led by the candidate has rejected the results. international observers are urging all losing sides to respect the final vote and resolve any potential disputes in court. president trump has another warning today for north korea. the president tweeted military solutions are now fully in place , locked and loaded, should north korea act unwisely. un willly, kim jong-i find another path. trump has warned pyongyang not to conduct a missile test near guam. japan has started to going land-based patriot interceptors in response to the threat to send ballistic missiles over its airspace. the defense ministry said today ,hat they are being deployed expected to minimize the risk of falling fragments.

we will have more on north korea next. strong wind and rising temperatures are stoking wildfires in portugal after cooler weather brought a beef rest -- a brief respite. some 700 firefighters are battling wildfires, located around 90 miles. the emergency management service said thousands of acres of portuguese woodland was charred and the days, 939,000 acres across the entire eu. powered by 2700 journalists and estimate -- and analysts in over 120 countries. we need to make

sure americans have the training they need for jobs in the future. i want to thank ivanka, my daughter, for her leadership and efforts. she's been working very hard to create new economic opportunities for women across america. speaking with the chancellor of germany helping women all over the world. we have made an enormous gains and americans back to work. the stock market is at record highs. unemployment is at a 16 year low. manufacturers have never expressed more optimism about the future. the optimism has been truly incredible. recently, foxconn has announced it will invest 10 billion dollars to create a new factory in wisconsin. jobwant to make sure every that comes back to our shores is filled with american workers. --have a lot of countries companies moving back to our country.

looking for the site and putting it out to seven or eight different states. they will be very happy building in the united states. that is why in june, we've began a historic initiative for workforce training programs. and apprenticeships are one of the many avenues that lead to the great jobs completely debt-free. and who knows more about the word apprentice than donald trump? you earn while you learn. so important. we love getting up in the morning and going to work and a lot of great things involved here. we are here today to discuss additional steps that we will be taking to expand apprenticeship programs. especially for women and minorities, where women have been truly underrepresented.

i guess you could say underrepresented for many decades. technology has become a part of nearly every industry from manufacturing to retail. we want all our citizens, every single citizen including women and minorities, to have access to tech jobs and other stem related jobs. american workers and are the best there is anywhere in the world. they built the skyscrapers of our cities, the roads and bridges and will be building plenty of new roads and bridges. the technology that has revolutionized so much more, as you're well aware. talent, and grit has always put america on top. we will remain on top at a much higher level than we are right now. speaking of now, it is our job to make sure they have the

training, immediately, to lead us in the future. we have great hope. we have a great future in this country. been morenever optimism. and unemployment is at a 16 year low. have all ofed to you. mr. secretary, thank you very much. ivanka, congratulations on working so hard. any questions? >> what do you mean by military solutions are locked and loaded? trump: we're looking at it very carefully. i know they are going to fully understand the gravity of what i said. they will understand exactly what i said and the meaning of those words. those words are very easy to understand. >> any progress on the diplomatic back channel? president trump: we don't want to talk about progress with the

back channels, we want to talk about a country that is misbehaved for many years. decades, actually. through numerous administrations. they did not want to take on the issue and i have no choice but to take it on. i believe we will be very successful quickly or we will be successful in a different way quickly. there is merkel says no military solution to fight with north korea. why is she wrong? president trump: she might be speaking for germany. she is a friend of mine, a very good person. she is a friend of germany. she is not referring to the united states. >> what do you say to critics rhetoric isr raising tensions? president trump: it's because it's me. that we haveou tens of millions of people in

this country that are so happy with what i'm saying. they are saying, finally we have a president sticking up for our nation and sticking up for our friends and allies. and this man will not get away with what he's doing, believe me. threat which he has been uttering for years, and his family has been uttering for years. if he does anything with respect to guam or any place else that is an american territory or un-american american ally, he will truly regret it and he will regret it fast. thank you all very much. that was president trump speaking in new jersey, holding a discussion on workforce apprenticeship with labor secretary acosta, and education secretary betsy devos. along with his daughter devonte

the trump and her husband jared kushner. husbanda trump and her jared kushner. said is what i mean and he doesn't want to talk solutions.channel that the u.s. will be successful quickly or perhaps in a different way. he answered questions about raising the rhetoric. critics say he's raising the rhetoric and he says it is only because he's the one saying it. if any other president said it, they would praise the statement. i was struck at the end when he issues anm jong-un overt threat which he has or does anything with respect to guam more anything else that is an american territory or ally, he will regret it. again, it raises the question of whether the u.s. is prepared to act on a threat or on an actual action.

and i'm going to bring in margaret who is bloomberg's senior white house reporter. the president saying he's being very clear here although there is a little bit of medina's here -- muddiness here about what would trigger an action by the united states. we haven't had a consistent message. margaret: yeah. me you know, if you asked half an hour ago what the theme of today is, i would have said even though the president sort of seemed to be doubling down on his language, he was actually dialing it back. secretary mattis and these other officials. making it clear that the u.s. would respond very swiftly if north korea actually did anything. what you heard now is actually sort of a mixed message. he seems to be poking the stick bluff,ain, calling his

perhaps even more. interesting development is the response may be off-the-cuff or maybe not to the german chancellor's approach to this saying that i hope she was talking about germany. let her speak for germany. get togethernt to at the end of this week that what you see is the cicely this question. decided notump has not pushm jong-un everyone around. they decided to call his bluff to some extent. if they go with the missile .isplay, the planning of phases under what circumstances would the u.s. respond and how? the president is not going to be split about that yet. hisnd bringing up that

representative is striking a different tone, traveling across california and visiting tech companies. as tillerson wrapping up well as. wouldn't they be back in the u.s. on the east coast speaking with president trump and holding meetings? the summit would suggest this is empty rhetoric. what are you hearing with regard to the president eating up with his team and discussing this in greater detail? just today, he will be meeting with what he calls a diplomatic thing -- h.r. is to thetillerson public schedule. the president has been briefed throughout the week, multiple times a day as the situation

evolves from the national security team. and we expect early next week for him to have this reef visit to the white house. details of that still emerging. this is what the entire administration is taking seriously. and discussing with a little more deliberation then perhaps this spray here. nonetheless, it is the sort of .one, volume, the instinct when you are asking about how calibrated the messages and what the administration has a good out, it is threshold for various responses. coming up, there has been a growing chorus of people warning of risks in the credit market when it comes to high-end

yields of emerging markets. we spoke with bond experts and we will get a discussion next. from new york, this is bloomberg. ♪

scarlet: nerves gripping the market this week. one person said if you're waiting for the catalyst to show itself, you will be selling at a lower price. it's not a time where you can not worry about the risk of it. the time to do that was 18 months ago. michael and i talked to a panel of six income guest and mike started off the conversation illustrating factors that are causing concern. >> i want to start with a chart that basically shows what jeff good lock is talking about. spreads.t shows

the yellow line. average and then duration. duration really high, spreads compressing. , iss the terror we heard that justified? rightf wright to start -- to start pulling back? >> we don't disagree. at goldman sachs asset management, we've been taking risk down steadily over the last couple of months. we are targeting underweight risk assets. it is nuanced. we don't worry particularly about the current fundamentals of the market. healthy, there leverage is high, but it is not increasing. at very low cost to debt. we don't expect it to pick up soon. are you being adequately in theated for liquidity

market? we think we are facing a time when volatility could be higher. seasonals matter in the four months we are entering right now. high-yield tents to underperform and we see triggers for volatility to go up. for that reason you have been underweight high-yield. how long have you been underweight high-yield? how much performance heavy had to give up -- have you had to give up? >> since early this year. favoring equities for the risk-based asset. -- assets. high-yield looks expensive. but everybody faces the same thing. gdp improves. i just don't think clipping coupons is worth the risk you are taking. scarlet: what is the risk likely

to be? to lighten up or to be in high-yield? we have seen a little pullback but this is nothing on the broader scale. we would look to at least move back to an even wait position. >> what is it people are worried about when you are looking at duration? you are looking at sensitivity to rate moves. what moves at this point? >> i think with regard to , a gets backcerns to comments that have been made. am i getting adequately compensated for the risks i am taking on? those decisions oftentimes are just made blindly.

our caution tone to investors is areeally focus on what you investing in. do you know what you are buying? do you know your position in high-yield? at the last few years, it has chased yield. investors don't know oftentimes what their total exposure is. it is time to focus on what you own. time to de-risk. >> just because of the length of the expansion? when you're talking about the normal horses of risks, they are going out of their way to say we are not going to move the markets. we're going to be very slow. >> we believe what the fed is telling us, that you need to listen to the fed. aboutk despite concerns if it will move in december based on inflation, our argument

is that they will. they are talking about this gradual path. clearly, to us, what we are currently in, it has legs. it is really two years down the road at the earliest. if you look at the equity markets, there is volatility and we expect the correction there. equity and high-yield moved hand-in-hand and there is room to run. it's time to be cautious also. that was craig bishop, rachel golder, and ryan really at the wells fargo investment institute begin earlier today. julie: and speaking of caution, it has been a big week in a bearish way for retail stocks. the biggest laggard on the week is macy's. it down about 12% after reporting the tech quarter earnings. jcpenney down 19%, 17% in a single day on it disappointing earnings report. joining us is abigail doolittle.

it has been fascinating because it's not like people thought retail was doing fantastically well. but it seems to be worse than people expected. abigail: to some degree, investors are throwing in the towel. it's a good point you make that there have been huge declines and this underperforming sector. you would think investors are prepared for this. macy's and kohl's earlier this week actually beat, but it came down to guidance. investors disappointed. and jcpenney, what a mess. was on gross margins miss. they did maintain the full-year guide. that is a positive. it looks like the traffic was really the issue. and to the point of investors throwing in the towel, let's look at the chart. it's been a long-term chart of jcpenney going all the way back. at one point, the stock had been above $70.

than five dollars, a four dollar stock and close to the levels all the way back in 1981. that is just to the degree the investors of thrown in the towel. , julia.with you there's a pretty big short interest on the stock of 39%. scarlet: and next week, we get the big one. walmart. been doingl mart has very well. investors have been looking for $123 million in sales. target has been lumpy year. -- lumpier. i was think of these companies of being -- as being similar. the target is sort of a fraction relative to walmart. it's a highlight the difference that these companies, their performance on the year -- this is g #btv 1904. we see walmart up 20% on the year and target on the lumpy performance, down about 20%.

out, by want to point the way, $120 billion or something? amazon was $38 billion. just for perspective. from new york, this is bloomberg. ♪

scarlet: this is bloomberg markets. i should say, this is "what'd y ou miss?" the dow mounting to new highs, but treasuries are barely moving as well. this chart shows the spread between the high and low yield of the day for the 10 year treasury note. if you go to the far end of this chart, it is currently stuck in the narrowest monthly range since 2006. so far, this monthly yield has been as high as 2.3 1% and as low as 2.18%, a spread of just under 14 basis points. we haven't seen that happen

since february of 2006. july is notoriously volatile for equities so you never know what is going to happen. market, perhaps, underpricing is monetary policy. and people are reminded about geopolitical risk. investors have been diving for cover over the last week or so. just where are they doing it? that is the question. this chart gives you some of the answer. enough. interestingly bitcoin has far outperformed the u.s. tenure treasury note. it also has outperformed gold. as well as the yen versus the u.s. dollar. the traditional havens over the past month have not been performing as well as bitcoin. we don't know exactly why people are buying bitcoin. are they concerned about geopolitical risk? do they want to hide their money somewhere? who knows. scarlet: more of a risk asset at

this point that a safe haven. market closes just minutes away. let's take a look at how the indexes are trading. we are still higher for the day. the s&p up by five points. this is bloomberg. ♪

♪ >> "what'd you miss?"

it was the worst week for the s&p since march, the biggest weekly gain for the vix since 2016, but markets are showing signs of stabilizing after days of conflict between the u.s. and north korea. i am julie hyman. scarlet: i am scarlet fu. julie: if you are tuning in live on twitter, we want to welcome you to our closing bell coverage every day from 4:00 to 5:00 p.m. eastern. scarlet: u.s. markets are clinging onto gains. there is a little bit of volatility. it's more like a little bit of the stumble in the last 90 minutes of trade, but we are still looking at gains for the day. not for the week, however. we got the long-awaited inflation report that shows generally the fed has reason to be patient in raising interest rates. julie: definitely so. cpi is what scarlet is referring

to. it's the fifth straightness -- s traight miss. scarlet: investors also reacting to earnings. jcpenney shares, closing at their lowest level since 1982, off by 17%. the company reported declining posted at quarter and deeper loss than analysts expected. graphics chip maker, having its worst day in more than two months, down by more than 5%, but this is a stock that has been on a tear as of overbecause of optimism sales of computer games and video games, along with a connection to bitcoin. that was a disappointment to some investors. snap, trading at its lowest levels since its ipo. the growth, falling short of estimates. it is the user growth that is of concern.

it's the same rate that investors expected. julie: let's get back to cpi and the reaction to that. i want to look at the bond market for that reaction. we saw the two-year yield, we saw it down on the day by three basis points, reacting more than the long end of the curve. 10-year fell in the immediate aftermath of cpi and then kind of bounced around. to give some details on the cpi cpi, just up 1/10 of one thing percent -- 1%. the fed funds futures, having an interesting reaction to that cpi data. we are looking at 25.5% odds we are going to see a rate increase in the summer. it has been declining.

the fed might be, as you said, a little more patient. patient.a little more let's talk about how it is playing out over the currency markets. dollar-yen,at the the dollar has lost ground against the yen for the fourth straight day. euro, veryside, the much in focus, gaining for the days, time in five holding near a 2.5-year high, all of this coming before mario draghi speaks at jackson hole in about two weeks. there's been a shift in thinking that he might say something to the way for the removal of extraordinary actions. looking at the euro chart, you have to wonder if a stronger euro will remove the necessity to say something. it all goes round and round. indeed.t does i also want to look at commodities on the week. we saw another weak week for oil

prices. it got to $50 a barrel yesterday and then raced back down again. this was a week in which we had an opec meeting. we also had opec raising its demand forecast, but at the same time, opec members pumping the most ever, in part because of an increase in libyan production, along with the geopolitical rhetoric. what did that do for gold prices? gold, having its best week since asil, up by more than 2.5%, we saw investors look for what they perceive as a safer place to be, risk aversion coming back in force. scarlet: those are today's market minutes. let's bring in cameron christ, macro strategist at bloomberg. we are going with our in-house people. cameron, thanks for joining us. vince. let's start with the vix.

up 55% for the week. we are at a 15 handle now, so it is all relative, of course, but there is research that shows when the vix jumps this quickly, there's reason to buy the dip. cameron: the vix started in 1990. the one-month average vix is below 119. on 24 separate occasions previous to this week that has happened, and believe it or not, the s&p 500 in month later has been higher on 24 of them. 27average, you've made about basis points. there has generally been a drawdown. noteast for this little

statistically significant study, it sort of pays, it kind of pays to buy the dip in a lowball environment. julie: something else we cited on the blog today is another way of looking at this, which is vix ack -- you can see the vix three-month lower than the vix one-month. it's unusual. typically, we expect people to -- a strategist that one of your colleagues cited was, we have seen a bounce again. it seems there are multiple indicators that this week was just a blip. cameron: if one assumes we are going to be in a very lowball environment. i think there are other reasons to think that maybe the volatility should increase on a

more trend basis. interestingly, single stock calls didn't increase this week. julie: they also didn't go down so much. exactly. the average 10-day realized volatility of the stocks on the s&p 500 has been about 20 all week. is that earlier in the week and for the last week or two, there have been no correlations in the index. have to stocks have gone up. half the stocks have gone down. nowhere.ve gone this week, we have had an increase in correlation. on average, the stocks have been more student body right or student body left, or in this case, student body down. scarlet: we talk so much about equities and how they finally responded to some of the volatility or jittery headlines. in currency land, it is as if

everybody fell asleep. vince: today. today, what we have seen is positioned to remain ahead of this weekend. this weekend could promise to be very interesting, very turbulent. scarlet: are you referring to north korean headlinesscarlet:? vince: these things tend to happen on sundays. people have slowed down their positions and backed things up. when we have high volatility, you don't need a great deal in terms of position size to get a big bang for the buck. you get the same sort of result either up or down. scarlet:scarlet: when you look at different asset classes, which is your leading indicator? is it high-yield? vince: i'm not a fan of gold, but it is looking like it wants to go to $1320. models suggest we have another $30 or $40 in it. that is one of the asset classes that people will gravitate to in environment, and if

north korean tensions continue to play out, that is where we are going to go. julie: what is your feeling about the haven indicator, if you will? the flipside of volatility is, where is the money going? if it is going to gold or the yen, does that indicate -- i find it a bit per verse because a bit perverse because of potential nuclear problems on the korean peninsula that you decide to pile into the country next door. bell,vlov is ringing his and all of the currency dogs are like, let's buy some yen. julie: the yen haven trade has been there for a long time, and it doesn't fundamentally add up. you've seen euro-swiss. the swiss franc has been weakening quite sharply, and that has been arrested as people realize, maybe i will buy some yen,rone instead of some but listen, treasuries are sort

of your go-to, which is why bond markets perform so well. the ancillary issue is people price out the fed. is aully not, but if there proper incidents, it is hard to see the fed moving forward with any monetary tightening. julie: when you say fundamentally if these traits make sense or not, do people think something is going to happen with north korea? is that why we saw action this week? our people pricing that into their -- are people pricing that into their models? vince: i think it is more along the lines of what was said a couple days ago, have 5% or 10% in gold as a hedge. this wouldght happen, the korean currency would weaken considerably. it is still up this year against the dollar. with the fed, regardless of where the north korea situation is, you've got to-year deals at

year dealsnds -- two- at the fed funds rate. the odds of them hiking the rest of this year are relatively nil. thing on inflation, as we saw once again today, the ability -- we saw-inflation, as once again, the ability of the fed to argue inflation is not going up begins to not hold water. julie: thank you so much, cameron crise, and fx strategist, vince cignarella. what do those lower-than-expected inflation numbers tell us about the economy, and what should we expect from the fed? we talked about it a little bit. we are going to talk about it a lot more. from new york, this is bloomberg. ♪

mark: i am mark crumpton. president trump has reiterated his threats against the north korean regime. speaking to reporters at his golf course in new jersey, the president said kim jong-un needs to watch his words and actions. threate utters one the in the form of an overt threat, which, by the way, he has been uttering for years and his family have been uttering for years, or if he does anything with respect to glom or any or anyplace- guam else that is an american territory or american ally, he will truly regret it. tok: the president went on say that the north korean leader will not get away with what he's

doing. the escalating war of words between the u.s. and north korea is alarming international leaders. russia's foreign minister says moscow is deeply concerned. german chancellor angela merkel called on the united nations security council to continue to address the issue, and japan has begun deploying land-based patriot interceptors as north korea threats to send ballistic missiles over japan and landing guam. the u.s. congress has given final approval to a bill aimed at trimming a backlog of veterans disability claims. the house approved a bill when it met briefly friday, sending the measure to president trump. the legislation would cut the time it takes for the department to handle appeals from vets unhappy with their payouts. the house is on recess, but a handful of lawmakers gaveled the chamber in and out of session that lasted less than five minutes.

police in texas have released surveillance video last month showing a car plunging seven stories from a downtown austin parking garage and barely missing another vehicle as it landed in an alley. within moments, people ran to help pull the driver from the wreckage. authorities say the accident happened when the car drove through retention wires on the seventh floor. the driver of the suv was not hurt. a day news 24 hours powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. scarlet: the u.s. cpi data that dropped this morning came in below analyst estimates. year-over-year inflation is still below the 2% target. what is driving this trend, and what does it mean for the fed's rate hike path? let's bring in our bloomberg senior u.s. economist and a reporter for "bloomberg news." when you look at these

underlying elements that go into cpi, what stands out to you as one of the big contributors to the shortfall? had a number of one-off shocks to inflation data over the last several months. first, it was the verizon cell phone thing. this month, it was a big drop in hotel rental rates. if you look under the hood, you look at the biggest component of the cpi index, it is the house prices component, and that has been slowing the last several months. if you cut through all the noise and take that out, we are seeing a slowdown in that main component. this is important for the fed. julie: we are showing it. matt: it is the white line here. maybe we are settling back to more normal levels, but this is important. if you look at all the components in the core cpi, this is what we are talking about.

this is the component that has the traditional relationship with the unemployment rate. you can't really be too confident that a stronger labor market will necessarily generate higher inflation. scarlet: it doesn't matter what the one-offs are either. the central part of it is a big issue. whether it one-offs, is cell phone plans or drug pricing, if there is always a one-off, should that be factored in? like, can't just exclude, we are going to exclude this thing this month and exclude that next month. you have to look at the full picture, and the full picture is a broad-based deceleration in prices. on, and we going don't see much of a rebound anytime soon. scarlet: what fed officials have been talking about, they've been talking about these one-offs

falling off the calendar. what does that say to you? it sounds like they can't wait to get past it, but they don't understand what is driving inflation lower. yelena: janet yellen talked about those idiosyncratic prices. from exclude drug prices the calculation of course cpi, we still see deceleration, a significant deceleration, since the beginning of the year, 40 basis points in core cpi excluding services and prescription drugs. you can't just blame it on those two factors. ise and more, the fed realizing that is not the case. we heard from very dovish fomc participants, but we also heard from president dudley and president kaplan who mentioned inflation is probably not coming back to the target level anytime

soon. julie: at some point, does inflation become a less important part of the fed's mandate? does it just start to not ignore it but not to weigh it as heavily as the employment picture, or does it prevent the fed from raising rates? matt: that is the big question about.een wondering despite the strong job market, will they start to pay more attention to the shortfall in inflation? i don't know if we are necessarily seeing that coming through in the fed speak. you do have this belief in the phillips curve relationship reasserting itself, so that kind of implies if the unemployment rate keeps falling, is going to be hard for fed officials to shake that narrative, that idea that they need to keep raising rates despite the low inflation. if you look at the components of inflation, there are so many things you can .2.

that's part of the problem with the core cpi. you can go through so many components, and they do not have much correlation to the unemployment rate. you are talking about things like auto insurance, health insurance, things you wouldn't necessarily expect price increases to accelerate. julie: with the inflation report, we have seen the estimate for when the fed is going to raise rates. scarlet: you mentioned how the odds of a december rate hike are now 25%. 50%odds being higher than doesn't happen until june of next year. does this have any bearing whatsoever on the fed's plan to reduce its balance sheet? is there anything that would prompted to hold off, or does it feel a rush to rebalance its interest rate? yelena: the big question for the balance sheet unwind is whether we are going to get a debt

ceiling debacle again or not. that is a big issue for this fall. that would push the balance sheet to unwind. it seems like the plans are all set, and they are ready to go on this front. unless we see something really tragic happen, we are probably going to see the balance sheet unwind this fall, but it does raise a lot of questions about interest rates. scarlet: of course, we will get more of a sense of what the fed thinking is when we get the fmo ocu minutes next week. yelena, matt, thank you both. coming up, germany's election season heats up. we will take a look at the race as it stands and the issues driving the campaign. from new york, this is bloomberg. ♪

scarlet: "what'd you miss?" elections in september, and campaigning is underway. reporter matt miller filed this report. matt: german chancellor angela merkel kicks off a 50-stop campaign tour before the september 24 election. she is the clear favorite to win with a 16% lead over her next biggest challenger martin schulz from the spd, but the party does not want to be complacent and assume they will win. things have shifted very quickly around here. and the cdu were not can now the most important issue is going to be the diesel issue. this in rupp did in the u.s., in germany, it's

become a massive issue -- this the u.s., in germany, it's become a massive issue. one in five jobs is in some way connected to the auto industry. that doesn't leave a lot of room for the spd to work against her. for example, the minister on volkswagen's board happens to be a spd minister. they won't be able to push her too much on that issue. they also will not be able to push her too much on the refugee issue since she has done a great job of occupying the center. strengthbeen merkel's on every issue. she holds the center, takes credit for all the victories she achieves, and she manages to spread the blame among her coalition partners. spd right now work in a so-called grand coalition. a big question for after the election whether she wins or loses is, what will be next

like?ion look if she wins, will she continue a ornd coalition with the spd, would she work with smaller parties like the green party? if the spd manages to pull out a victory, will they work with the liberal greens or the left? will they be able to put together a coalition with some of the smaller parties, or will they have to look at a grand coalition? the coalition question is the biggest one right now, and it looks like merkel is the clear favorite to win. matt miller, berlin. julie: so nice to see matt miller, even on tape. coming up next, what happens when north korean overconfidence meets an unpopular american president? find out next. this is bloomberg. ♪ ♪

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mark: time now for first word news. president trump said north korean leader will quote regret it fast if he continues his threats to u.s. territories and allies, another warning that the u.s. is willing to act swiftly. we'll have much more on north korea with peter atwater from financial insights. and madureo wants a face-to-face phone conversation. he assembly has broad pours to rewrite venezuela's

constitution. he u.s. imposed sanctions on venezuela. after republicans' attempts to repeal and replies obamacare, the president is now fully committed to tax reform, that's according to house ways and means chairman kevin brady, who spoke today. >> the president is all in on tax reform and how critical it is to the economy and his presidency. so i'm pretty optimistic about his ability to use his unique bully pull pretty to make the case of what we have isn't working and how simplicity in fairness and growth will work. mark: they are looking to secure a major legislative victory. los angeles is taking another step towards the 2028 olympics despite lingering questions bout future costs.

the vote comes less than two weeks after the city announced an depreement with international olympic leaders to host the 2028 games while ceding the 2024 games to paris. global news 24 hours a day powered by 2,700 journalists and nalysts in over 120 countries. scarlett: u.s. stocks took a little bit of a stumble in the final 90 minutes of trade. but clung to gains at the close, although it was a down week overall. it's now trading at 15 handle, much higher than last week. but still in line with fairly long-term averages. julie: what did you miss, markets are spooked as president trump dials up rhetoric from fire and fewer to now locked and

loaded. market watchers weighed in on that earlier. >> the reach for yield is apparent in every asset class. we know the chase for yield continues. >> we should be watchful for excesses getting to a tipping point. >> doesn't surprise me that the hunt for income and then yield has reached into the high yield market. you have to take a step back and saying am i being fully compensated. >> bond funds have to be buying credit somewhere whether it's high yield or high quality corporate in an effort to get some spread over which they can earn in treasuries and you have a natural buyer for it even if they have to hold their nose. >> i'm nervous about pretty much everything. the return on capital is rather less important. just keeping your money and not losing anything. >> a lot of the folks who got it

right at the beginning of this rally are beginning to say, look, this can't go on forever. scarlett: when you listen to those comments from the various guests we have had, none of them point to north korea but it hangs in the background. julie: the conditions in the market were ripe for some kind of correction. scarlett: people looking for an excuse. julie: the unfolding crisis could have more devastating consequences given the haracters of kim jong un and president trump. our guest joins us now onset and proxies for confidence that you are looking at. not individual confidence of these two gentlemen but proxy for their confidence as well. let's talk about it from the korean side of things. >> a couple of months ago i started looking at the relationship between what was happening in north korea and the

south korean market index as close as you can get to a proxy for confidence in north korea. what i started to see was this very clear relationship that the higher the kospi moved, the more aggressive and more active north korea became. what you have seen is the kospi really took off. you had launch after launch after launch after launch. and that suggests that what we have is this very clear high confidence environment in the peninsula including in north key and that kim jong un is very, very confident, almost overconfident. and that sets up a situation where you have a leader who is uncoachable, who underestimates risk and is prone to very simplistic -- ignoring the fact kind of decision making. and that leads me to believe unless something dramatic were

to happen, he is somebody who is going to continue to launch missiles. he is feeling very, very confident. julie: the kospi has fallen in the last couple of days but still up about 15% and as of july 24, it has been trading at a record high. if kim jong un were to look at the financial impact, what do you think based on his behavior thus far will continue to do going forward? >> so the markets are providing exactly the background you want. they're ignoring it. they're basically like impervious to it. you have people quitting their jobs in south korea to become stock investors and lots of things in the financial media how euphoric things are in that environment. from is nothing suggesting caution to him. in fact, it's the reverse. if he is looking for a reaction,

he's not getting one at least on that side of the world. julie: he is getting one on this side of the world from one person in particular who keeps saying his statements aren't strong enough. and he doubled down today and said if kim jong un keeps doing these threats or acts, he will regret it fast, i believe is what the president said. >> so here in the united states, we have a leader who is at the complete other end of the spectrum of confidence. his approval has been below 40% through three months straight. this is people's underconfidence in the president. and he feels under siege. he is under pressure. he has no major legislation done. he is very, very frustrated and you see it from him in twitter but seeing behavior that suggests that he's going to be

rereactionary and going to think and going to be very simplistic, overreact i have, angry, me here now. scarlett: we heard something like that today when someone asked him what do you have to say when critics say you are raiseing the rhetoric. the president said people are saying they are take it because it's me. julie: what you are describing is not a very good recipe for appeasement. >> the fact that people are supportive of this -- don't forget that his popularity during the campaign rose his confidence. and his core supporters are the chronic underconfident, republican confidence going into the election was very, very low for a long time. you have in his support base

people who are echoing that there's a need for retaliation. enough is enough. they're angry and north korea is as good a place to focus that energy as any place. scarlett: there is a mismatch in confidence and what does that mean for a country for china, the president threatening to come in and do something. does china come in and do something? >> china is in a very tough spot. because the overconfident are not coachable. so trying to influence what's happening in north korea is going to be especially difficult and finding a way to navigate between a very angry and intense u.s. president and overconfident korean leader is a very tough spot to put any nation let alone a country like china who has clear interests in both camps.

julie: what then can we expect over the next couple of weeks? >> i think it's very likely that we will see additional launches. again unless something dramatic were to change in north korean confidence, there will be further propellants launched and there, i think the risk is a major overreaction on the part of the president. the interesting thing will be to see if the u.s. military, who has been caught way on the back foot several times in the last couple of weeks, has any voice of moderation in that process. julie: you paint a pretty sobering picture here, peter. >> it's not something i either wish for and certainly don't hope for. scarlett: coming up, stocks in ng kong and volatility there surging as president trump stepping up pressure on north

korea. one of the companies leading a chinese tech name. from new york, this is bloomberg. ♪

julie: time for the bloomberg business splash. passport capital assets falling below a billion dollars due to client withdrawals. according to a letter. firm's assets stood at $900 million and down from $2.4 billion. the the fund gained 220% the following year. the u.s. justice department has subpoenaed two companies on the ale of opioid drugs.

more than 33,000 americans died from opioid overdoses in 2015 and the president called it a national emergency. amazon has hiferede bankamerica. the giant has a temporary bridge loan and looking at longer term financing. the banks will arrange a series of fix investor phone calls on monday. and that is your business splash update. one of the holding companies is leading the bigest drop as china cyber watchdog has launched an investigation into reports of multiple violations that news services. for more, i want to bring in our correspondent. violations, they are in the eyes of the beholder and have

different rules in china than we have here in the united states and talking about things like pornography, violence, rumors that that's what is on these web sites? >> president xi trying to establish his control over the internet. china is being ambitious what they want to control, not only things that could be seen as offensive but things that are disrupting social order so this is very broad based and comes on a new cyber law that the president implemented. and this is coming ahead of the party congress where it is a very sensitive time. his is really an ongoing investigation. julie: he could be clamping on media-type services and once the party congress passes, the leadership is entrenched and he

can let them go back to doing what they were. >> observers in beijing think this is the new reality. this is a strategy shift. we saw thousands of web sites get shut down for things as innocuous suggestively eating bananas. and apple had to remove services that allowed people to access private networks such as news services like ourselves. julie: have to get around a great firewall. astoria has dorf never allowed services to their guests. it is impacting people outside of china. julie: when you look at the pullback, it's on the back of what has been stellar performance.

and up 22% year to date. and is there evaluation questions? >> they have been on a roll. we have seen a couple of dips because of government regulations but investors don't see this as a long-term harmful trend. one of their possible gains, the china on ease government wrote a strong statement saying it was causing negative emotions among the population and put curves the amount of time people could spend on the game. and people rely on it much more than games and illicit content. julie: does the chinese government want to straddle the line between clamping down but not ruining the company which is a big generator? >> they don't think this is going to destroy the company but putting their hands down and

need to put in controls. you can't see this type of content going across the internet. and all of these companies they said they are willing to cooperate and do everything they can to fix the problems. scarlett: thank you for joining us. e.t.f. tracking robotic index has broke the cap. the business behind robotics. ♪

scarlett: robots are on the march. roboglobal is tracking the intelligence agencies. it out performed by a wide

margin and tracks the index passed a billion dollars in market cap this month. what is driving these gains. spoke with c.e.o. of roboglobal. >> when you think of the e.t.f. it tracks the index we create. we provide the index that e.t.f. uses to choose the same security. it's one and the same. i contribute the success to the continued growth in robotics automation. we have watched this for four years and seen a lot of different movement in the subsectors we follow and during the last 12 months, if you look at the earnings at the companies that are in the index and have been growing at a pace. scarlett: looking at the composition, a lot of smaller companies and a lot of companies

based in japan. you think 37% of your index holdings are in japan, why is that so important? >> the index itself is global in nature. it's 40% u.s. and like you said, roughly 35% to 37% japan. we go where the robotics are and japan has been on the forefront of developing robotic technology. scarlett: tesla and amazon is not in there. -- .m.a -- amazon through speech recognizes writing, but amazon is one of the best utilizers of robotics in their warehouses. they have 50,000 robots helping them do fulfillment.

the reason they are not considered a robotic company, we are looking where revenues are driven specifically by selling robotic technology. if your receive news are driven by that, your receive news will be reflected in the stock price. amazon's stock price is their web service company. scarlett: and the application of that technology. that's a good point. when you came up with this idea to create an index that focuses on company involved in robotics it .i., how did you put together? because unless you have a degree in advanced engineering, how do you make a distinction of a company that is leading the way than following the coattails of others. >> we realized early on if we are going to capture the growth that we see inherent in robotic

automation, we have to define the space. this is the first product to build a road map for investors. we brought on two of the leading global robotics experts in the country to help us, not necessarily pick the names but to understand the industry, to understand the space. because if you look at the index, you would be surprised, 50% of that index is focused on the technology of robotics technology. that's the sensors, the processing, the machine, the computing. but those are things that make it critical for robotics to succeed. on the other hand, the applications that wrap up are the end uses where you see it in health care, consumer products, logistics, agriculture. scarlett: people engage with the

product itself or the technology. how often do you rebalance or reconstitute the index? because there is a lot of change here. >> this industry is shifting rapidly. we feel it's very important to stay on top of it. we rebalance quarterly. scarlett: my colleagues and i were talking, when it comes to a.i., there is always someone out in front. who do you think will be the winner. alone musk or mark zuckerberg? >> i feel strongly about this. we talk to them fairly regularly about this. zuckerberg. scarlett: explain. >> where we are with a.i., going to create energy and technology. but we are nowhere close to

simulating true human thinking. a.i. is a prediction. and it takes data and makes good conclusions. reading a ct scan sees millions pictures of benign or malignant tumors but doesn't have the ability to distinctish but just processing data. scarlett: that was the c.e.o. of roboglobal. what you need to know for next week. this is bloomberg. ♪

julie: don't miss this, july meeting on wednesday. >> and nafta renegotiations starting on wednesday. wal-mart reports second-quarter earnings on wednesday. have a great evening and great weekend. this is bloomberg. ♪ 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 in washington and you are watching "bloomberg technology." is not backing down in the world words with north korea. the double down on his warning to kim jong-un in new jersey

northsaying the new korean leader will regret it if he moves on guam or any other u.s. territory. he says north korea has gotten a pass from former administrations. by the kaiservey family foundation finds most people polled believe it is time for the g.o.p. to give up trying to replace obamacare. four in five people want the administration to fix the flaws rather than try to undermine it. only three in 10 want republicans to keep trying. congress has given final approval to a bill to trim a growing backlog of veterans disability claims. the house approved the bill today sending the measure to president trump. it would cut the time it takes for the v.a. to handle appeals regarding disability payouts. the nfl has suspended star running back ezekiel elliott. he has