after a trip to southeast asia, secretary tillerson told reporters he believes president passes warning that north korea would face fire and fury was appropriate. >> what the president was doing is sending a strong message to north korea in language that tim john nunn could understand. because he does not understand -- seem to understand it dramatic language. >> north korea has also said it is considering a missile attack race on guam. the trump and menstruation expanded sanctions against eightela by assets of venezuelans after it seeks to raise pressure on the government of nicholas majuro. several of those sanctions our current or former venezuelan government officials. supporting --m of charged with rewriting venezuela's's constitution. declared itself superior to all of her government -- other government institutions. the action came as the u.s.

seeks a court needed international response and opposing penalties on the regime for undermining democracy. the treasury department accused macatee -- a mexican soccer star of having links to a major drug trafficker as part of hitting 22 mexican nationals with sanctions that freed their assets in the u.s. departmenty or -- released a statement saying the move was made in conjunction with the mexican government following multiyear investigation of the drug network allegedly run by role hernandez that has links to two new -- major exits and drug cartels. opec says three nations every a friend their commitment to the agreement to cut oil production. iraq, and kazakhstan. when it come up short comes to actually reducing output. 24 countries agreed last year to cut back and try to end the global oriole -- global news 24 hours a day

powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. ♪ likewise -- .carlet: joe weisenthal is off 30 minutes from the trade -- from trading in the u.s. >> struck -- stocks lower for the second straight day in assets when higher. >> the question is what did you miss? president trump's rhetoric against north korea rather -- rattled markets around the world. the fed president said whoever is the next fed chair should consider warning. more highlights from our exclusive interview next. didn't -- disney ready to embrace the cord cutter.

how it plans to transcend cable into a gold mine. >> rising global tensions have put renewed's -- perspectives on risk taking. it is held onto the game, blending the gains of threats. the vix is still significantly low. the reaction suggest short-term volatility in equities? the chief economist at the institute joins us from washington. great to have you on the show. a certain sense of cautiousness for investors making sense when both sides, north koreans and united states, amplifying uncertainty here. >> absolutely. two years ago, it was china. it caused people to delay forecasts about how much growth would be. delaycost the fed to

policy normalization can north korea is no were near the size of china but it is the fact that it is nuclear and we do not know how it will be nuclear, that is a threat. markets are reacting badly and it could be amplified. that is partly because of what we see and what we don't see. how much financial strength is their backing all this up? >> geopolitical risk in any kind of action could lead to more market volatility. rises tof it actionable levels for the fed, stageay bring about a new in the market. can you explain what that levels mean? is it the rate of change we could see it move that? >> i think the easiest way to measure it is to look at the market measure, like a move index on the bond market. the fed has reacted slow for his normalization of any policy change when there was a large

and sustained rise in the vix and the move index that ugly volatility start to go up. the measures are at historically low measures but let's wait and see. we still have all of september to go before we start to see the policy action. jackson hole, they tell us if are ready to move. we had delays until december. >> i am looking at the function on the bloomberg which indicates investors right now are not really pricing in real odds of an increase in the fed funds rate until march. 56% for march. said, you have to wonder whether monetary policy could be a catalyst for more volatility as suggested? what do you think? >> it is good reason not to move also because inflation is not there. inflation has been on a

declining trend and we do not know why. a spokesperson says with low rates of unemployment, we should start to see some signs of rising inflation. loweringgns of inflation. in the past, i have come to you before and said the rate has always been a lousy measure and now more so than ever because of a change in demographics. what i tell viewers to look at is the ratio of hiring to job openings. that now is still at historically low levels. data cannot just recently, my god, look at all the job openings, it must be a hot labor market out there. the only thing that makes wages and prices rise are hiring and hiring is at the slowest pace ever. people are reluctant to hire until they find the right person. they would rather wait until they come of the current range. that means nothing going forward for quite a while. >> that is his everyone he said to us. he does not expect inflation to

reappear in any certain sense. he did not quantify be on that. at the same time, the imf actually raised overall costs. huge partg partner, a of that, you can can look at these things and say, you have got central banks talking about the exit but there is no more pressing need to on the inflation front. they decided it was pretty benign. do you agree? >> things are getting much better. twice of zero is still zero. from may bedle goes zero point something to one point something. it does not make me stand up and advance. it is still not a lot of growth. growth inflation is not there. if there is any sense of thattainty or disruption

could throw growth off-track, that is something to watch out for more than anything else. >> do you think the biggest sort of uncertainty we have seen does come from the monetary policy? investors now, geopolitics , aome a more pressing issue .ack of clarity >> geopolitics has become a part of that environment. we have seen that happen with brexit and all sorts of earlier events. there's no reason for the fed to not stall if markets behave badly because of concerns about geopolitics. that iset to happen but not to say it cannot happen. that is the risk i will be watching out for.

been talking to howard and jeff and most of them sound more cautious of late, saying they want to do risk, they want to reconsider some assets -- asset classes because prices have gotten lofty here. given that there is no real visibility into what will happen in washington, is this a good strategy at this point? we're still looking at a fairly the riskvironment and for taking performance is higher than going into something favorite now. >> it seems as though you cannot go broke by complacency. the trouble with that is we are in a world of disordered markets. for as long as we have had zero rates, almost 10 years. people have almost forgotten what a normal environment looks like. restore the normal environment get rid of these

distortions in all of these cautions are right. we had zero rates all over the place. but thee can there be market that raises asset prices and cannot be sustained over the long run given basic economic fundamentals. bitounding the alarm little being a catalyst for volatility. thank you for joining us. up, if the poems he fails to dissuade north korea in its nuclear ambitions, what options does the u.s. have? the commander general ways in. from new york, this is bloomberg. ♪

scarlet: the federal government is quietly weighing military options to eliminate nuclear capabilities. a former nato supreme allied commander, david gura began by asking him about rex tillerson's, that americans should sleep well at night. forget anybody is excited. this has been building for some time and for decades, north korea has had the potential to inflict hundreds -- hundreds of thousands of categories. harry our own forces there and by the -- our own strategic deterrent, that is still operative. >> when you look at what options are available, so much of the conversation means on diplomatic -- that aside, plans for

military options as well. how much of this has been thought about over the decades we have been dealing with the issue? if i knew the specifics, i cannot tell you. is you could try and teams andecial forces locate nuclear warheads hear it if we did that, and i'm just making up numbers, your military commanders would probably tell you they have an 80% chance of getting 70 or 80% of the warheads. he would initiate that action by disabling the north korean air defense system in the command-and-control medications. do we think the north would just am via do nothing while we are rolling around the countryside flying helicopters and shooting

guard? i don't think so. you would trigger a general conflict on the peninsula. positioned to bring conventional fires, chemical fires, biological fires, on the city, a and he hasation other shorter range missiles with chemical and biological weapons. the other option is to just take out the whole country and put them in 200 nuclear weapons in the country, hit every , use groundsite penetrating weapons, going deep because they have had 70 years to harden their facilities in his mountain ridges and valleys in the north. could you get everything, probably not, but you would make a mess. there is no good military option here. us fors frustrated

years. >> i wonder how things are different now with new principles in place? a new leader in south korea, north korea as well. has this changed since you interested with it when you were a serving general? >> very little has changed in terms of the military situation. north korea has gotten longer-range rockets. the threat to the south korean population is much worse. >> that was the former nato supreme allied commander speaking with bloomberg markets earlier today. isa time for a look at the -- biggest business stories right now. asset prices approached generally fully valued. he said there is not much buffer. have the same view after record stock market surges.

exploring a possible -- spanish wind power firm. oaktree has a 71% majority stake in the area, valued at $1.2 billion. foreign investors are noble assets -- renewable assets. is according to people from a with the matter. joins softbank with targeting the cable carrier. target has a market value of and pay-tv billion providers. that is your bloomberg business flash. few minutes to go until the closing bell. let's look at a stock that moves into the session. we're focused on starbucks down to his lowest level since february. helping to drive the shares lower. abigail doolittle is with us now. abigail: the analysts are

basically saying we have seen all of the slowing growth. what he is talking about is what we all see. basically the fact that there are so many stores everywhere that the new stores do not have a great chance of growing or being profitable. if we happen the bloomberg and tape it would just take a look at the function, this is a map of the u.s. and it shows us all in the u.s., look at this. it is pretty it -- it is pretty incredible. represented here on this map, you can see how they would all eat on each other. targets and airports. it is the main issue fighting against starbucks. the food and beverage innovation has peaked and labor investment apparently may need to be put in play. as a number of challenges. elsewhere.out

can everyone is looking forward thinking they could be a growth grabber. it is 14% of revenue, 6%. should some time on the -- on a phone or cheap if it is likely to happen. this is a five-year chart. you see shares have appreciated last fively over the years. in the last two years, it has been stagnating in the range. a bearish break of the uptrend, and of china does not come on quickly, it seems that is unlike economy could see more selling pressure ahead. the company agave

shot in the arm. been on then has job since april. what is he doing about growth? >> that is a good point. soould probably close those they could cannibalize together. the ceos on -- not in a position to override the current message. i believe that was in 2005 and in 2008, the -- the company really struggled in a big way. they do not want to completely steer the mission -- the messaging. the bottom line is there is a reality check that growth is slowing here and many to figure out how to message it perhaps by the end of the year and maybe the ceo, kevin johnson. i say every time i walk by starbucks, i'm reminded how i just walked past another one so i'm going around the same block over and over. >> exactly right. >> if there were a coffee shop before, we've going there or

deliberately to a starbucks? >> i would personally go to starbucks because i am a starbucks person when that is the option. i spoke with jennifer in one trait of human beings is we want what we cannot have. starbucks is now anywhere. it takes away that desirability factor. i think that is the point of it. there we go. bloomberg coffee. >> thank you. u.s. banks recovered a great deal since the financial crisis. european banks have wallowed in the last years. international counterparts from new york, this is bloomberg. ♪

>> the 10 year anniversary of the decision to freeze funds that were exposed to subprime mortgages. only later on did we realize this was the catalyst in -- that snowballed into the global financial crisis. in the u.s., europe, and around the world. indexropean bank stocks in the white. banks around the world have not recovered from the crisis yet. they would be above the red line. p and banks are in the worst shape. areaw how u.s. bank stocks -- until about 2011 or so. european banks did better than that and then things changed around 2011 and 2012 as europe went through a debt crisis. we continue to see some of the struggles there they look for growth and brexit presents a whole new level of challenge for the banking sector there as well.

>> recapitalizing the american thanks and the europeans weren't. italy is one of the most conserving once for their nonperforming loans. we started to see them deal with that. i saw a fascinating headline about italy and the fact that they are holding themselves in debt, also one of the big issues around 10-11% of the height of the crisis. bank ind about the bond their holdings. a total reduction in sovereign debt holdings. automatically.it one of the things going on as a result -- quite interesting. yields down.

i am talking about what we talked about earlier on in bloomberg markets. look at what is going on with factors that could make in factors -- investors cautious. keyave seen a number of reserve -- key reversals. the down the s&p 500 in the last few days. i am looking at technical reasons. we have talked about this a number of times before. the correlation between the s&p stocks, if you look on the right-hand side, not only that, but in the last year or day is average wedding large amount in the average moving day, it is not as actually -- it is more common than you would realize, the ratio between the average winners and losers has been a levels not seen since the 1990's.

-- not reason for a bear a reason for i bear market but a reason to be cautious. >> a lot of warnings to be cautious of late. take a look at how the market is set up now as we head toward the close. caution there with the dow off -- .2%. second of losses. from new york, this is bloomberg. ♪

♪ julia: "what'd you miss?"

stocks around the world retreating after president trump rants of rhetoric against north korea. i'm julia chatterley. scarlet: i'm scarlet fu. it joe weisenthal is off this week. onia: if you are tuning in twitter, we want to welcome you to closing bell coverage. begin with our market minutes. we did see stocks get a little bit of a leg up in the last hour of trading. they paired their losses but we are still looking at declines for the major indexes. the s&p little change here. the second straight decline. the first today drop for the dow since late june before the 10 day winning streak. a look at whatve is going on in terms of individual movers. scarlet: disney and netflix, we gave you the results yesterday,

earnings e-commerce sales missed. direct tore launching consumer streaming services. a investor still questioning what that means for the company. does it entail more short-term pain for a long-term gain? it's bad news because disney will no longer provide content to netflix in a couple of years. it is no longer going to pay or get that payment from netflix. that means a loss of content as well. it's not the only defense company. lockheed martin -- a lot of rhetoric around president trump and north korea sending these defense shares up on the day. at 1906, a drop of almost -- priceline at 1906, a drop of almost 7%. let's take a look at the bond markets now. we have the headlines on north korea and you see a natural bid for safety. not much going on with the u.s.

tenure yields. we did see them earlier on in the session with a $23 billion 10 year auction. italyn see underperforming there. just above touching 2%. this is an interesting one. , it's trump's comments got one third of the landmass covered by u.s. military base. you can look inside the terminal here, g #btv -- we have not seen much of a reaction. i can't tell you much about the liquidity in this market, but i thought this illustrates the power of the bloomberg terminal. scarlet: i did not realize that guam had debt or municipal bonds. julia: exactly. scarlet: let's move on to currencies here. the dollar turned positive, creeping higher. not really. ticking higher.

, it would beve up the longest winning streak since march. i want to highlight the korean theas well as because of headlines out of north korea and washington. lower at the open. the dollar gap higher at the open on heightened tensions. and it reflects the dollar strength versus the won. ,he hong kong dollar surged rebounding from a 10 year low. we are talking in relative terms here because the hong kong dollar is pegged to the u.s. currency. the hong kong monetary authority announced they will drain liquidity from the financial system. if you look at the hong kong dollar over the last few years, we see a steady weakening of the hong kong currency driven by a wider interest rate cap with the dollar. ample liquidity in that currency. julia: given everything else we

have said, gold trading at an eight week high. and in the copper market, we see that -- the first drop we have seen for four days. you expect a bit of risk pairing. a bit of cross-reference on corn and soybean. the u.s. department of agriculture releasing their world agriculture supply and demand report. and we get the first corn and soybean forecast of the season based on that. discussing the market minutes. scarlet: breaking news from 21st century fox, rupert murdoch's company. it reported fiscal fourth-quarter adjusted earnings of 36 as that beat estimates by one penny. the range was anywhere from $.30 to $.40. this is on the higher end. when it comes to the top line, six $.75 billion, missing the estimate of $6.78 billion.

a beat on the bottom line, a miss on the top line. you wonder about the advertising market for these media companies. entertainment revenue, $1.80 billion, less than expected. and also missing the consensus estimate by share which was one point -- julia: in light of what we heard from disney yesterday in terms of how they will treat espn, what did stocks see with their sports? one of the big questions to me a managinging in partner, a veteran in the media. having worked for industry giants like the new york times. scarlet: great to see you. and after such a wind up, let's talk about disney.

disney came out with this big announcement about direct to consumer streaming services. the stock is down. is that a result of earnings or --it down on the ability >> let's roll back the clock. one year ago, tom stood up in front of analysts and gave the earnings report for 2016. he said, espn is losing subscribers. --came to the media industry tanked the media industry. he came out the next year saying we have a strategic business model shift. we are going over the top. he has known this was going to be coming for four or five years. scarlet: you are singing he's too late. mr. bibb: too little too late. both the disney and espn streaming businesses are up against terms of competition now.

julia: espn is a powerful business. it costs a lot of money but if they manage to execute on this, they have a great streaming service. even too late, it will be a powerful business. mr. bibb: let's break it down. does not have nfl, does not have nba, does not have most of the big college football and basketball games because they are subcontracted to other networks. if he does pay up and capture those rights, he's going to be in the same bind he was with espn on cable. julia: and it's never going to offset? mr. bibb: it will be advertiser sponsored. thedisney channel including kids in juvenile channels will be subscription with no ads. something that bob iger said when it came to distributors and how it affects them. iger: i think

distributors will see this more as a threat than anything else. it is not intended to be that. we are reacting to marketplace conditions and taking advantage of the quality of our brand. and the technology that enables us to reach consumers directly. this case,d in distributors are basically the middleman and disney is cutting out the middleman. mr. bibb: in this case, he bought the middleman, paid almost $3 billion. scarlet: what happened to comcast? fees and the affiliate the subscriber fees, they are the highest paid fees that anybody in the cable world has. $6.61 per cable subscriber. those will start to erode because it viewership is going down, subscribers are going down, cord cutting is increasing, and the cable guy -- they have to make it up on

streaming. if he's not charging money for that, they will try to sell advertisers. let's talk about 21st century fox. do they offer something similar ya? and whether or not the bit to acquire the whole of sky goes through. scarlet: the pending purchase of public share of sky has been cleared and the sky transaction may close by june 30, 2018. those are just plans. ironically, however, it is fox news that is propping .p the broadcast side the trump bump is still prevailing and they are the world right now. julia: should they stick to that? mr. bibb: all of the fox network, despite the primetime losses to american idol -- they still had ad sales.

scarlet: i just want to point out that fourth-quarter cable network programming revenue over it 21st century fox beating consensus at $4.33 billion and andoperating income adjustments for taxes is $1.44 billion, also topping estimates. that part of the business is doing well. mr. bibb: the thing to watch for at fox is that james murdoch is running the company now. they are trying to get more centric and less conservative alt-right. the father, rupert, is letting them do that. will they keep the audience going forward, that is the big question. julia: pushing more to the middle ground is a questionable one given what their ratings are doing. mr. bibb: and if they lose the trump affiliation, they may find themselves even behind msnbc and

some of the other news networks. not to mention cnn. julia: we will come back to it, no doubt. great to have you on. thank you for that. coming up, we will hear from our schools of interview with james bullard. it why he thinks the fed needs to begin reducing its balance sheet. from new york, this is bloomberg. ♪

mark: i'm mark crumpton, time for first word news. britain's ambassador to the united nations rycroft says the u.k. fully supports the trumps stancetration's tough on north korea's nuclear

ambitions. threat and many others, we are united in calling on the north korean regime to halt its nuclear program. see it asat we should one of the many strands -- mark: rycroft added that the rhetoric isn't earning chances for diplomacy. holds the keyyang to sanctions being lifted. five members of the military have sued president trump asking to stop his proposal to ban all transgender people from serving in the armed forces "in any capacity." the service members who are suing anonymously are already members of the army, air force, and coast guard. they say the shift in policy announced on twitter violates the u.s. constitution.

the change in the status of transgender military members hasn't been implemented yet. ron johnson has suggested fellow republican senator john mccain's brain tumor at the after midnight timing of the vote were factors in mccain's decisive vote last month. senator johnson's comments came in an interview with a chicago radio station. a mccain spokeswoman called his remarks bizarre and deeply unfortunate. senator mccain said he voted against the bill because it fell short of the republican promise to repeal and replace obamacare with meaningful reform. is urgingternational kenyan authorities not to use force unnecessarily while responding to protest and .pposition claims the associated press reports at least three people have been shot during fighting between police and demonstrators. amnesty's regional director says

force should only be used as a last resort. global news 24 hours a day powered by more than 2700 and analysts in over 120 countries. i'm mark crumpton, this is bloomberg. julia: st. louis fed president exclusivelyspoke with bloomberg today about why he thinks the central bank should hold off on more rate hikes. bullard: if you recall, i would have reduced the balance sheets first and raise interest rates later. the committee didn't do that but this year, we've managed to get a discussion going. we have come up with a good plan on how to reduce the size of the balance sheet. slow so incremental and so initially, it is almost nothing. over the next year or so, i

prudent waya very to go about this. create policies based on the balance sheet for the future if you need to go back to policy in the future and reducing the size of the balance sheet during relatively good times and allowing that policy space going forward. .t's a good approach if we do it in september, it will be almost negligible initially and will build up over quite a bit of time. >> when you say build up, it does get pretty substantial. you are saying a little bit of tightening to the balance sheet, the economy contained -- can take. mr. bullard: it is one basis point per month, what is that compared to the volatility in the bond markets? >> fair enough. remember when the fed said the balance sheet would start when

normalization was well underway. we have had 100 basis point of rate hikes, right? is that an adequate rate buffer for serving the unwind at this point? i know it will be gradual and -- if things, but go pear-shaped, maybe 100 basis points, right? you don't have an adequate buffer, that's what a lot of people might say. mr. bullard: there was a speech at jackson hole on this topic. she talked about how the fed would react to a future recession if one developed. there's no recession on the horizon today. that we did was have enough ammunition to handle a recession going forward. we could reduce the policy rate back down to zero. reason, i think they

would want to develop policy space in terms of interest rates and in terms of the balance sheets. you felt like you could make moves if you had to at some point in the future. >> you are saying, don't worry about it, once we get to zero, we will go to quantitative easing? mr. bullard: you could do forward guidance and some of the other things. >>'s forward guidance all that effective? it remains: controversial, but some of the study say it was pretty effective. it is hard to say. wewe get back, it almost -- are not going in that direction right now, we are going the other way right now. this is a contingency plan for the future. >> are you saying that we are

almost where -- because of this -- mr. bullard: we are a 2% growth rate economy. sub two percent inflation rate. inflation expectations remain as low as they are based on market managers. i would not see the policy rate moving much from where we are today. >> the dollar is down 8% this year. people are waiting for more central banks to get more hawkish. the fed and the bank of japan, they are having the same problem. inflation is not cooperating. that is a commonality. does a weak dollar make sense to you? what do you see with this? mr. bullard: it does make sense to me. what has happened in 2017, the dollar had a big run before that , beginning in the middle of 2014. retracing some of the previous strengths of the dollar.

during 2017, on this side of the atlantic, we had the week inflation numbers. on the other side of the atlantic, they had relatively good growth numbers. they are happy about the growth prospects in europe compared to coming into 2017. naturally, the stronger european economy and weaker inflation numbers is moving to a stronger euro and weaker dollar. i don't think it passes through from direct trade channels. i don't expect there will be a big effect there. speakingmes bullard with kathleen hays. from new york, this is bloomberg. ♪

scarlet: "what'd you miss?" the s&p 500 has put in 30 closing record highs this year. are there more ahead? abigail doolittle is standing by. guest isthat special erik walden, great to have you here as always. you have been bullish, even calling pullback. you told me something earlier today that the s&p 500 is in pullback season? >> we are still bullish. will getng dynamics difficult because seasonally, the s&p is in its worst performing two-month period of the year. pullback, expecting a -- here is a chart of the s&p 500 with the 50 day moving average.

we are expecting minimal downside risk here. that support level is 2450. the more important level coming at that or is on to yellow line right at 2400. that was where we started to break out in may and tested it in the summertime period. downside risk is limited. that is a 3% decline. a lot of the clients i talked to can't time that or position that. our message is to stay invested. use it. chart, whatthis level would concern you? mr. wald: start with 2400. i love the 20 day moving average. as long as you're above that 200 day moving average, we are in an uptrend. go across asset class area and take a look. the spread between the u.s. 10 year yield and the german ten-year yield.

and these of the intermarket signals we are getting. a lot has been made of the recent downturn in interest rate. ticking lower. is this a disinflationary worry? we look at breakeven inflation expectations, they are taking higher. dig a little bit further. take a look at this bottom chart here. the 10 year treasury and the 10 year deal. this is moving higher as the 10-year is moving lower. the sign that it is moving lower is was going on overseas. risk, that is a signal the is coming from overseas. have to worry about overseas equity. the u.s.. overweight we are ok paying that premium given the valuation differential. speaking of the u.s.,

let's take a look at one more stock market chart here relative to the u.s.. blue, the s&p 500. and the ratio inverted. it all up and i want to make a point that we moved indicators -- sideways, and they are becoming attractive. that white line shows increased productivity. traders are getting a little bit more pessimistic. -- pullback,ck this is something on those pessimistic levels of the year, bulls are ready to head for the door. abigail: great stuff as always, ari. scarlet: abigail doolittle and every wald -- ari wald of oppenheimer and company. a new war of words during president trump's working

vacation in new jersey. he has taken to twitter to criticize mitch mcconnell. this is bloomberg. ♪ who knew that phones would start doing everything?

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mark: i'm mark crumpton. time for first word news. defense secretary jim mattis has sent out a warning and a call for de-escalation to north korea. the u.s. and its allies have demonstrated the capability to defend themselves in the wake of an attack. and added that pyongyang should and down in its pursuit of nuclear weapons. secretary mattis says it includes ensuring the readiness of the missile defense. north korean authorities arranged a giant rally as a show of support for their rejection

of the united nations latest round of sanctions. square for the event. the yuan passed a new resolution imposing tougher sanctions on north korea in the wake of its two long-range missile test in july. french police today shot and arrested a man suspected of slamming a bmw into soldiers in a paris suburb injuring six of them with what officials say a pure to be a carefully timed ambush. authorities checked surveillance video of the area as they search for the attacker. then on the highway near the english channel, police stop what the prime minister calls a principal suspect in the attack. the democratic national committee congressman keith ellison says it is an outrage that president trump has not condemned the weekend bombing of

a minnesota mosque as a terror attack. just beforeounded morning prayers, but it caused extensive damage to the islamic center. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton this is bloomberg. ofrlet: let's get a recap today's market action, little change for the s&p 500 and for the most art, down. stocks did try to stage a comeback in the final hour of trading. the dow falling for the first time in two days. the first today decline since late june. president donald trump is firing back at senate majority leader mitch mcconnell. he said, senator mcconnell and i had a this effect activations, but i don't think so. why not done?

we are joined from washington, gton.he'll -- from washin sahil, what can we read into this, i guess? about their relationship going forward on other aspects of policy? trump wassident responding to senator mcconnell's remarks that he made recently in kentucky about the that the reason, in mcconnell's view that the senate is seen as having not accomplished much in the president's first 200 days, his expectations were set too high. he blamed the president for setting expectations that high. he described him as a newcomer and not quite familiar with the democratic process and the way things work. it did not sit well with the president. you had his social media director come out and go after senator mcconnell on twitter.

and in the last hour and a half, the president himself make the highly unusual move of publicly criticizing a senate leader and member of his own party. again, unusual. it is, i think -- it bodes ill for the relationship of these two going forward. the relationship has already not been very good. between another feud president trump and the established republicans represented by mitch mcconnell. tell us about the background of these two men. amazing caseve an study in two different governing styles. the freewheeling spontaneous approach of president trump that he is famous for. for theably the basis way this white house functions. and in mcconnell, you have a rigorously disciplined and methodical leader who is

extremely strategic and never speaks off or out of turn. and is much more focused on an endgame. these two are extremely different in the way they operate. i think some of that is look,nly precipitating -- this is the beginning of summer criminal nation after the republicans set a very ambitious 200 day agenda. senator mcconnell also did this, promised obama care repeal. about tax reform, infrastructure, it would be a bonanza of legislative activity. none of that has happened. a lot of the first 200 days has been mired in infighting and chaos. they are all trying to get a handle on what really happened. there is finger-pointing there. this: we already asked you to some degree and you said it bodes ill for the two of them working together, but just in

terms of getting things done like tax reform which is what we are looking at now, how do we see this relationship developing. ? i'm sure he understands he can to get this done without having the support of miniter -- senator mcconnell. priority. the health care issue. it they did everything they could to try to get that through and they couldn't even get to a conference committee between the house and the senate. tax reform, in many ways, is more complicated. you're affecting 100% of the economy there. the basis setting the stage for the ability of this congress to function and the ability to work with the president.

things have not gone particularly well there. they've got to work differently and approach the whole debate. sahil kapur joining us from washington. thank you. we will stay on politics because former president's bill clinton and george bush appeared. it here is what both of them had to say reflecting on their time in the white house. you are in they oval office, you learn the secrets, nuclear codes, the crises we might be getting into. what is the biggest surprise you found? clinton: how easily i could be turned into a two dimensional cartoon instead of a three-dimensional human being. you have to discipline yourself

about what to talk about, how to talk about it. you have to keep remembering that there are all these leaders between you and people that didn't used to be there. that surprised me. i thought i was a pretty good communicator. i fell on my face for five times until i figured out how to do it. president bush: right after the inaugural parade, i decided i would go to the oval office to see what it felt like. unbeknownst to me, and the car had called upstairs and asked dad to come in. i was sitting in the oval office just taking it all in and in walks my dad. welcome, -- i said, welcome, mr. president. he said, thank you, mr. president. >> what was it like when your mom walked into the white house? president clinton: she started laughing out loud. bush: my mother said,

i guess so. president clinton: get your feet off the jeffersonian table. surprisingey gave answers about their biggest achievements as presidents. ask what were you most proud of having done? president clinton: i was most proud that we had the broadest shared prosperity and 50 years. from the bottom 20% income in percentage terms and increased more than the top 20%. and nobody was matted anybody else over it. it was shared across racial, religious, and regional lines. did i abolish inequality? no. and you can't. but we had more shared prosperity, including three budget surpluses. >> what would you say in eight years? president bush: my daughter's love me.

[laughter] it's a challenge to have teenage daughters when you're the president. laura's guidance and love, our family unit strengthened. i think that's a great accomplishment. i was taking about what my mother would say if i was the u.k. prime minister. scarlet: she would have to see you behind the desk. [talking over each other] she just laughed. it was charming the way george w. bush and bill clinton came off. the weight of the world had come off of them. julia: apparently, when they were talking about this, they were asked what makes a good leader and they came out with strong character, open to different points of view. they begin with the end in mind which is always interesting. the final one was, you have to

be humble. and seeing them there after the events -- getting a sense of that. scarlet: and bill clinton's answer about discipline. he said delay is between him and the people he wanted to communicate with, presumably the he had to communicate with everyone and those are use right now. julia: discipline and communication. you can catch the full interview with president clinton and president bush tonight at 9 p.m. eastern time right here on bloomberg. scarlet: it's going to be a good one. coming up, we will assess the disappointing returns for quad funds. what does it mean? from new york, this is bloomberg. ♪

scarlet: "what'd you miss?" he quad fund robot takeover has been postponed for now. they are showing weakening returns. we have been closely tracking this industry and is here with the latest. >> it is quite remarkable when you look at these returns, because the companies we examine are called market neutral. they take a fund position and they have been doing quite incredibly over the last decade. we looked at clinton group and they have yet to have a down year since 2006. that includes 2008. financial crisis, tech bubble, no down here. all of a sudden, in the middle of last year, they started posting consecutive falling months and they are headed for

their worst year on record. exceptions toys this rule. it can't be a coincidence among the people we've talked to because it is so consistent. julia: what are the reasonings they are giving? >> three main reasons. the first that it is crowded. the metaphor is a poker table. think of the computerized traders as the poker players. the smartest people there, they take advantage of the dumb money, people that don't know what they are doing. all of a sudden, you have everybody adopting quantitative strategies or moving to passive investing. all of a sudden, this dumb money doesn't exist or it is in passive funds. you can't predict what it's doing. brilliant move or players are playing each other and it's hard to get good returns. i won't dwell on this too much

because we hear about it all the time, low volatility. it is hard to get returns when things aren't moving around. julia: if you're following a trend, it's not your friend in this kind of thing. scarlet: stick with an index fund and you will be doing just fine. quant is a really broad category, so where are we seeing underperformance? >> one thing that hurts is when you take a short position. finding shorts is really difficult in this market right now. some of the difficulty also are with not high-frequency when we talk about hft or flash, not that quick. but a little bit shorter term, they are essentially called that -- statarb. , factorfinal one investing. if you've heard of smart beta, this is the circuitry behind that. betting on stocks that are low volatility, don't move around a

lot. betting on value stocks, growth stocks. the had their worst record on year going back to 2008. iso want to say that it mostly in the equity space we are seeing this issue. what you said about the dumb money reducing, in a sense. what proportions of the market are actually incorporating some kind of factor process? what are we looking at here? is popular ishat using factors for portfolio construction. let's say you are a growth manager. let's say you want to buy growth stocks. you want to use quantitative processes and see that it is quantum vision where you are. they are deconstructing portfolios, adding the process in. and whether knowingly or not, they are having more bends to

the portfolio. in a recent bloomberg conference i was at, we asked the audience of fund managers, how many of you are using these factors? 43% said they were. a majority that weren't said they were interested in doing it. markets reporter for ws, thank nurse -- nes, than you. capitalize on a following in indonesia and shift focus from hardware to software? this is bloomberg. ♪

julia: "what'd you miss?" blackberry is still a big hit in indonesia. and with me. blackberry'sains biggest markets where you'll find john chen this week. today. be speaking later it to have you on the show. i am the only person i know that actually still likes blackberry. >> what is the strategy? >> they stopped making the blackberry smart phone. they licensed the design out, the specification to other places. indonesia happens to be a big market for black buried -- library.

blackberry.ket for talking to partners with officials on how to expand blackberry. scarlet: it's curious that it is such a big hit in indonesia. they are also trying to take advantage of that partnering with local companies. cracks may want to expand that partnership with the government. they are about using their secure software. it has really been the big sell blackberry. you remember these hacking scandals, it's been pointed out the blackberry platform is one of the most secure out there. they're focused on licensing out that software. what they call sort of the enterprise of things. the internet of things. they're looking at the enterprise of things. that is really the growth market. trade and immigration are

also critical factors for this company. john chen himself as an immigrant. he came to the united states when he was younger. and he has a very strong view on immigration. and also how he thinks it's going to affect the tech industry as well. he had strong views on u.s. china relations. he's testified in front of congress. , tiedeen the chairman between the u.s. and china. we will be talking not just about his business and where he takes the company from here. the stock has gone up just about 20% as they took over back in 2014. the stock will continue to rise. goldman sachs came out with a sell rating on blackberry, saying that they can't see where the fundamentals will drive the stock any higher. so there will be a lot on the

agenda with chen. scarlet: blackberry a software company and not a hardware company. they also do a lot with cars? >> 60% of connected cars globally use blackberry software. it is interesting. you would not think they would be the leader in that but they are the leader in terms of connected cars. john chenanother area wants to accelerate that growth, so to speak. but we've had sales numbers come out of the u.s. and it looks like that market is stagnating here in the united states. there are concerns about the challenges of trying to connect those cars. the all about ecosystem, so that is incredibly fascinating. betty, thank you. you can catch the interview today on bloomberg daybreak: asia.

in the meantime, let's to the bloomberg business flash. cvs and walgreens sued for overcharging on copayments. medicinethe fact that was cheaper. they clawback the payments for the managers which pocketed the difference. walgreens had no immediate comment. goldman sachs talking about bitcoin. dollarsyst said real are not worth the cryptocurrencies. bitcoin has 200% this year with -- it did notng discuss whether to buy the digital currency. all street investment banker bonuses will rise while trader bonuses will stay flat this year according to a compensation consultant. advising and transaction fees rose four of the five biggest firms last order.

it offset lower trading results. hedge funds and asset managers should hold steady overall due to revenue pressure from the index funds and passive investments. and that is your business flash update. julia: what you need to know to gear up for tomorrow's trading day. from new york, this is bloomberg. ♪

scarlet: don't miss this. data including u.s. ppi. bill deadly talks about wage inequality at 10 a.m. eastern. and i will be looking at earnings. it macy's, nordstrom, snap, blue apron all report earnings tomorrow. --rlet: and facebook ceo oh coo sheryl sandberg at 5:30 p.m. eastern time. julia: that's all for "what'd you miss?" scarlet: got you outnumbered. the dinosaurs' extinction... don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here.

find your awesome with the xfinity stream app. included with xfinity tv. more to stream to every screen. alisa: i am alisa parenti from washington and you are watching "bloomberg technology." president trump took to twitter to criticize mitch mcconnell in the aftermath of the party's

failure to repeal obamacare. he says republicans have been talking about replacing the health law for seven years. trump firing back after mcconnell said his inexperience and politics gave him excessive expectations about the process. five members of the u.s. military suit president trump and top military brass in a bid in reaction to his banning transgender members from the armed forces. they say it violates the constitution. deputy chair and minnesota congressman keith ellison said it is an outrage that president trump is not condemned the weekend bombing of a minnesota mosque as a terror attack. no one was wounded in the attack. ellison is the first muslim elected to the u.s. congress. ron johnson suggested john and the brain tumor after midnight timing of the vote to repeal obamacare were fact