united nations approved sanctions. a bank of england dubs joins a hawk this course with high rates of united kingdom and sterling rallied to a 2017 high. hugh hendry, the hedge fund manager known for his contrarian view closes his fund after 15 years. from new york city, good morning. this is bloomberg daybreak. i am jonathan ferro with david westin and alix steel. futures are a little bit softer and you would not describe this session as anything risk off associated with north korea. treasury yields high by two basis points. euro-dollar higher. the real movers in fx and bonds. the gilt yield of eight basis points. sterling at the highest level since brexit with huge -- 135 is how we trade as a more hawkish

comments out of theboe. you can see how the safety trade is not playing out with dollar-yen higher and a mild risk off move after the missile launch it now back onto the dollar story. gold going nowhere. jonathan: potential terrorism in the u.k., several people injured in an explosion on a subway train in london. police said they were treating it as terrorism on a number of people were injured, suffering facial burns and some were hurt in a stampede, according to the press association. no word of the whereabouts of the perpetrator. station inen subway london was cordoned off as police investigated and north korea is another manchild launch -- missile launch in japan after the united nations approved harsher sanctions against the regime while rex tillerson says these continued provocations deep in the north korean

diplomatic and economic isolation. joined by our chief agent economics correspondents. editor forcutive international government. walk three details as they come through in london -- through the details in london. >> the metropolitan police updated us and it looks like it was an improvised explosive device. it does not look like it went off as expected. -- it is basically a bucket with wires. it is fair to say, you had an explosion on russia -- people injuries,th facial -- it look like it could have been much worse. there is still a lot we do not know, if it is the first of a sequence of explosions. part of a broader cell.

investigating whether it is a water attack. jonathan: these -- what was the response from the government, how high of an alert will be police and government be throughout the coming days in the capital? >> the country is on the very severe terror alert. london over the summer still feels like a city under siege. the fifth attack in the u.k.. the fourth in london over the past few months. theresa may was quick to send her thoughts with the injured and emergency services. , beingow, the focus treated as a live event and the assumption, the working assumption is there may still be more to come today. this is not over yet as far as the government is concerned. jonathan: we will keep you up-to-date. the nature of the threat is different but a country on high

alert. japan as the threat of north korean in the korean financial a rises. -- peninsula rises. what have we learned in the last 24 hours and the reaction from japan? >> the latest missile test has provoked another call, especially for the u.s., for greater economic sanctions against north korea, an embargo on oil imports. we have had this debate before and china said they do not favor ,urther economic sanctions especially on oil and a view in china sanctions would be ineffective and we know that china does not want to do anything to destabilize the regime in pyongyang. withe going in circles another missile test which has prompted more calls for sanctions and china showing no signs of agreeing. alix: is there any sense of urgency? the reaction was calm.

it gave up gains quickly. there is a growing sense of unease among investors and government. he said they have the capacity to smash north korea. that -- he has been talking about trying to set up talks or opening up communications with the pyongyang. this could still be resolved through the usual economic channels but a degree of unknown, given the pace of tests from the north. david: thank you both. here to give us his evaluation of the geopolitical risks is the president of the plowshares fund with worse the limit -- he is the author of "nuclear nightmare."

he has worked on capitol hill on the committee on armed services and for the carnegie endowment for international peace. thank you for being here. let's start with north korea. slowly, perhaps faithfully coming to terms with the fact we may have to live with a nuclear north korea? >> they exploded their first device 11 years ago in 2006 and are a nuclear weapon state. we do not want to recognize them or give them that sort of status. it is difficult to see how you walk them back. we hope to negotiate a freeze and freeze them in place. we think north korea wants to do a half-dozen more tests and to are sure there missiles reliable and convinced themselves that they have a nuclear deterrent. they think they can safeguard their regime. they may be willing to freeze the program at that point. but maybe not be ideal

better than them building 100 weapons with dozens of long-range missiles. david: you said we hope, someone in washington said hope is not a plan. is there any reason to believe that kim jong-un is inclined to bargain at any point for any reason? >> yes, they have told us they are willing to for several years. disagreement is not whether you can talk to north korea, it is what are the terms of the talks. are there preconditions? both sides, united states and north korea, putting preconditions, we will not talk to them unless they agreed the point of the talks is to give up their arsenal while they will not talk to us unless we agree the point of the talks is to recognize them as a nuclear weapon state. we need to start a dialogue, a talk about talks to get to the point we can have serious negotiations. if in that scenario, china can be helpful, they are willing to

have more sanctions if the in game is a negotiated agreement and not the collapse of the north korean regime. jonathan: geopolitically, china satisfied with the status quo, ed needmething more nuanc to happen, japan needs to rearm and south korea needs to develop a security forces to implement some really high profile defense and put the that -- pressure back on china. you will not be the regional if south korea gets a military capability and then maybe china comes to the table because the status quo changes on them. >> you are right, china does not want a rearmed japan or more assertive south korea and a greater u.s. military prisons. they are trying to rein in north korea. showing the limitations of their power. they are not willing to put sanctions on enough so north korea collapses, which is what the u.s. wants.

we want to force the end of the problem without us having to make concessions. china will not do that and they fear that worse. they think that they may be able to wait out the situation as u.s. influence in asia wanes. 40, 50 years from now, japan and south korea will not have choice but to come to terms with china. we cannot afford to wait and allow this to happen, we have to get in the game and missile defense is an illusion. you want to know why we did not shoot this test or the next test, it is because we cannot. these missiles are going to hide before -- so -- even within range, at best a 50-50 shot. missile defense systems do not work that well. you. joe, good to see here is the impact on the market.

entry date chart of dollar-yen, dip early which recovered right away. it is now higher and dollar-yen around the high of the session at 11. joining us is steven wieting. how do you understand market reaction and the geopolitical risk? >> you have to be careful to not intermingle all security risks, natural disasters, and economic outcomes that have lasting effects on market. when we see global security issues, there tend to be a risk-averse reaction and maybe this time there was not one. if you take a look, you see , sixth involving the koreas since world war ii and the one-month return on u.s. equities is positive after the initial drop. this is very short-term noise. if you look at what does move a

, 20% forbear market larger drops inequity since world war ii and 11 or 12 associated with recessions, outright economic contractions and a drop in profits. you cannot say every one of these issues, very serious, can change the world, really has to do with financial markets in the way people think. david: it can have ramifications. 9/11, there were real consequences in the financial markets. not something to take seriously until it is. >> it changes the composition of activity and a horrible waste of human potential. it means some industries go up and others go down. i was once asked in the early 2000's, how can the u.s. economy be expected to grow, don't you care about the people in iraq? in reality, one did not have to do with the other and they are not the same thing. jonathan: thank you very much,

you are sticking with us. coming up, hugh hendry, the hedge fund manager known for his contrarian views is closing down his eclectic asset management fund after a 15 year run. the man himself is coming up shortly. this is bloomberg tv. ♪

jonathan: a journey bedridden from the city -- that's a give to the severe london. -- that took him to the city of london. is closing his eclectic asset management following a 15 year run that ended with some losses.

he joins us now with guy johnson in london. great to see you both. us.reat to have hugh with i have known you for a long time. you have charted quite a course and blazed quite a trail. are you doing this on your own terms? are you saying, i am out? or something imposed upon you, do you feel? >> i feel like i am sitting in the cast. -- i do not think many managers have chosen to go out like this. that is a function of economics and the cost of running a hedge fund today. they were just too great. died in anhink, i

active combat. of combat. guy: i do not believe this is it, this is a hiatus. mr. hendry: i have had an immense love and appetite for life. i am better suited to deal with the random course of events, good and bad, which will inevitably arise. guy: you said it was not meant to end like this, talking but the market, you? mr. hendry: the last three months were hard -- harrowing. i do not wish to speak for others but my sense is that my --ro cousins have been under our returns have been mediocre ifce 2012, a longtime, and it is to do something and generically we have been running higher levels of risk.

to demonstrate we are really trying. i was no exception. i run a lot of risk over the --mer and to my great over horror, i became correlated to the travails of the crop residency and political events in the korean peninsula. presidency and political events and the korean peninsula. guy: i hate to reduce it to something this simple, difficult has it been to turn from the bed and 28 -- 2008, two people -- -- bear you were in 2008 there was a cathartic event for me, november in 2013 when i published a letter, borrowing from entourage, the american television theater, what if i was to tell you that i had

turned bullish at is that something you would be interested in? my investment base said absolutely not. since 2013, my message has been that i thought the stock market was safeish and the opportunity to find a symmetric trades, which -- a futility in trying to find trades that would do well thehe advent -- and immediate futures, i cannot perceive a crisis. the cathartic event was saying, the central bankers, we same -- came close to staring down this prices.flationary we came close to an environment where the american comedy could have endured the -- economy could of indoor the horros. -- horrors.

there is no cost greater than preventing what could have been an immense human tragedy in the aftermath of 2008. guy: over the last five years, i was looking at your performance, not drastically bad, high single-digit returns to mid single-digit returns and low single-digit returns and some years with losses. youare investors abandoning , from billions to 30 million? -- i clocked had up the best part of 15 years of performance. i can say definitively that we compounded that 6% per annual over the course of the journey. in terms of what i was doing, i was a macro portfolio diversify or to funds. my correlation was tight to volatility, when volatility veryd in 2008, i made this good profit.

over the course of that time, volatility has been low. i have offered a positive carry of 6% plus the majority of my carrots are long volatility and diversifying portfolios. -- clients are long volatility and diversifying portfolios. curtailed and what i can and cannot do. my role is to diversify your risk portfolio. guy: is that model best? mr. hendry: i fear we have to change expectations for that model, the global macro model was that it came from a fixed income universe. i have been trying to articulate the notion of a debate between debt and credit, the folks with lots of money, who provide the capital to the geniuses and the entrepreneurs who go out and create income and jobs comment thursday economy forward. my argument for the last three decades has been, we have over

rewarded the rich. therefore, that would manifest itself in high risk of return to u.s. treasury bonds. the return versus equities did not seem very high. global macro fund could come in and leverage the fixed income returns and get a very high risk adjustment return, which would cover the expenses of running a hedge fund and would cover the expenses of having puts on the s&p. occasionally, these puts would come very rich and add to the rockstar notion that these guys could walk on water. huge allocations to the sector. today, i think -- i would estimate that real 10-year u.s. treasury returns are 0.3%, the notion of leveraging what seems -- doa fully valued asset

you really want to do that? if you do, they are not that great and not to cover the increasing records really -- not riskver the next protecting -- guy: i will take that as a yes, the model is broken. mr. hendry: we look at it as the -- different -- the great vulnerability to everyone's wealth today is that we are depending on what has been an correlation with u.s. treasuries or government g7 bonds were stock markets have been hit the skids, thankful for government bonds. today, they are not priced to protect you and clients are willing to underwrite losses until we see the skids. it has a role then, and a roll with a lower allocation. guy: everyone is trying to find an economic framework for

financial markets at the moment and you do not think about the 2000s or the 1990's or 1980's, thinking about the middle of the 1960's and what happens next. why the 1960's so relevant to what is happening now and how evolve?l leave all -- it seems like a long back time, 4.5% national unemployment rate in the u.s.. we have been here three times, i would dismiss two of the last times, they coincided with the of bust and housing bust 2005-2006. moments in time where there was a lot of credit excess in the american economy, to say the american economy was very vulnerable to the federal reserve hikes. in 1964-1965, we do not have that, we have a labor market

that was as tight as we see today. there was nothing that prevented the economy from being knocked over, if the fed raised interest rates. we discovered that the fed was slow, the fed today is certainly not in any hurry. market, the monkey brain of the capital markets, i hate you, i hate you, i love you come i hate you, now saying, we want risk policy. stay loose. the markets are anticipating 25 basis point hikes between now and the end of 2018. culpability, of the fed and capital markets, they should have the resolve to push for tight it but they are not doing so. in 1960 4, 1965, a same situation, inflation steadily picked up. the mechanism is, when you get wage hikes, it becomes kiwi/wage

e plus wage hikes, you are giving money to people who will spend it. and two thousand 12 was giving money to rich folks you had no desire to spend it, with , a work in which ben bernanke predecessor, they never had the guts to go through and that is where we are here in 1965, 30 years where u.s. inflation rates did not go below 2%. itself -- could it repeat itself? jonathan: you have the patience of a saint. if you could put money back to work now, over the next five years, how would you be thinking about markets? today, the good thing today, i believe there is

a lot of good things today. we are witnessing synchronized economic growth across the world. europe is picked off the floor and is growing. is full cylinder and the american economy refuses to go into recession. that is good news. good news for equities. good news for commodities. they have picked himself off the floor and will continue to trend. because of this monkey brain, i hate you, i love you, capital markets want to give u.s. treasuries between 2% and 3%, they will not do anything to precipitate a crisis. is,only bad thing inevitably, there will be an air pocket and where is your protection? think the terms, i most distorted asset class in the world is the two-year german bonds or the -- i would be sure that. people are willing to lose 75 basis point per year for security.

we do not need that security for long price. where we have had a credit excess is china. will china bust? i have no idea. should you be worried, i believe you should be. i believe you should have protection but it should be very cheap. today, you can make any china risks disappear at almost zero kerry. -- carry. we started off talking about whether this is a hiatus, let me grab late on the question -- extrapolate on the question, what model does work and what work? if this is a hiatus and you will be back, i find it hard to believe that you will not go away and rebuild and have a rethink. what is the model? how does a manager approach a business, how do you re-create or create something that is a functioning story to run money

that has sustainability? what does it look like? mr. hendry: i have absolutely no idea. guy: nothing that works or do you think has got legs as you look at what will happen going forward? mr. hendry: you are confusing me with someone else. i am the guy you want some ideas. i am not the guy who does the plumbing. i am very bad at the plumbing. i do not want to offer corporate responses for the hedge fund community. i have offered one which would be client-based, willie to underwrite losses. i want you to -- willing to underwrite losses. that -- fory investors today, a lot of good news and enjoy it. it will come to pass. when it comes to pass, people

were say where is the market hedge funds? i have cosmic karma. jonathan: to wrap things up, it was always well known that you were not a city boy and did not like london. what is your message parking or leaving the hedge fund world? mr. hendry: i do not know what gave you the impression i was not proud of the finance clan. my point has been come i have been very good at being idle. sitting in front of a named terminals for 10-12 hours per day, good as you try to justify what you are doing. i do not think it has been very good for ideas. some of the best ideas we have is when the money relaxes and we do other activities -- mind relaxes and we do other

activities. if i have succeeded in anything, i have been succeeded by being idle. jonathan: we appreciate your time, we wish you good luck with what comes next. hugh hendry from the city of london. alix: i have a feeling his being idle is different from us being idle. you have terminals on the beach. is there with us and from london is jordan rochester, i want to get your reaction to parts of the conversation that came out. something that struck me was the idea that there is going to be an air pocket and you do need the protections but the protection needs to be cheap. >> protection his cheap. tremendous overlap in the macro views. why is protection cheap on equities? earnings to

>> we saw an implied lie lows diversification can be added cheaply and folks are moving away from diversification. >> this is a chart we have been bringing up, the white line is fx volume, the blue one is the volatility of s&p stocks, the purple line is the move index and volatility of treasuries. maybe we have seen pickup and fx volatility but so historically low and hard to find the event that changes that. as if this is a structural change. you had them having the conversation and that was a big part of it. >> when the fed announced quantitative timing, that could be your trigger event on the radar. there is a structural reason why and you should expect rate

volatility to pick up and global growth in itself been central and --corn donated coordinated and quite a -- it shoulding lead to higher rate. i like the trade to move the index. when the cherry drops is when you have a rapid rise in real interest rates and we are not calling for that yet. you could see it later on in the cycles. that is a trade for later down the pipeline and you rates angle is a really nice point. david: i took away that the world has changed, his world has changed. why? is it the case that, there are fewer major events that can throw you off? two, there is regulation that has saved the day, are more immune or is there so much liquidity from the central banks, that is what is counting things down? >> the decline in the world economy across regions and

2008-2009, wasn't seen since world war ii. it is very uncommon for us to have such a correlated decline in sony parts of the world, so severe at once. world, many parts of the so severe want and garden-variety downturns in a particular region can occur. people were worried the fukushima disaster in japan would have a global disaster resulting. people think regional problems can -- 10 tuesday regional. in terms of central banks, jordan just mentioned, every time there has been some sort of regime change, whether we are going from qe2 to between operation twist, these sort of events, some take up and volatility. a time when it would come, started at times when volatility was at an all-time low. bonds, howwo-year

difficult is that trade? i offered the patience of a saint for his investor base. five years, difficult. >> you do not have to lose 5% per year. maybe it is a cheaper trade than going short on a bond on a negative yield that is even deeper. these rates are extremely unusual. there are distortions in these markets and the bottom line for most investors is that you can allocate away from the extreme and violation differences. if we look at global investment community at the private banks, are overweight bond market segments, in the context, underweight they can come but over wakes and -- the yield 300 basis points more than underweight. jonathan: are you surprised we are having a conversation about reductions of qe, yet we still have these violations in markets -- valuations and market?

>> you just had a taper tantrum in europe what was express mostly to her and see andy credit risk --qe has been profound in europe, they bought a third of the bond market in germany and it is have a bigger effect in terms of the fed impact. i have a fairly negative view of where they're going in a couple years. they are still purchasing for now at a diminished pace through 2018. alix: then and the boe and the fed, muhammad ali arian said that markets have been lulled into believing that the central bank would be their best friends forever and helping them overcome unusual uncertainty. it is also a configuration that makes central banks uncomfortable and increasingly anxious, the bank of england reminded of this thursday and it is a matter of time before the fed does the same. jordan, it feels like as we get more towards the central banks conversion when you have different central banks taking

the lead on fx, treasury market, rates market, and for difficulties as an investor. >> you are, we focus on the sterling, but that is not what the bank of england does, they look at the situation in the u.k.. there is a recent the bank of england is moving more optimistically, because things are not as bad as what they thought. as rising inflation pressures, some are domestic. they keep saying, a lot of inflation is on the fx evaluation. a risinga lot of -- domestic component picking up and that is what they're looking at. it is the buildup of leverage in the system. debt to income ratio is rising once again. it is good to have a bank of england looking to like when things are not picking up in terms of debt to income ratio. it tells you, the later part of the cycle, when you have unemployment at 1970's lows. for now, not helpful for markets in terms of the ftse because the higher the fx rate goes against

ftseollar, it below or the will go because there is an fx component of earnings. not like the global economy is altering. islobal synchronized -- this a market that needs to get to grips with more positivity in terms of the outlook. therefore, more hikes in the curve. curve,f you look at the the markets now expecting three rate hikes in the next three years from the boe, verily expecting -- verily expecting to from the fed. expecting two from the fed. >> there is a good chance that markets are underrating where the fed will be. even the fed own forecast is half the traditional hiking cycle over the next several years. markets are predicting less than that. this is an issue. when you say everything is driven by central banks, all

throughout the qe time of the last 10 years, global equities and earning -- forward-looking earnings over six months have been correlated, the changes correlated plus 70% correlation. why are u.s. stocks 11%? earnings first half of the of plus 30%? why are tech stocks of 20%? why did oil move up and down? supply and demand, not everything can be blamed on central banks. they will not solve all of our problems. david: right now, let's get an update on what is making headlines from outside of the business world with the first word news. >> police in london say terrorist set up a homemade bomb and a subway train at rush hour. 18 injured and some had burns. a number were hurt in a stampede that followed the blast. a white bucket and sky news says the device

probably failed to completely detonate. it took place at the parsons green underground station in west london. the latest north korean missile went further than any other they have launched. it was the second to fly over japan in two months and traveled a great enough distance to put the u.s. territory of guam in range. it was not unexpected as north korea had said it would retaliate for the united nations security council sanctions. it may be a signal about what the trump administration has to do about the iran nuclear deal and much, rex tillerson says -- defaulted. he says the u.s. has not decided on whether to certify iran's compliance, it is required to do that every 90 days. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. this is bloomberg. david: as you commute in today, listen to our college -- colleague tom keene and david

gura on bloomberg radio. can be heard across the united states on sirius xm radio. next wednesday at 2:00 p.m., our special coverage of the rate decision on bloomberg tv. ♪

>> this is bloomberg daybreak. coming up in the next hour, lee jeffreys chief market strategist. alix: a rough week for

commodities, copper, zinc, nickel take a hit with weaker than expected data from china in terms of industrial production. that hit the metals and the interesting question is, what does it mean for inflation? jordan rochester is here and steven wieting. this is a five-year forward chart, the white line, the purple is copper prices, the white is wti, inflation's expectations have paid that come your respective gasquet to, your respective -- oil has stabilized and copper had a run. is that what is happening with inflation expectations? are we in a changing environment? >> i do not think so and core goods prices and commodities in the united states is almost no pass-through. american consumers pay for one commodity directly. that is gasoline.

and heating oil. that is the only thing where you get fairly direct pass-through. americans eat prepackaged tv dinners. they are highly processed foods. downs of food commodities do not get directly pass-through with the exception of a small basket. it goes to other important inputs to final product. as you go to emerging markets and deeper into frontier markets , you look at some of those economies. much more prices a duty, especially where the -- price sensitivity, especially when he could basket -- alix: that you better. -- they eat better. the reason i brought up a commodity relationship with inflation, rhetoric that we have a china and the 19 national people's congress in october,

after that, all bets off. a lot of talk about copper rolling over because of it and nickel and zinc. the pass-through from that to global growth? >> it is possible, and event risks to watch and typically you see government spending ramp up into these events and most of the consensus, you expect the president to consolidate his power and go along more with structural reforms. it could see wind down of the spending. also whate risk, but is going on outside of china, this will pick up, not just in europe but in the u.s. and the rest of the world. it is a risk to watch but not the end-all. how important is this inflation expectation issue? power of in pricing producers in the united states. how much is that is people do not expecting prices to go up

and not willing to pay them? >> partly because of that. the rise in amazon. if i am looking to buy something online and find a cheaper price, i go with it over the competitor on the high-end. that is a common trend among many economies in the world. perhaps more so than in economies where you see more internet connectivity. the western world. there is so far it can go where margins get squeezed to the point where you cannot go lower. we are perhaps at that stage where the cost of input and the copper prices commodities, there is a time for inflation to pick up, especially when unemployment is so low. on inflation, it rolls over a two-year it, especially two-year and. you see 1.5 cent on most economy forecast on the street but a pick up into next year. this is the downturn short-term and it will pick up next year. jonathan: unemployment, the

united states, it makes me think of the united kingdom, interested in how this debate shapes monetary policy. cable started this week at 131, it just 136 in the session today. talk me through, what is going on at the bank of england and why are we having this debate over a rate hike on threadneedle street? >> they have been having this debate for a long time and the bank of england policy in the wake of brexit. in november, they softened the language to say perhaps they will not ease as much as they thought. from the beginning of this year, they have been taking small steps toward warning us the bank of england rate hike. we saw that any gene minutes in august, a disappointment. -- gene minutes in august, a disappointment. the market was disagreeing with that. people are saying that 2019 is more likely than not. only a few that change their

views to a november hike. the language from the bank of england has been very strong. they need to raise policy in coming months. this morning, we saw a more dovish members of the mpc, he talked about how he agrees with the majority of the consensus on mpc and we need to raise rates in coming months, if the data holds up. you may see the -- a bank of england rate hike in november, and then they may rate -- wait and see. some people think, if they do hike, 12 month, or a one and done. he went further and said, if we hike, it is not a one and done, a rate hiking cycle. in the u.k., you need to focus on to understand where the back of a good is going, look at inflation, all of it down to affect. seeing a global upturn in growth, that is positive for inflation. within the u.k., high consumption than what most people thought in the wake of wrecks it with rising investment and wages not falling as far as

people thought of the bank of england still thinks the political curve hold and it could pick up any wage side into next year. the second part is the rising debt to income ratios. he mentioned that that is the one of the things that will get him to vote for a hike. to jump in quickly come if i want to jump on the bullish sterling trade, and my doing that against the euro over against the u.s. dollar? >> we are all side by this hawkish turn, stronger in terms of the messages that i expended -- expected. eurosterling down is the way i am playing it. i like long against the dollar. up 140 and perhaps 145 by year after. if things go well on brexit. septembereresa may's

22 speech with a lot of the brexit noise being ignored by the markets. we had a cabinet agreeing to a transitional deal which i thought was big news. the account did not care and we saw signs theresa may will go for status quo, the softest form of brexit in terms of getting the end destination. she wants the u.k. to be a single market member. that is not guaranteed. if she gives that speech on september 22, saying we have two or three more years of full eu membership, that is good news for the pound. alix: if you have a bloomberg terminal, check out tv and watch us online and check -- click on our charts and graphs. if you mentioned our -- missed our hugh hendry interview, you can go back and watch. this is bloomberg. ♪

week a conversation of the , how likely is tax reform coming out of washington?

the assets correlated with the president and bloomberg, my favorite chart, the white line is domestic versus international companies come the blue line our buyback stocks versus the s&p and the yellow line is high tax versus low-tech stocks, very sensitive to the trump agenda. when the president was elected, now at lower levels from small caps, buybacks, high cap equities than we were at the end of 2014. gordon rochester is with us and steven wieting. is stored is everything being priced out of washington, d.c. but so extreme, not like donald trump will not raise taxes. what do you attribute? >> this is pricing tax reform out of the marketplace. the mexican peso is up more than 15% this year, that would be a very powerful indication that the idea that the u.s. would disrupt the world or be really exceptional in this growth rate has been priced out of the market.

it is possible, now we see expectation so much, we will have a revival. we have just been through and are getting through the time of the year where interest rates tend to fall. we have a soft expectations and can revive expectations. inis unlike where we were december, january where the notion was the u.s. what tax foreign production to pay for american income tax cuts. and tour -- the border adjustment tax was taken off the table. that very potentially disruptive effect, very positive for u.s. inflation and stimulus. painful for the rest of the world war -- we haven't go of the trades -- alix: what didn't happen was the that tax, the 20% -- wheatcroft -- found a trough?

>> i would welcome it. what people have been talking about, this tax trade, many moments where we of try to get back in. the most recent was when the debt ceiling was delayed against december with the deal that was done with the democrats. the tax cuts will be quite small. half a percent of gdp is impacted. i am not that optimistic on tax reforms changing things. especially if the border adjusted tax, we disagreed a lot that it was positive for the dollar, if it is not happening anyway, less incentive to get into this trade. what stands out to me is like the dollar yen and euro dollars, expressing the short dollar trade. it needs to go lower. david: if you are looking for an opportunity to sell the dollar, how much is that saying about what the fed is not going to be doing? are you agreeing to the market

-- with the marketplace? >> a lot more than the fed that drives the dollar. america has a clark current account deficit -- large current account deficit growing larger. the longer the deficit continues , the weaker the dollar should be in the long run. the fed, we think there should be more and pricing, the rates should be 2% in our economic the. the fed said 3% in the market is saying less than that. be sure to the dollar but the rate side is a different story. jonathan: great to have you with us. coming up later today, speaking with kathy jones. ♪

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jonathan: north korea launches its second missile over japan days of to the regime. bank of england the joys a hawkish chorus. hugh hendry, the hedge fund manager know for his contrary views closes his fund after 15 years. some of these goods of injury -- exclusive interview with him coming up. i am jonathan ferro with david westin and alix steel. we start with futures a little bit softer, down a 10th of 1% and the s&p still storming towards a big week of gains, potentially the biggest since july and euro-dollar from her. the dollar a little bit weaker. treasuries, yields have gone higher, 2.20. alix: you have sterling of over 1%. the highest level since brexit. 1.35 is how we trade.

ten-year yields -- dollar-yen with no help -- no hurting actually from the safe haven trade. it traded lower after the news from north korea. gold -- a change from the market. david: coming up at a: 30 eastern time is -- a: 30 eastern time is august u.s. retail sales .. that is all coming up . londoncted terrorist in set off an explosive device in a rush-hour subway train injuring at least 18 people. police searching for photos and information with no word on the whereabouts of the perpetrator as a manhunt is underway. a threat of a different kind, north korea's second missile launch over japan in as many months flew far enough to put quorum in range. range days after

united nations approved harper -- harsher sanctions against north korea and rex tillerson said this deepens north korea's economic and -- isolation. what is the latest on what we know about this tube attack? >> there is a manhunt underway in london. we have not had that much new information for the last couple of hours. tore was a an attempt detonate a device in a bucket in the tube and the middle of rush hour. there is relief in ways because you have an explosion in the tube in rush-hour and no one was killed. that is one very bright spots. right now, the entire security apparatus of the london police are trying to identify the perpetrator of the attack.

and whether this person is part of a terror cell and perhaps there will be further attacks later today. david: no one has claimed credit yet. what is the reaction in london on the street and in the markets? >> you are right, no one has .laimed responsibility i was at the west end when it happened. london is accustomed to this, the fifth attack this year in london and a history going back decades of terrorist attacks. the mood is calm. for people living in that part of london, there was immediate concern about what the fallout from the attack would be. london is very much taking this in stride. the prime minister came out quickly and said she is working with security forces. the reaction in the market was muted. david: let's go to kevin cirilli in washington.

theresa may is taking it in stride and how is president trump dealing with north korea? but mike yet to tweet pence is set to meet with nikki haley today regarding the latest application of north korea -- provocation of north korea, the united nations security council will convene today days after the united nations security council pass a new rounds of sanctions against north korea, impacting the energy sector in north korea. their next step is a bit unclear at this point. some say president trump may add additional meetings today to meet with the vice president on this matter. we will keep you updated. we should also note that the president also commenting on terrorist attack in london, that he -- tweeting

believes this is a reason his temporary travel ban should have been more stringent. david: the last round of sanctions of that against north korea were water down with what china andtes -- russia were against harsher sanctions. administration is able to work with the chinese and russians in terms of what comes next is going to be the big elephant in the room. in just a few days, the united nations general assembly is set to begin. all of this will be at the forefront. north korea is not tampering down its behavior ahead of this massive global forum. david: thank you both for being with us. with itsth korea second missile and the markets shrug it off with asians stocks up and treasuries and gold lower

and the u.s. dollar a 1.5 month high versus the yen. is this a caps on market -- teflon market? undoubtedly someone writes, the market will decline but most likely when his underlying economics fundamentals falter. joining us is the union credit chief economist. is that the deal, you can offset geopolitical risks as long as you feel good about the global economy? >> i wish it was that easy. i do not think you can completely. it is almost like the market is caught in a triangle between good economics, very good economics, fundamentally around the world, and the central banks, the surprises from the fed and bank of england that

maybe they will do more than they said before. geopolitical risks. can you really invest your money because you are worried about north korea? no, not for very long with all the liquidity around. you have to do something and the good news is the economy is doing well. it it isear a lot of time to buy value and adding protection. do you need to start doing that on the margin, not just to diversify because there is a need for some kind of protection in lieu of a crisis? >> yes, it is difficult to time these sorts of things. i agree, a number of things that look expensive nowadays. but a lot of good values. depending on whether you can go there and your mandate. a lot of real assets in europe, particularly germany, real ,state, several companies particularly in the financial

sector, are kind of cheap. you can buy major european banks for a fraction of book. the economy is moving ahead at 2.5% growth and the banking union is coming along well. you have to be more careful. where it looks expensive. jonathan: you mentioned german real estate, before the ecb did qe, people were worried about violations of german real estate and where are we now? >> we are closer to where it should be. god knows where it should be. here is something very simple. the real estate prices per square meter in any major german city is still lower than most of the other major european cities. and a lot lower than london. that looks interesting. if you look at the prices in berlin, hamburg, munich,

compared to the cheapest part of german in east germany, the gap is not as big as it is between paris and the cheapest part of france. you can look whichever way you want but as long as interest rates are down here and no real prospect in europe that interest rates will go up, ecb keeps telling us they will end the qe program completely before they contemplate an interest rate hike. you are it for -- jonathan: you have been bullish in europe while everyone else is bearish. you have been out front, at times on your own. you admit that some prices in europe, there has been a significant misallocation of capital because of what the ecb has done. >> that is fair. america,em is that in the moment that the central bank

starts to mess around in the long end of the market by securities in private companies, you are missing in a market where you under normal circumstances you should not be an any economist would say that leads to misallocation of resources. we have to guess the central bank. i described between good economics and central banks and geopolitical, the central bank corner should have been aligned with macro. they are not aligned these days because growth is good and monetary policy all over the world is exceptionally accommodative. david: as i listen to you, i am mid-1990's,e someone who wrote about the end of history and after the fall of the berlin wall, they were getting together and there would be peace and no more wars, then we had the.com bubble burst and 9/11. as you look forward, what may be the cause of that sort of

disruption going forward it feels placid the way you describe it. >> i hope it does not. -- we do not know how to forecast. there is a lot of money, asset manager sitting on a lot of money and they have to invest. even though you would be nervous about these black swans. what can happen in the near future, i will suggest, we talked about north korea, god knows how you handicap that. i do not know how. you probably want more cash when these things come around. you cannot just sit on cash or gold because you think north korea will hit guam. you have to be nervous about it. i do not think you can let it drive your investment decisions. in economics, you have to watch the credit bubble in china. i am not confident they know how to deflate this.

maybe not this year. there are big issues we can see. i would suggest that, given where central banks are in the early part of the cycle of the economy, you have to be invested in real assets and keep a close eye on the dangerous spots. jonathan: you will stick with us, and coming up on monday, a lineup of special guests, including david perdue, and i am looking forward to alan krueger of princeton university on a really interesting research paper on the opioid crisis and what it means for the u.s. labor market. you are watching bloomberg tv. ♪

alix: sterling with a big boost, a one-year high plus versus the dollar. sterling at the highest level since brexit and gilt yields soaring with a seven-month high after and implements dove of the stokef england speculation of an interest rate increase within the coming months. eriknielsen is with us -- nielsen is with us. you have waste pressures generally growing and equilibrium interest rates rising. is that where they 62% chance in the market of a hike in november versus barely 54 the for theecember -- 50% fed in december? >> too low a price, the bank of england -- that is too low and the fed also. alix: have they? a headline which of the bank of

england is bark is loud but has no bite. doesrday, they have done that dov -- doves. >> a fair point. when i read what they said at the bank of england, it sounded like they cheated, they talked about the short-term and the majority thought it was about time. they saw the inflation numbers and did not want to go now because they had not prepared the markets. bark, ands just a they will not deliver, in my opinion, we have a major credibility problem for the bank of england. it has been coming a long way. this one, given where we are, i thoughope to hike even it may not be the right policy move. jonathan: the interesting thing

is not just headline inflation, the dynamics that they pinpointed will drive it in the forecast. it will not just be a drop in sterling. they really think that unemployment as it grinds lower to 4.2% that wages will take off. what strikes me as fascinating is that the bank of england has a conviction of confidence around the phillips curve, would you have that conviction and confidence if you were on the mpc? no, not so sure i would, we have done work on the phillips curve and it is difficult to identify. if you control for various variables of inflation, it works better than it appears to work. there is still a big unknown and unexplained part of this kind of lack of reaction on the wage side. the fact of the matter is, the u.k. economy is at full employment, there is a full capacity with no output gap.

you have this big move in the exchange rate with no effect on trade. you have the brexit, the begin -- biggest unknown of uncertainty that any of us can remember. you have a hard job at the bank of england to say what will i do now? given you have sat on your hands and out you are at this stage. i would not have done it, i would not hike now and stay low for a long time to see how it all pans out. they cannot tell us they will come if they it is a disaster. david: what they told us, i understand what you are saying, at the same time, isn't there a big difference between the bank of england and the fed? the fed it says they will keep going and it is a part of a plan. is it possible be bank of england is saying we need to reverse the one cut we did after brexit, is this one and done, really that dramatic?

>> that is a very good point. i agree that -- the fed is on a path and it is a matter of when. for the bank of england, they cannot -- inflation is almost 3% in the answer to that maybe they need to do something. factink that given the they have -- it is not probably the right thing to do and they will not go again. they will not start this process . you are still hanging around with one hike here and maybe, it is the uncertainty, that is incredible. it is not an easy job. they are not making it easier for the markets. done, i am back to december in 2015. you will stick with us. coming up, the jefferies chief

market strategist on his take any safe even trait and where it is. this is bloomberg. ♪

>> this is bloomberg break. wall street's most relentless critic in congress has a new target, democratic senator elizabeth warren will introduce a bill to crack down on the facts and give consumers -- equifax. they say a cyberattacks may have exposed personal information of 140 million americans. the parent company of mercedes-benz planning its biggest overhaul than a decade. they will firm up management plans that organizational rebounds by the end of the month . they want to grade a holding company to combine three divisions, focusing on cars and vans, heavy trucks and buses, and financial services. some suppliers at toys "r" us are scaling back their shipments because they're concerned they could file for bankruptcy

according to people from a with the matter. toys "r" us is said to be in talks with lenders about a new lung to let it stay open while it works out a recovery plan to bankruptcy proceedings. jonathan: thank you. after 15 years, hugh hendry is shattering his fund after slumping 9.4% this year. we had the privilege of catching up with him for an exclusive interview on bloomberg tv and this is what he said about what he sees as the most distorted asset class in the world. mr. hendry: and evidently, there will be an air pocket and where is your production? -- protection. the most distorted asset classes the two-year german bonds. if people are willing to lose 75 basis points a year for security, you do not need that security for the wrong price. us, the: erik is with

german two-year yield is negative, it has been such a stubborn trade because, even though the ecb is talking about stepping back, we are still negative, more so than the -- what will turn around the story? >> good point. it is music to my ears. negative yields makes no sense. you said that the central banks are distorting markets. they will stay negative as long as the ecb by these normals amounts -- buy these normal amounts. in addition to being the set i said in europe -- safe asset in europe, a higher -- they are probably going to stay negative well into next year when you have a good chunk of tapering. not the first chunk, starting in january but when we have another

cut down around mid next year. jonathan: actively trying to short something like the german two-year is quite another thing, the widow maker is japanese government bonds that went on for a long time. what probability do you attach to maybe coming the european market could become a widow maker in the same way it happened in japan? >> let me start by saying i have a terrible track record in these safe assets. it has been long and painful. i never thought they would come down to these levels and you are asking the wrong guy. the truth of the matter, it is strange. it will adjust. the short answer is there is almost no probability, in my opinion, that europe and these assets will reflect the last decade of japan. europe went through a big crisis, in retrospect, we understand a good deal of why it happened.

it is a lot with the import of the financial crisis from the u.s. and taken the sovereign debt crisis by a currency unit that was not complete. this is being addressed. , the samene productivity growth in the united states of about 0.9 or thereabouts. the decade does not seem to make sense to me. jonathan: thank you for giving us your time. erik nielsen joining us. byid: coming up, joined jamie dimon, what is the one --ng our guest cap all in have in common. coming up next on bloomberg. ♪

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delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. from new york city for our viewers worldwide, this is "bloomberg daybreak." i'm jonathan ferro.

futures a little softer as we grind toward an 18th week of gains, potentially the biggest since july. as you can feel the board, the story of the bond market -- off the lows of last week into today at 220. on the 10-year we are up a single basis point, and the fx .36%., euro-dollar -- and we have a downward revision .o the previous month the estimate today was 0.1. --you strip out the oil, the if used about out autos and gas it comes it -0.1%. the downsides apply for u.s. retail sales. and the estimates from -0.3 all the way up to positive the 0.7.

i think we were expecting something noisy because of the hurricanes. alix: i also want to point out that july was revised lower. that's an inward -- an interesting downward revision. joining us, mark, jamie dinan, the cochairman of fortress investment group. guys, it is such a pleasure to spend friday with you. you're all co-owners of the milwaukee bucks. let's look at eco-data for second. the story last year, the beginning of this year was the retailer would hold up everything. consumer spending would be great to read that would tell the -- propel the economy forward. you are laughing at me. mark, why are you laughing? mark: i don't disagree.

alix: how do you look at it now? mark: it's pretty much -- i think it is tough. you want consumer spending to go up, but that to happen, i think people are waiting on the tax front. so, i think you're going to have 1%, asnomic growth of you're not going to have economic growth of 1%, 2% until things start happening in washington. wes, are we going to see that? are we going to shift their oars it all wait and see? things are stable. they are across the board in our business. mark is right. there's not a big transformative change in the economy, but things are pretty stable. europe has had it quite good year this year. it's all not doom and gloom, but it's not the big boost until get

structural change. privateu are a distressed guy, too. i would think retail and consumers would be a great place to look for. overall, things look pretty good. alix: are you just going to agree with me for half an hour? because that's going to get real boring. [laughter] i always look at the economy as looking at a body of water. the surface is calm. eating animalsls down there. lots of action. in my view, that is what is happening as well. the economy is growing. there are winners. there are losers. to give it jeff bezos basically the killer shark out there and you do not want to see him in your peripheral view. the narrative is out there. i wonder how real it is when you

see the amazon-whole foods deal and you see kroger going down 18%, 19%. do those deals make sense to you? you go homedo when and you see this big box from amazon prime every day in the foyer. go to the mall. find out what people are getting a udall have to go to the mall now. go to the kitchen. coming in the door. it's changing the face of retail. i think we are just at the beginning of it. jonathan: you have a distressed asset at the mercy of a cyclical turn -- say, what happened with crew -- but if you are at the mercy of what happened structurally, how do you think that environment and, most specifically, in retail? >> you are trying to buy things at liquidation value, and the problem is, you are not going to know what it is.

so, what ends up happening for us on the retail side is we are staying away from it at least until we figure out what is going on. look home on the surface of the pond, as jamie come but what are not right now, geopolitics. north korea, another missile test. a terrorist attack in london at the same time. we just had someone on the program someone who had a fund as some time, and eclectic it manager. here is what he had to say. witnessingre synchronized economic growth across the world. europe has picked up off the floor. it is growing. just is just teed up -- two cylinders. the u.s. economy refuses to go at a recession. that is good news. they know that.

i think they will continue to trend. david: to oversimplify, are the markets ahead of geopolitics or are geopolitics that of the markets? in the sense that the markets are saying, it will all be fine, or the markets will have to catch up with turbulence? >> i think it is all good until it is not good. that sound like oversimplifying. there's a lot of good things in the world. i actually agree with what he said. i spend a lot of my time out of the country. i travel have the time. i spend the first half hour of every conversation talking about our politics and what america is doing and what it means for the world. there's just a matter of time until the has profound effects. president referred to obama obliquely moment ago and you tend to be more on the democratic side of things, but what you certainly see is more turbulence coming out of the white house. you can agree with him or disagree with them. but there is turbulence. why is it that showing up in business? mark: i actually don't know.

i will give you a better example. where is the sovereign debt of south korea trading? i think what you will find is it's trading at roughly the same level as the united states. so, the question is, if you live 10 miles away from a person who can absolutely annihilate your country or you live here in the united states, which debt would you rather own? would you rather own u.s. treasury or south korea, that sovereign debt and they are trading at the same level? jonathan: the record, you now deal with about five basis points. marc: when you look at that -- jonathan: death by tweeting. [laughter] marc: it makes no sense. money,there's so much whether it is dollars or yen or euros, sloshing around, and this is reacting to those geopolitical tensions?

this is creating absolutely the problem that there is too much money sloshing through the system. there is no place to put it other than a fully priced risk asset. the last crisis was 2008. memories are exactly 10 years. we are about nine years from lehman brothers. a lot of seasoned professionals have actually operated a lot with this crisis in a very risk oriented way. and the investors who totally ignored risk last nine years have made the most money, which is why you go back nine years and they are historically active

. they are ignoring all of the noise, all the geopolitical stuff. that was the way to go and that is what i think is partly driving the complacency. jonathan: you mentioned risk assets. what about risk-free assets? you mentioned the 10-year treasuries. this week we had a century bond come out of australia with a yield of 2.1%. price theth do you risk-free asset, nevermind the risk asset? --what is happening there that is the quest for yield. going on two things out there. there's the theory that we could come into an ice age. in other words we will have deflation, basically low growth. willf this technology destroy what we view as normality is. superlongo be in

duration assets. . think that is partly it the flipside is, why would anyone buy 100 year argentinian bonds? they have defaulted five times in the last 100 years or something. they are having a little more disconnect, ok? didn't you hear, the reformers are taking over? the question is what is going to be the other side of this cycle? what is going to be that for the u.s.? marc: i think it will take a while. i think wes is right. things are fine and they will remain fine for a while. alix: what is a while? years already nine in? a distressed guy.

i think a well be two or three years. us -- right now it's in the energy sector, aviation, asia, europe. you've got to go outside the u.s.. we have ended up -- we are buying a company -- i'm sorry, brazil, where it is a waste management company that we are buying and when you look at that , here in the u.s., we are buying at a 25% discount. find these assets outside of the u.s. and the reason is because people think there's a little more risk outside. if it's me, where do you want to invest? do you think you are getting overpaid by investing in result. when i look at that, i say, i think him getting overpaid if i am buying something at 5% discount and there's massive growth -- why wouldn't i do that? alix: what about energy? energy, the play -- if

you look at where things were a few years ago, the futures would tell you what would be at $60. today, futures tell you oil will stay around $45. in've got to get involved restructuring and restructure these companies to wipe out people beneath you so you become the equity of that company, but that is a two-year process. alix: can you give me examples. of theed at defaults energy sector to your half ago and it never really came. where is it going to come from? there is ocean drilling. there are a number of the steps of companies. there is a process. what you're going through is restructuring. jonathan: you mentioned asia. where in asia? marc: shockingly, australia is in asia. [alix laughs] jonathan: let's go there.

let's go there. are there opportunities in australia? it ends up being indonesia. those countries, and the symbol reason is countries where you reason is, simple countries that have gone there used to get their financing from chinese banks. china is shutting that off. you are able to lens to those companies. you are able to get to -- lingzi lu lowe's companies for your able to get 15%, 20%. a legali am able to use system that i think is pretty good, the same thing in india and i'm doing it around a 40% discount. jonathan: i you doing that within australia? idiosyncratic parity got to find those situations. jonathan: do you worry about the environment? marc: i worry about everything.

i've got a lot of issues. [laughter] alix: now you are really, really stressed. david: so, wes, we know where marc thinks there are opportunities. banks, there's not a lot of turmoil in the marketplace. where you see opportunities? times think there's good to buy stuff and good times to build stuff. in these very, very placid times, it's tough to find stuff to buy. we are having a ton of good returns building up stuff. things that are idiosyncratic maybe by nature, but there's great things to build -- yeah, i think in the u.s., you can bet change.h of legislative the executive action, what they can do is being very focused on

regulation. there's a big deregulation trade in this country. are the toprvices of the list. there's a lot to do in this country. there's a lot that can happen the by virtue of reviewing relations of the last few years. how has that changed your daily life in the way you invest? not changed very much. i don't have to do earnings calls. the investment side has not changed at all. we are very focused on a different businesses. we have legacy businesses, and then the business is good. i talked about the building. we're really excited about -- there's a lot of fundamental growth. jamie, what are your fees? jamie: you mean what we charge question mark alix: -- what we charge?

alix: yeah. those little things. mind: investors do not paying fees if they think they are getting services for those fees. the challenge is, if you are underperforming, if you have a generic investment strategy is increasingly difficult to justify premium fees. if, like wes mentioned you are rcilding things, like ma mentioned, you are finding opportunities, you're creating at the spoke portfolio. poke portfolio. 2016 was tough for you. jamie: yes. [laughter] alix: how is 2017 going? jamie: we cannot really talk

about performance. i will get in trouble -- alix: better or worse? jonathan: you kind of did already. jamie: across equities and credit, virtually globally -- in europe, i know wes is also involved. in europe you have $2 trillion of nonperforming -- mostly real estate -- assets. you can buy these assets, particularly with the italian banks now where there's a huge disconnect between supply and demand. and we're finding significant discounts to fair value and it's a huge market there, but you've got to be local. you need special services. you need finders. you need infrastructure to take advantage of this. placest to try to find where the supply and demand is balancing in your favor or it is so opaque, so murky, no one

knows what you are doing until you publish it. another interesting place -- italy, even more so if they have the election. the political risk in europe, i wonder -- jamie: they have changed government since world war ii. i think they are kind of used to it. i was in milan. they are looking at what happens and the garbage is not getting picked up. even the italians are getting that you can make lots of promises, but you still have to govern. we're not that worried that regime change in italy is going to be hostile. in fact, i think we are more optimistic. wes has a bank in italy -- and i think you probably agree with that.

50% in the more than market of distressed loans. we are in a position that is a really big, terrific one. the banks have a lot of bad assets they need to dispose off. you have to work those out. everything in italy is a little more complicated. we took our bank public. it was a big success. and there is the permanent stuff. every day there's seems to be more portfolio stuff. it seems to be a very busy market. learning fromre the u.s. market that populist politics does not play out as people expect. it's difficult to execute. italy is a good example. it's even harder to execute. one good thing about this country is that we inspire debate and it's hard to get stuff done. but with a legal system that encourages the rule of law. places like italy, like france, other countries over there, they got a little confused about

those issues and that creates a lot of friction in the system, but the flipside is it drives down the asset prices and creates opportunity. sell time seeing the most action in italy? a restructuring, the balance sheets are coming off sides. they are very focused on cleaning up belly she's and there is a time of stuff for sale. >> with all due respect, the europeans kicked to the can down the road because italy for banks are being regulated by a national regulator. what is happening, now the eu, the ecb regulates all of the big banks and they are not playing games. they are going in and saying this is what this is worth and you need to sell it or raise more capital. milken overichael said thisfew days ago is their golden age for private equities. do you agree with that?

are we setting ourselves up for so much money in the market with no assets to the value it? wes: i think there's too much capital and few opportunities, if you take companies over, it brings in a lot of good processes, right sizes them, grows them. the performance of the asset class over the last 20 years has been terrific and i see no reason why it shouldn't continue to be terrific, but there's definitely too much money on too few deals. thed: we've got to talk of bubble for you guys get out of here. you bought milwaukee of few years ago. there's a deal that went down for the rockets which was a little bit more than $550 million. i will because -- marc, start with you. is that a change in the nba or a difference in the markets? it is a mixture of

both. i don't think ours is worth 2.2. i think is probably 2.1. [laughter] marc: it's all positive news regarding the nba. you got more people who want to watch it. every year they are setting records. you've got a great tv deal and i think that will be for the next 10 years, and part of the other thing is, you know, for the rockets, my understanding, the person who lost that team had and lost 30 years ago it by $5 million and for 30 years wanted to buy that team. of two pointalue two, but the value for all of these teams is moving up and the real question is how long does that last. i think it will last for a pretty long time. referred to tvc,

deals. there are various over the top services. and you're putting harley davidson on your jerseys. we bought the team and are to believe it was the highest price ever paid at the time. 550 went to $2.2 billion, were pretty sure. we bought just before the new tv deal and it looks like it's smart in hindsight. it was just good timing on our part. i think there's no question things are going to change. the content is very valuable. the nature of how it is distributed will change a lot. consumers are consuming it a lot differently. they are trying to figure out how the revenue model is going to work and how that will turn into money for the teams. it's very much a question. david: jimmy, i'll dependent are you on the market? particularly with things like streaming? is that break down as a universal gain?

biggest seais the change. anybody can watch anything they want to watch no matter where they are. if you are a huge fan -- you can watch it anywhere. [laughter] wes: you are right. atie: we are looking entertainment without borders, entertainment without boundaries. huge quality product. we think it's only going to be better and we think we will be america from team. jonathan: when i go to games and the u.k., football, on the way to the stadium, you drop a by blackhawks, any honest, respectable gambling establishment -- drop by any family the spectral establishment and place a bet. when will you be up to do the same thing? basis of it is very

little of the betting on the sport is outcome based. it is all content-based. 85% of the bets are placed in process. they want to bet on who is going to make the free throws. sampling exists right now. legalizing it, doing it the right way, monetizing properly, i think that's a very sensible approach. withhan: do you guys deal it, too? >> first, keep in mind, it's happening anyway. it's almost like prohibition. everybody is drinking. i'm a big believer that these activities, government should legalize him and everybody will be better off. vegas andi go to las i gamble and i win, steve when gets a little bit of the action. gets a little bit of the action. should a work that way for the teams? should there be a cut for the owners?

are asking me, sure. i should get a cut of everything. [laughter] i don't really know. i think it's a complicated issue. first, let's try to get legalize gambling and we will see what ins up happening. i think it's what wes and jamie said. ultimately, it's got to happen. the question is when. alix: let me read you something your -- it will not end well. it's a fraud. that's talking about bitcoin, what jamie dimon said about bitcoin. bitcoin, go, what you think of? jamie: tolls. , i missed it from 30 to 4000. don't look at me. it came down another 10% because of the chinese. at the end of the day it's an algorithm that creates money.

,f it's money in my back pocket i paid with three singles today. have three pieces of paper? they can make the argument. this is probably going to become ubiquitous and go the way up -- i don't know, to looks. alix: marc? marc: i know nothing. it's not my world. alix: is this something you need to know about? can you just put it on the sidelines. to do with itneed now. wes has a better view. we have guys in the firm better believers in it. the block chain technology, i think that the fundamental thing and the integrity of that, i think that's actually great. david: is that going to revolutionize five -- financial

services? wes: i think it could. we are all worried about being hacked and the sanctity of our money, but i think the technology and the black chain itself, a lot of value to that. i view it a little bit like the internet. when the internet first came about, there was a lot of money made and there's a lot of money lost because the internet itself was not a thing. it was the applications of it that were the thing. that's what i think about bitcoin. the actual prices, i don't know, i'm a skeptic. alix: number one conviction call. one word, go, marc. marc: energy. >> japanese equities. wes: energy infrastructure. all very thank you much. of course, at 3:30 p.m. eastern,

the owner of the atlanta falcons will be joining bloomberg to be from exclusive interview from benz sagan.cedes we are 32 minutes away from the open. we are down about a 10th of 1% on the s&p 500. we are going toward a weekly gain, the biggest potentially since july of this year. the story of the bond market as follows, of the back of those --ail sales, treasuries yields unchanged after grinding higher at 2.1 percent last week. the fx market, dollar weakness is the story, the euro-dollar, 11971. you're watching bloomberg tv. ♪ jonathan: north korea launches

its second missile over japan. the dollar has extended its loss on futures after an unexpected decline in u.s. retail sales raise concerns and hugh hendry closes his fund after 15 years. more from that interview throughout this program. from new york, good morning, good morning. this is "bloomberg daybreak," and i am jonathan ferro alongside david westin and alix steel. we are a little bit softer as we grind toward a weaker gain, this on the back of pretty disappointing u.s. retail sales. and treasuries, yields, back to 2.18. that's your yield on a u.s. 10-year. crude, the movers ahead of the open -- alex deal. alix: oracle with earnings after the bell down almost 4%. the first quarter revenue did

grow 51%, but guidance was disappointing for the second quarter. overall they saw between 2% and 4% growth. they are catching up on the business but it is still trailing amazon. it is still trailing microsoft. this is cut to neutral from outperform over at credit suisse. are seeing a lot of oversupply in the industry -- a.k.a., there are a lot of ships out there. general financial of 3.5% premarket. at one point it was up 10 percent. the virginia department of insurance approved the takeover by a chinese buyer, with the company having to city area's-based -- two subsidiaries in philadelphia. will president trump and a

blocking it? so far things are looking pretty good. you set upet's get for the market open. despite risks from the north korea and the united kingdom, the market holding steady on pace for its biggest weekly gain since july for the u.s. dollar hitting a one and a half months high against the japanese yen briefly. now we have rolled over. investors shrugging off the latest rising tensions. joining us, jeffrey's chief market strategist. yesterday, the headline drops. the most liquid part of the day. drops a third of 1%. we are becoming increasingly desensitized to this, aren't we? >> i think so. the s&p was down 20 basis points. there's no storyline that is continuing to make it worse,

and i just think people do not have a great handle on how to hedge for it, so they are not hedging for it. the other thing that i think is bizarre -- i find it bizarre is people by the yen when there is a missile going over japan. it never makes sense to me. jonathan: how does that regime breakdown? the fact that you buy the japanese yen? >> if something catastrophic happened and people were not going to be running to the yen to buy? david: ok, if it does break down, where does it go? where is the safe haven currency? >> the usual safe haven currency is the dollar. it's not even gold. it's the dollar. david: it hasn't been in recent weeks. >> no, it has not. we have more crisis in washington. but the dollar, the last true crisis were everybody felt like

they did not know what was going on in the world -- what rallied? everybody went to the dollar. that is usually the place that you go. and gold. >> gold does well, but really, the lehman time, gold was not rallying. the dollar was rallying. flowswe saw u.s. equity the biggest and 13 weeks. that to me is not associate with uncertainty in washington and a risk off worry mentality. >> i think people are under positioned. i think people came into this, new the world -- there was a new rate.after november 7 the it has taken a lot of time for people get positions back on. people do not like they levels. they think the markets are expensive. and what you see is people getting forced back in because we are at record highs and

yields are at recent lows. alix: where is the biggest miss price? >> i'm not sure there is one. it's not that severe. if we get a lot of the things we are looking for in this new administration vis-à-vis deregulation i think there's a great tailwinds for higher returns on capital, higher potential growth and not a lot of inflation. the positive supply story is what we have been spending. you add tax reform, get demand stimulus, you can have a good run. my biggest worry at the start of the year was you had a fed that was not very cooperative. you had a time when janet yellen could be more hawkish. inflation didn't did not cooperate with that view. even though she was quite hawkish. she will probably have the balance sheet tapering september 20.

i think you'll end up with the trump fed, which we can talk about. that could be an interesting thing. i don't think it will be a fed that will be particularly bad for markets. jonathan: do you have any insight into what that looks like? of discussion lot that it was going to be gary coh n, but that looks less likely. jonathan: but the idea that this would not be favorable to a risk appetite -- >> oh, it would be. as,ver you in-depth with you know, the chair with the other two governors, and built of you fill job comes up in the next 18 months, if i'm not mistaken. there's a lot of changes in very powerful parts of the fed. if you think about his goals, his goals are to keep that gdp

going, keep the jobs going, the s -- the s&p going, he uses those as basic reference points for success, so you get more of you dotopping fed and not think about the long-term risks as much is the short-term gains of those specific variables that represent political success. is one of the things he has accomplished is desensitized the markets to washington? is that a good thing? >> explain what you mean by desensitized question mark david: right after the election we saw a real move in the markets. >> for about three hours. itid: it was down, but then came up and that lasted into january, fabric, march. on the expectations of what would happen fiscally. largely come off.

yet the markets kept going. they did not react downward the way they reacted upward and that would indicate that perhaps they are not spending as much attention to what is going on in the white house and congress than before. is that a good thing? >> now i see where you are going, david. definitely 100% the fiscal stuff got priced out. i think what got priced and was more the deregulation, businesses seeing less flow of regulation coming from the department of commerce, the fed and the likely positive reinforcement that gives towards expected returns on capital. if you add tax reform, lower corporate taxes as well as additional repatriation, as well as some individual tax reform, that's a much bigger deal. i'll think the market even things that can happen. david: if deregulation is really driving this, is that more a

matter of sentiment or fundamentals? things ceo's expecting to be good because there will not be as many regulations or are they saying lower-cost and higher margins are ready? >> i think is more sentiment, but every day of regulation does not come from one of these departments there is reinforcement that there is a lesson in the way of getting this business. suppose you own a couple thousand restaurants and you are getting a letter from the department of labor saying you need to have this in your bathrooms, change this around alwaysur payrolls, something new, and then it just stops. that's a pretty good sign in my be time to own another restaurant in another place. [laughter] alix: always opinionated. we love that. staying with us. davidzervos from jeffries. --n markets top and bottom

we will talk to him at 9:30 a.m. this is bloomberg.

david: this is bloomberg. im david westin. the dollar down after an unexpected decline in august retail sales. .2%, and the expectation were for them to grow 1% -- .1%. this is raising concerns over the strength of the u.s. consumer and the economy. ofll with us, david zervos jeffries. we know the consumers are important to the economy. it's such a large percentage of the economy. how concerned should we be about

the soft numbers? quote the usual fed statement which is we never worry about a month-to-month number. if you go back and look at the year of 2017 and data, what has been the interesting trends? the interesting trends are we are growing at a pretty decent clip. we just had a revision in gdp back up to 3%. we have been creating pretty decent job gains with volatility, but by and large, surprisingly decent given how low the unemployment rate is and scraping the bottom of the barrel and up until yesterday we had a little bit of an upside surprise in cpi. we had kind of a weaker inflation, stronger growth story . i think we are getting a little bit of a kind of return to the mean lately, so we are getting a little bit of weakness in retail sales, a little bit of higher prices, just a little higher unwinding this year, but i think that trend, that trend of a

higher potential growth rate and a higher -- an economy that is doing pretty well, but not spinning off a lot of inflation is actually the interesting story this year. david: ultimately we care about these numbers because of the way that they read through the earnings and therefore stock prices. david z: yes. david: given the economy you just described -- it is growing, but not to robustly -- you expect us to maintain the earnings growth we have seen? david z: of that kind of funny view on the earnings growth story. if my deregulation story plays out the way i described, i think a lot of the regulatory changes that took reportreated pretty big profits. in fact, corporate profits as a percentage of gdp were at a 70-year high even though we were growing at a very low rate on average. pricese start falling,

can come down, there's more .ompetition, less market power top lines might grow. bottom lines might fall. what that does to initial multiples and how people look at that at the stock market level, i think is debatable. i think people like topline. if they get nervous on bottom line, you might have a little sting. i think that has been a story on wall street all year. maybe look at the russell over s&p. there's a little bit of a better playing field. i think that's a good story. you had july revised downward. non-retailers, non-store retailers were down 1%. that's an amazon story. that is down. building materials down. you would think that would be good because you would be going against all of the things in the hurricane -- we kept thinking the issue in wages, the economy were supply then.

to be signals point -- do these signals .2 us potentially looking at a demand and supply problem? david z: i do at what to get too wrapped up in one or two months of numbers -- alix: again -- david z: i think if you get a little weakness going into the end of the year, it's possible. you have a lot of uncertainty, a lot of people worried about things besides just -- about earnings, some of the revisions we've seen of been in consumer discretionary stocks. does that tell us a particular story? david z: i'm not ready to get nervous about an economy that is growing at a reasonable clip, producing a decent amount of jobs, but not generating a ton of inflation. i like that worry. that story has been pretty consistent throughout the year. we will get a lot of volatility around the story. the big difference for me, the different.g janet is done.

she is gone. we will get a trump backstopping fed. if there is aggregate weakness dutch which i think you're saying there's a chance. maybe there is, i think we will have a fed that eases off pretty quickly on anything aggressive and we will get aggregate demand stimulus back, whether that means tapering or not tapering as much remains to be seen. jonathan: thank you. we got there. i look at treasuries specifically off the back of retail saleseak numbers across the board -- kind of resilient. yields were higher. there.hanging in if it was a couple of weeks ago and we got that kind of print i imagine we would be down 5, 6, 7 basis points. what is the message right now? a pretty good had run in treasuries. we tested some lower yield levels. we are at very tight levels and spreads. i think a lot of people are looking at credit markets and kind of going, wow.

can you really issue positive therefore company that is coming .ut run in the a huge -- we where people will are pretty close to the highs in s&p, we are a pretty decent levels in bonds. it is not the middle of the range. i don't think it is going to be a big change is what i'm saying. have a couple other -- a payroll print or something more. maybe i have been on holiday too long. david: great. you mentioned the credit spreads. private equity making loans at 7, 8 times even the -- ebitda, getting way up there.

are there any signs we might have problems around the corner question mark -- around the corner? david z: the credit people i speak to, they are very wary. the question is, can it go more and it always can. look at whatever ig, cbx is trading, if you put enough leverage into this stuff, you can make it go higher. the question is will people start to securities?these story. see a big default i don't even see a regulatory story that will get people to stop buying the stuff. it is hard for me to get very bearish on the credit markets even though they look optically -- if you look over many years -- they look very, very expensive. ok, you will be staying

with us. we will have senator david purdue of georgia and alan krueger of princeton university coming up. life new york, this is bloomberg -- live from new york, this is bloomberg. ♪

we keep talking about synchronized global growth. in the commodity markets, industrials, base metals that it can apart. all down this week after a big run. it raises the question of what you do with inflation expectations and emerging markets? take a look at my terminal. the white line is oil. the purple line is copper. breakeven ande is you see that they track each other. then they have the breakout of copper in the last few months and you have a bottom here with those inflation expectations. they move higher before the cpi yesterday.

still with us, david zervos of jeffries. this is all going to fall out of bed in october and that ends up going back to the u.s. david z: very well put. i don't have a strong view on commodities. i know the copper move got people very excited, but that could be exactly what you say, something driven out of china. i think the story is -- i'm going to go back to my same thing, a sort of interesting time to think about investment in the u.s. in this deregulated lower tax environment. expected real returns are higher. that's usually not a great sign for the yen and not a great sign for commodities. i think of the margin it's an interesting flow and it will keep happening. last year i was very focused on the yen. in the spring i sat down with you after the big bump and i said, this is the time they are

not going to raise rates. we have the shanghai accord, the after off the table until the election. go by brazil. colombia. probably willhe be a better story for the u.s. growth wise and i'm not 100% in the em trade or the commodity trade. although i would say i really like the lead america trade as a fundamental trade. i think what is going on there is fantastica. alix: what areas? david z: argentina, brazil. all of the moving away -- jonathan: fantastic in brazil politically? alix: falling apart. look at the currency. the guy was caught on tape taking cash -- jonathan: that's what i mean. is that fantastic lyrically? fantastic performance

in the markets given the political backdrop. and by the way, we expect these things and brazil. this is not abnormal. lower the frequency with which they happen in every thing will be ok. david: you have the regulatory investment come essentially, any united states. that's the regulatory investment, essentially, in the united states. you have brazil, the asset fund value -- way those things, which is more attractive? i've come back to the u.s. more. it's an easier trade. there's less land mines. there's a very cooperative fed once the transition gets made. now fischer has left, janet will be leaving in january. you're not going to have a chance of having a fed that runs against the administration, like you had bill martin versus lbj back in the 1960's. you've got a good storyline developing their and i'm pretty excited about both the deregulation and, now, with the

pivot to the democrats, possibly the tax reform. jonathan: that does not seem to be happening -- david z: i'm saying things are good. we're not that far from record highs. it's hard not to stay with a view -- jonathan: i do wonder where we are at in the cycle. s of jeffries is sticking with us. we are down to the opening bell. we are down a 10th of 1% on the as a become a dead flat on the doubt. we grind toward a weekly gain, potentially the s&p 500, a which which included brief record highs. you are watching blaber to be -- you are watching bloomberg tv. ♪

jonathan: from new york city, as we wrap up the trading week, let's get to the score. 22 seconds away from the opening bell. futures are a little bit softer.

down about seven points on the doubt. up 5.1% on the s&p. toward a weekly gain of 1% on the s&p, the biggest since july 2017. disappointing retail sales have not move the bond market too much. yields have grind higher since last week when we hit 2.0% on the 10-year. up a single basis point, even in the face of the disappointing data. a stronger euro, much stronger pound driving the dollar lower by half of 1%. 91.65. that is your cross asset picture. alix: a pretty muted reaction in equities. dow jones up by .2%. s&p barely down by a point. the nasdaq down by two. s&p and dow jones writer run record levels for the last few days.

row, the longest streak in a week. s&p, since july, even though we have a done move today. individual stocks, i want to point out airline stocks. united getting hit the hardest, down over 2%. united and american get a downgrade at j.p. morgan, cut on a lack of pricing vigor. they cut their targets by 20%. they also see higher fuel prices hurting carriers there that is a hurricane harvey story. potential long-term effects of the hurricane on the equity markets. by 1%, but this stuff got an upgrade, target raised by 10%. basically, it had a big fall and is a valuation play. it felt too much and i you want to pick up stock on value. passengersaying that may turn to southwest for their safety record, if prices are equal.

equities for airlines a little bit softer on this friday. jonathan: tremendous interviews here on bloomberg tv throughout the morning, including hugh hendry, the hedge fund manager known for his provocative views and a 31% return in 2008 in the depths of the financial market. he is closing his asset management fund following a 15-year run. take a listen to what he has to say about the economy now. we are now witnessing synchronized economic growth across the world. europe is picked off the floor, it is growing. anda is just full cylinder the american economy refuses to go into recession. that is good news for equities. good news for commodities. they already know that, they have picked himself up off the floor. they will continue to trend. jonathan: we gave him a chance

to make a comeback. a pretend $1 million in your account, and this is what he said he would potentially do with the money. >> inevitably, there will be an air pocket, so where is your protection? i think the most distorted asset class in the world is the 2-year german bond. i would be short that. to lose 75re willing basis points a year for security. you don't need that security, it is the wrong price. jonathan: still with us is david zervos of jeffries. shorting bunds has been a tough trade. david z.: i love you, sad to see , sad to see him closing down, but he was great. he was a big hater, we used to go to battle when i was doing my lover versus hader stuff.

he converted at a decent time. maybe he converted a little too late. jonathan: is that a parting shot? i will get that in there. hi, hugh. german fixed income is like shorting jbb's. i would not touch it at all. maybe you will get some backup, the ecb may do some tapering in october. maybe they go to 40 billion for six months, but the ecb forecast is 1.5% in 2019. they are not going to get any inflation. they will be back to saying qe sticks around. if they try to talk hawkish, the euro will skyrocket. jonathan: let's say inflation tops out at 1.5%. -70 on a german 2-year does not make sense. david z.: they are not making them. germans do not like debt, they

don't like this fiscal stimulus. why short something that is already in short supply? maybe there is going to be some day were the germans have to issue some debt but i don't see it coming anytime soon. i'm not in that camp. if you are going to short something i would be more likely to go to the long end of the german car, then the short end. david w.: what about the air pocket? you don't want to short bunds short terms, but do you believe there is an air pocket, how do you give yourself a section -- protection at a reasonable price? david z.: most of my career and jeffries we have been advocates of risk parity trade. dalio's made ray success he has had over many years. everybody has built a risk parity structure. ,e coined a lot of phrases on for the layman to operate a risk parity trade, but by and large, you buy your s&p's and then you

buy fixed income, or you basically own a fixed income portfolio in the same volatility bucket as the s&p you own. it is a much more levered six income portfolio. hard for retail to do, unless you want to do it in futures. you basically end up with a position whereby the s&p dropped by 10%, next fixed income portfolio will rally and almost offset it. though you end up with a long-long position. i am a big advocate of that trade. that is what we have been advocating since the summer. we didn't like it at the beginning of the year because we were worried about janet tightening more quickly to unwind the shanghai accord, but hugh is right, there is a good growth story behind it, within easy central bank behind it, which will be good for risk parity. to answer your question in a long way, the hedge is fixed

income, levered long eurodollar futures. do you take more leverage on the s&p by taking options, protect herself if it is a big swing? i think the volatility has been unusually low, you can find some pretty good option structures if you feel like you want insurance. i would rather have insurance that pays me every day, and the insurance that pays me every day is a long fixed income position -- levered long fixed income position against my equities. i don't have to pay theta, option premium, and i feel like if the world blows up and s&p goes down, i have something that will protect me in fixed income. that is basically our trading strategy at jeffries macro right now. you again. to see david zervos, always a pleasure to spend time with you. now to the technicals. if you look at the dow jones

touching another intraday high, but you have to be careful. tom demark is the founder of demark analytics. he has advised big hedge fund gary cohn. he says we could be looking at a possible market top. you have three tops. take a look at the first chart. we are looking at downtrend exhaustion. walk us through it. tom: the first chart should show the dow jones average identified with a 13 at the bottom in november, two days before the market bottomed. exhaustion identified the market was more than likely to move higher. at the same time, the sidebar, we were receiving a buy signal during the trump election, which but we were positively disposed.

the next time we recorded -- apparently it is not on the screen -- alix: it is now. we are looking at the current trend. tom: december, january, we were waserned the contrary 13 going to appear, the opposite at that time. inwere on the air with you january. of market was within .40 recording 20,000. at that time, we said no, the market would not exceed 20,000. then the conclusion was, what if the market exceeds 20,000? then we said it would go a lot higher over an extended time. that was our forecast. isiously, these interviews like a snapshot as opposed to motion picture. we did change our perspective on the market, have been long ever since. ,ight now, we are at the point

where price objective off of that january level, the reg out was -- together with that, we have 13, which should appear today, more likely monday. that should show trend exhaustion. the combination is pretty potent. you have potential trend exhaustion coming out for the dow. then you have the upside projection of the june 2016 bottom. what does that wind up telling you? bulls are in unison again, more so than in january. these are more compelling than they were at that time. many other indices are also about to record 13 tops, meeting price objectives. what we have across the board is maybe .2% above the upside of recent highs in the price objectives, fulfilled for most market indices.

we have not experienced a 5.5, 6% decline in any market index since june 2016, with the exception of an intraday move on nasdaq 100. the broader industries have declined more, but we have not had the correction says something more serious on the downside. this could be a pretty meaningful top. about thes talk potential downside, which brings us to your third chart, comparing what we saw in 2011. walk us through the comparison and how significant the downside could be. tom: we always look at comparisons between time periods. we started that in 1987, followed that through 2006, through the bottom in 2009. periodorms well with the of 1973, 1974. we like to compare tops with bottoms.

if you like it the decline in august through october 3, 2011, and you invert that chart, it almost looks identical to what we are experiencing now. it is the inversion of that. we could have a dip and one more the up, but it looks like potential risk is much greater than the reward. we have not appeared on any media at all since january 6, anticipating a top and it eventually has evolved into one now, approaching it. alix: the by the dip theme has been a trade in the market. what would be different now, why wouldn't that play out this time? how do you square that with your technical analysis of the sentiment being burnt out? tom: the price patterns, objectives, exhaustion we measure, the confluence of all of these variables are beating today. if you had a sharp pullback

today, you may recover him a but it is unlikely. once we start down -- we like to use as a comparison to tell us the market has turned down -- once we close less than the prior four closures and then follow through the next day. we are waiting for that. alix: we will be looking for that on monday and tuesday, watching that through the market open. tom demark, thank you for your perspective. wrapping things up 13 minutes into the session. , aer three record highs couple of days of losses on the s&p 500. we are flat. on the week, we are positive. 1.4% on the s&p 500. from new york, you are watching bloomberg tv. ♪

>> this is bloomberg daybreak. up later, kathy jones of the charles schwab. she is there fixed income strategist. stay with us. this is bloomberg. eco-data this morning at retail sales on its but the befalling in august. july was also revised downward. how much of that is hurricane impact? joining us now is ivan feinseth. good to see you, thank you. nothad home-building stores reporting a decline, non-store retailers reporting a decline. think they would go gangbusters around a hurricane. >> i think you will see that

later on. the hurricane put a damper on sales, people did not go out. people tried to get out of the hurricane area, not focused on shopping. the biggest thing happening is the consumer, in my view, is still strong. record low unemployment, record high stock market, strong housing market. what consumers are spending on has changed a lot. they are spending less on things and more on experiences. travel is doing better, the cruise industry has had back-to-back record quarters. people are going to events, entertainment, concerts. --x: the nordstrom model somebody has your close for you, you get a mani, pedi, you think that is the solution? new concept they announced is going to be successful. [indiscernible]

you are talking about herself going to nordstrom. ivan: there is nothing like a good pedicure. alix: where are we with the amazon story? -- down 1%, was that a cop issue? i believe they pulled a little bit of their sales forward but amazon is still evolving into this ultimate on the channel retailer. they are building a brick-and-mortar presence while expanding their online service offerings. youd w.: on the one hand have amazon taking so much. on the other hand, people going out to dinner, cruises, movies. what is left of retail? is nordstrom even retail anymore, do they shift over in their sector? shopping malls are becoming entertainment malls, they are building more theaters, restaurants, places where companies can showcase their products. if you go to the mall, it is

still busy, consumers are caring backs. tombay to measure if the is shopping is to count the bags. the malls are involving because the trends and what consumers want to spend their money on is changing. it is more emphasis on experience and less on things. david w.: you talk about digital being amazon, buy things digitally. people are interacting differently today. when i had teenagers, they would go to the mall to see their friends. now they are chatting. is there a reduced valley of malls in the social phenomenon? are: i think teenagers still going to the malls and chatting with their friends at other malls. it is kind of both. communications have changed with social media, we have on our phones.t still, you will see a continual expansion in consumers spending money on experiences.

alix: what do you like? ivan: in the retail space, nordstrom's has been my number one pick. i think they have a differentiated shopping experience in connect with the consumer well. private.ly will go it seems they are in a transaction to go private. my second best in retail is macy's. i think you will see -- i have to create some value. i think you will see some type of real estate transaction, some type of restructuring. they do have a lot. people are still going to buy clothes. in different ways, but people thingsill buy things, they like, things they need. retail is not going away. it will continue to evolve. technology will be a major driver of how it evolves. alix: i may be would not get a mani/pedi at macy's. david w.: i'd be careful here.

how about bergdorf's, are you ok with that? ivan feinseth, good to see you. go to the bloomberg terminal and check out tv . you can interact with us directly. you can scroll through and click on something you may have missed. this is bloomberg. ♪

david w.: this is bloomberg. at the top of the program we had work about a terrorist attack in the tube station in london. now we are told president trump will be coming out to address that. he has tweeted about it. deeply concerned about terrorist attacks, of course. we expect president trump to come out and address the attack in london. jonathan: the fifth attack this year, at least 18 injured when a suspected terrorist set up and in vermont exposing device during the morning rush hour.

the prime minister theresa may giving her thoughts. she says they are looking carefully at police powers to fight terrorism. for anyone toful speculate on the investigation. the threat of terrorism is severe. we will keep an eye on those two things as they play out and will bring you those remarks when they begin. program, we spoke to the co-owners of the mba milwaukee bucks, asking them about politics to bitcoin, and whether they -- where they are investing their money now. for us, it is australia, india. it ends up being indonesia. those countries. countries where you had a lot of chinese companies that had gone there, these together financing now chinese banks pay right what is happening, china is shutting that off you you are able to lend to those companies and able to land on a secure

basis and make anywhere from 15% to 20%. jamie dimon spoke about investor fees. >> they don't mind paying fees if they are getting services for those fees. the challenge is if you are underperforming, if you are having a generic investment strategy, it is increasingly hard to justify premium fees. on a the u.s., you can bet lack of legislative change. it will be hard to get stuff done. what the government can do, what they are doing is to be focused on deregulation. it is a big deregulation trade in this country. fascinating discussion. for me, it was about distressed assets, talking about a cyclical industry. compare that to what is happening structurally with retail. jamie said ice cubes can melt to

nothing. it is a different world. alix: that meant that he did not like retail, i want to be clear. jonathan: it's increasingly difficult to know when to buy retail because you buy to liquidate, not for the turnaround story. david w.: it is hard to find distress in a very calm environment. jonathan: fantastic morning of interviews here on bloomberg. all of them will be on bloomberg.com. 26 minutes into the session, futures were pretty flat into the open. we grind toward a weaker gain on the s&p 500. viewers on bloomberg tv, listeners on bloomberg radio, this is bloomberg. ♪

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across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. york, is 10:00 in new 3:00 in london, and 10:00 in hong kong. live from london, i am mark barton. welcome to bloomberg markets.

we start this hour with breaking economic data here in the u.s.. we are looking at a beat for confidence, the university of michigan consumer confidence out for september, the elementary reading coming in at 95.3. the survey called for 95, this is versus august of 96.8. down from august that beating the survey for the preliminary reading for the diversity of michigan consumer sentiment index. not much of an influence on the markets, another day of very small moves, mixed trading action. the dow putting in another record high on the day. for records for the dow in a row. take a look at transports lacking a little bit.