was a week ago. it's hard to believe so much has happened since then. it feels like a month ago. i think we will see changes. john kelly definitely has a

different style than the other chief of staff, reince priebus. the tweeting style, we are not sure if it's about john kelly and the control he has over the president or the president is starting his vacation and is hoping to rest a little bit the next few weeks. scarlet: yeah, i'm glad you bring that up. he is going on vacation. going to be at his trump golf course in new jersey. congress is going away as well. they go on recess. they were supposed to stay around, is that correct, because mitch mcconnell had wanted them to stick around to work on headquarter? but my understanding is they will still be calling sessions in various points during august in order to prevent recess appointments? anna: well, the house was always planning to leave at the beginning of august. the senate was going to stay for two extra weeks to work on some of the backlog of nomination confirmations and to try to work on headquarter, although that vote ended up not working out for the repeal and replace plan. i think they are going to --

republicans did make clear to president trump that there would be no recess appointments. that if for some reason he wanted to fire his attorney general, he would not be able to appoint a new attorney general during recess and go through the process of a recess appointment. scarlet: how is jeff sessions doing this week? the president hasn't really tweeted about him or talked about how he's very weak. is he on firmer footing right now? anna: well, we know john kelly did give him some affirmation that he is not going to get fired. the president is not trying to make him resign. so it looks like he's kind of gotten out of the line of fire for now. he was in the news today for his press conference promising to crack down on leaks which could have some substantive elements to it, but it also looks like a way to get back in the president's good graces and to go after something the president has criticized which is, you know, constant leaks from the white house like those yesterday with the leaks of the

transcripts from his calls with the mexican president and leader of australia. joe: anna, obviously the next big legislative battle on tax, gary cohn was on bloomberg tv talking about that fight. let's listen to what he had to say. gary: we need to create the jobs like getting rid of the regulation that's bagging down industry. we need to reform the tax code so we can incentivize companies to invest in america. that's what we're trying to do. we are totally committed to doing it and we feel confident we can get that done between now and the end of the year. joe: so he said they're very committed to doing it. ultimately it's going to be up to the senate and the house to see if they can match that white house commitment. is there any reason from your perspective to be more optimistic about the white house's possibility of getting that done than headquarter? anna: any republican you talk to is going to say that republicans are more wired to think alike on taxes than on something like headquarter. almost all republicans want

lower taxes. there is agreement on that. however, there are a lot of details that still needs to be worked out. we had some certainty last week when united statement from the senate and white house decided not to go forward with paul ryan's controversial border adjustment proposal. we have gotten past that hurdle. now there are other elements that need to be decided and that's going to keep going on over the august recess even though the congressmen are out of town. staffers are still here trying to work on that legislative text and have a bill that they can start discussing in september when they get back. scarlet: bloomberg's anna edgerton, you are going to have a quiet august or quiet couple of weeks with the president and congress leaving town. thank you so much. coming up, three charts you don't want to miss from today's optimistic jobs report. the july jobs number, 209,000 jobs added for the month of july. from new york, this is bloomberg.

scarlet: u.s. labor market showing signs of strength as the economy added 209,000 jobs in july. the unemployment rate fell to 4.3%. for the deeper look and the charts you might have missed let's bring in matt. matt. joe: let's go to the first one. one of the biggest questions in the economy has almost become a cliche and boring to talk about, what's going on with wage growth? you have a chart here showing that we're getting mixed signals on income growth. so what are these two lines on this chart and what are they telling us? matt: so the white line on this chart shows us the measure from the jobs report we get every month about total income growth. when you add up the number of jobs being created, the amount

of money those workers are making and you can see it's been very steady 4% growth throughout this entire expansion. but the other big piece of economic news we got this week were about the revisions to the savings rate from the g.d.p. data that's produced by the commerce department. it's a separate report, and what that showed is income growth, that blue line on that chart, has been slowing a lot while consumption growth, consumer strength growth has remained -- spending growth has remained the same. it's not clear which of these reports are right what's happening with income growth. the jobs report suggests it's steady and the g.d.p. data suggests it's declining. scarlet: but both of them did take lower for the most recent period so perhaps that's not some encouraging news. when you look at the industries in america that face the most disruption and are going through the most change, retail obviously because of the ham zohn effect. mining also -- amazon effect.

mining also feeling the effect. you are looking how income growth is hitting the different sectors. matt: yeah. the last chart showed this data may be revised lower eventually. but taking it at face value, if you dig into that and looking at different sectors, what's happening there. i find it interesting. the blue line is the mining sector that includes all the oil and gas extraction. you can see there was a big drop in income growth in that sector about $360 million change in that growth rate. that was a big drag on the economy last year, right? but if you look at the white line, this is the retail sector, and we know that's been going through a lot of trouble lately. that's actually been a bigger drag on total income growth than the mining and logging sector drag was. and so obviously those mining jobs are more systemically important. they create a lot of additional jobs whereas these low-paying retail jobs might not necessarily, but still just given the size of that decline, it's important to think about in terms of consumer spending that could be a bit of an issue.

joe: so mining jobs pay more than a typical retailer job. there are so many retail jobs? matt: exactly. that's what the chart reflects that. the retail drag is bigger because there are so many people in that sector even though they are making less money. scarlet: you can make the argument that retail has not bottomed like mining. matt: if you look at the job growth rate, that went negative for the first time since the recession in july. joe: very good points. this is the flip side to this. retail is declining but tech, that must be doing phenomenally well. there are some signs of slowdown. what are we looking at here? matt: yeah, so interestingly, looking at the services, we looked at low-end services slowing down a little bit. but also at the very high end, if you look at the so-called innovation jobs. you see year over year growth. the blue line showing total line growth. you can see we are in a bit of a downswing, a deceleration as well. these are your computer-related jobs.

things like biotech. these sort of innovation industries that we think are sort of the new drivers of productivity in the u.s. economy. so it's not great that we're seeing a slowdown there. that could be temporary. but we have to see how that goes. joe: in the wake of this report, what did -- the economists that you talk to, has it changed their outlook on anything, whether it's the fed, inflation, anything like that? or is the conclusion, this is basically more of the same? matt: yeah, i think conclusion it's more of the same. it doesn't change anything for the fed. the big question going back to the first chart, which of these two reports is right what's happening with the american consumer and the state of their finances and now we are going to wait for the ultimate revisions to really find out. joe: and jackson hole coming up. we were talking about it earlier with neil. what will be the key debates? i'm sure there will be the official topic. what are going to be the key things you want to hear? matt: it will be interesting to

hear -- especially how other central banks. with the fed outlook being so benign right now, how -- what mario says. as we saw a few weengs ago, he can have a big influence on u.s. interest rates here too. so we might get more of that again. joe: all right. bloomberg's matt boesler with the charts. thank you. if you have a bloomberg terminal you should check out tv go. you can watch it online. click on our charts. there's earlier, neil, who we were just talking about. scarlet: i planned that. joe: click on the graphic. click on headlines. send us a message. you can see down at the bottom to submit a message. if you want to submit a question, way to consume our content. just go to tv go on your terminal. this is bloomberg.

scarlet: e.t.s. hogged the spotlight when it comes to the rise of investing. but t.i.f. is going just as quickly. here to explain the growth and why it's bad news for wall street is eric from bloomberg intelligence. eric, explain the difference between tifs and etfs and why one is used over the other? eric: traditional index funds is the vanguard total market. that's an index fund. it doesn't trade. shares of that fund doesn't trade on the exchange. the e.t.f. was modeled after a traditional index fund. that's what it did in 1993. i thought interesting these traditional index funds had een going neck-and-neck with e.t.f.'s. collectively those two bars

with the $6 trillion in passive assets. but half of it is in index funds even though etfs get attention and it's d.c. plans where that money is coming in because etfs is -- joe: why aren't etfs in those plans? eric: it's fractional shares. i won't get into details. those are lg san francisco. you don't need to trade them. the tax efficiency doesn't matter because you're already in a tax-exempt account. the fact is etfs are something that you're going to already have an index fund for that low cost because the institutional class of the index fund that's probably in your 401-k plan is probably cheap or cheaper than the etfs. so the cheapest of etfs also goes away. they lose three of the big advantages and that's just not enough to move the needle. scarlet: i have a fourth reason which is just lays evens. there are so many etfs. the vanguard fund is pretty much there and it's not going to change.

eric: yeah. scarlet: ok. so you talk about traditional investment funds being a bigger threat or one of the biggest threats to the financial industry. why is that? eric: yeah. this is a huge story you will hear about in the future. if you look how assets are managed in an active mutual fund, you have a fee of 69 basis points and they trade a lot. the turnover is about 50%. that's about a basis point per -- cost per basis point or per percent of turnover. long story short, that's the amount of revenue that an active fund kicks out at $10 trillion. hedge funds kicks out half of that, $3 trillion. they make a lot of money. fees are high. etfs click out $11 billion. and the reason they're lethal to wall street is they don't have any turnover. there's no activity in them. their fees are low, and nobody trades them. so inactivity is brutal and lethal to wall street because the whole system makes money on

people moving money around. and these things do not trade at all. it's basically money leaving the system. joe: you compare this in your research to amazon. i think it's very interesting and sounds very apt. here we have amazon sucking activity away from the rest of all other industries and that chart you showed is striking. the degree to which that represents lost fees. eric: yeah, the big difference between -- vanguard is a lot like amazon. i call it the third dimension which is the market. here you are looking at a bar chart of the assets in 2016. they went up for active mutual funds even though during that year they saw $400 billion in outflows. because the market returns were -- it was up 12%. bonds and stocks going up so much in the past eight years has totally covered up all of the revenue loss of the $6 trillion that's gone to passive. when that market flattens out, you will see more m&a. you will see people moves, to

say the least. you will see a lot of this come to light. scarlet: that's why you see so many fund management companies right now scurgying to make some deals. -- scurrying to make some deals. it's very defensive posturing. eric: and the they took in this money but the revenue is flat, it's because of that. joe: that really is interesting. the idea we -- you see that a lot in finance in general, i think, where the -- just the rising assets lifts all boats despite all the underlying activity start to deteriorate. eric: assets is the name of the game for some of these firms who want to get big, blackrock and vanguard. that doesn't necessarily mean revenue. fidelity is a great example dealing with this. right now they have a third of their assets are passive in index funds. they only count for 3% of the revenue. so as money goes to index funds, even if it's going into your own shop, it's almost like self-cannibalizing yourself and that's essentially what's going to be happening for the

foreseeable future. scarlet: all right. great way to end it. eric: sorry for friday. scarlet: eric balchunas. we will make that a thing t.i.f.'s. some of the biggest stories in the news right now. elliott management is pushing for a higher offer on m.x.p. according to people familiar with the matter, elliott has taken a 6% stake in the dutch chip maker and believes other potentialal buyers exist. the agreement to buy has stalled with antitrust regulators. a pharmaceutical cut dividends and earnings targets. according to people familiar with the matter, the european oncology garnering interest from mylan. and the women's portfolio is attracting apollo and others. final offers are expected at month's end. and vanguard will continue fighting the fee wars. rivals fidelity, blackrock and

sharl schwab cut to meet vanguard. but tim buckley says he continues to plan lower fees, quote, across every product. buckley also says vanguard is pushing to grow outside the u.s., a move that should help decrease fees. that is your business flash update. joe: and a little bit of breaking news crossing the bloomberg. the u.s. has submitted its formal intention to withdraw from the paris climate deal. you recall earlier in the year, donald trump with that rose garden ceremony talking about how the u.s. will withdraw. now the formal communication to the u.n. has been sent. the statement does say that the u.s. theoretically is open to re-engaging in the deal if the u.s. can, quote, identify terms that are more favorable to it, its businesses, its workers, its taxpayers. but for now the word is, plan to leave. scarlet: one of the things the trump administration was up in

arms over was the fact that the u.s. will be contributing to a fund to help those developing nations get more green. they saw that as a bad thing. joe: and didn't get the impression that the other leaders were eager to reopen it. while there is possible re-engage it doesn't look like that's likely. once again, the formal declaration to leave following on trump's earlier announcement to leave that paris climate deal has been submitted to the u.n. and coming up -- what you need to know for next week. this is bloomberg.

scarlet: all right. "what'd you miss?" -- next week on monday, opec and non-opec members of the joint technical members will discuss, what else, production cuts. joe: then on tuesday, i will be looking at a no confidence vote for the south africa president. scarlet: and that's

alisa: i am alisa parenti in washington and you are watching "bloomberg technology." let's start with a check of your first word news. president trump makes a stop at fema today before taking off for his summer vacation in new jersey.

trump said states can count on his administration to dispense emergency funds efficiently. he spoke while members of his cabinet were briefed on the hurricane season. special counsel robert mueller is using a grand jury in washington as part of an investigation into potential coordination between the trump campaign and russia according to people familiar with the investigation. mueller is turning to the washington grand jury in addition to the one in virginia already involved in the inquiry. migration agency says the number of deaths of people trying to cross from mexico into the united states is up 17% with 232 deaths through the end of july. that is up from 204 a year earlier. it comes despite a drop in u.s. border arrests. they fell by nearly half this year. after deliberating five days, a brooklyn jury found martin shkreli