damage in central america. when it hits the gulf coast of this weekend at expected hurricane forst, it could destroy crops, impact oil drilling, and damage property. rooftop will airlift panels and batteries to puerto rico, where a hurricane knocked out power to 90% of homes and businesses. the first supply plane is expected to leave this week. puerto rico's governor also welcomed elon musk's tweet suggesting a rebuild of the island grid with solar panels and batteries, telling the tesla founder, "let's talk." attorney general jeff sessions issued a memo today regarding religious freedom. 20 principles based on the justice department interpretation of existing laws. among them, that religious employers can discriminate in hiring. the memo helps explain the executive order president trump signed in may, which was seen as

a thank you to the religious conservatives who helped him get elected. the director of the anti-nuclear weapons campaign that one the nouvelle peace prize -- novell peace prize says we cannot threaten to slaughter hundreds of thousands of civilians in the name of security. beatrice fan of the international campaign to abolish nuclear weapons told reporters in geneva that the election of donald trump as president of the united states also sends a message. ways forare no right the wrong weapons. if you are uncomfortable with the idea of donald trump having nuclear weapons he is able to launch, you are uncomfortable with nuclear weapons in general. i think that is really the message that we want to come across. fihn said the award signs a needed light on the need for a world free of nuclear weapons. news powered by more than 2700 journalists and analysts in over

120 countries. i am mark crumpton. this is bloomberg. julia: live from bloomberg world headquarters in new york -- joe: i am joe weisenthal. julia: the s&p 500 heading for its first retreat in nine days. call it consolidation, please. investors coped with geopolitical tensions. obviously, the weather report. sorry, the labor market report. joe: the question is, what is it? scarlet: the headline number could be overshadowing the strength of the liver market. shedding jobs, but wage gains picking up steam. what does the future mean for the fed? an international economist

weighs in what members of the fomc short list would mean for monetary policy. trump's big threat -- he is doubling down but not using any clarity. a drop in payrolls, but also rising wages. let's bring in the chief international economist for deutsche bank. whether aspect. we know he is a dove, but he is saying the market is too nonchalant. >> the report showed that 1.5 million workers did not show up to work because of bad weather.

it is a lot. if you take that into account and start wondering what does that mean, it does by definition say it is incredibly complicated to disentangle the underlying trend. scarlet: he said specifically is if you have negative numbers -- it was a bit startling. joe: i am curious. obviously, the market's interpretation was that the negative number and whether you can look through that -- but the market read a lot into that 2.9% wage growth. the labor participation growth jumping to its highest level since 2014. the headline is the weather. confident.eel >> we have been talking about, why has wage growth been so weak? it might be an indication of inflation. we will finally see some

acceleration and wages. if that is the case, markets are saying maybe we should not have rates at these levels. joe: you think that is a number that would not have been distorted by storms? >> absolutely. 3% of u.s. gdp, so it does of employment starts dropping. you do see a significant decline, which we did see in a number of sectors. wages, the impact of the weather on the wages is generally much smaller than it is on actual jobs. we think we should put more weight on the fact that wages went up. the headline number is probably more distorted by the weather. scarlet: a writer at bloomberg intelligence was talking about heavy wage gains were a reflection of utility worker overtime pay. there will be more overtime pay in the coming months because of rebuilding efforts. to what extent does that create momentum? are people looking at the hurricane effect, the rebuilding

effort, that is not representative of broader wage gains? or are they going to isolate and say that is separate from the real economy? >> it is important on its own, but the utilities workers driving wages higher -- the second thing that really is complicated with that story is that the participation rate went up. more people went back to the labor market. people who would not have come in and come back -- given the fact that the unemployment rate fell so much, it is consistent with the broader increase in wages. the fed will be looking through it. that is why the comments are not surprising. you said 1.5 people were not able to turn up for work. joe: 1.5 million. wasa: the restaurant sector heavily affected and would be the lower wage earners. is the credibility to this idea

that just by pulling those workers out, the average hourly earnings rose? played somehave role, but normally restaurants and food services ads about 25,000 jobs. that was dragged down, around 100,000. there are differences. back up next month, you could 300,000farm payrolls up to have that payback. the upside risk is that today the market was slightly nonchalant. the bottom line is, we are going to get a big payback from this. unemployment rate down to 4.2%. labor force participation rising at the same time. we got there the good way. could there be more? could we get into the low threes? people have been saying we are full employment, at 5.5%, and it keeps going down.

the labor force participation rate could continue to rise. how far can we go? >> if you on your bloomberg screen type wirp and look at the probability of a rate hike, that went up to 80% today, in terms of the december meeting. that means the market is not really saying we are going into a situation with the first column. 80%. that is only around 70 the beginning of the day. we have basically seen a situation where the market is putting a lot of weight on the wage gains. we have had low wage growth for quite some time. last shoe to drop in the u.s. forecast, this is what the fed has been waiting for. should start to hunker down, should start to be prepared. maybe rate hikes are coming faster. the fed is saying in the. chart they will hike seven times by the end of 2020.

the market is suggesting only three times. theyher words, the fed, if do see that inflation move up, they will be following through, and the market has to move up. gary cohn made a comment where he said the impression -- the participation rate could improve farther if we got tax reform through. we spoke to austan goolsbee earlier and he was like, look. it is a difficult relationship. what are your thoughts on this? >> i get what you are saying. you need to do something rates,c on marginal tax so you get people incentivized to come back to the labor market. the problem is, we already have unemployment of 4.2%. that is so low. we already half, if you look at different demographic areas of who is and is not working -- it is harder and harder to see where those conditional workers

are going to come from. if the economy is at full employment, like the fed is saying, adding more to that is going to be difficult to get people out of the bushes. difficult to generate more jobs. the risk is you generate higher wage gains. julia: inflationary. scarlet: the chief international economist for deutsche bank sticking with us. coming up, we speak about the search for the next fed chair, and how that affects forecasts. ♪

scarlet: the search for the next fed chair is on. if you look at the short list of

who is in contention, you have the incumbent, janet yellen. you have kevin on that list, along with gary cohn and jay palette. my question to you is, who do you think the president is consulting with when it comes to thinking about the next fed chair? he likes to crowd source and share his ideas and gather ideas. directtalks to has a influence on how he thinks about who he should put in that place. >> we do not have a guess on who he is discussing this with. it is very important to markets. this is the number one issue in all my meetings. i was in asia three weeks ago. it is incredibly difficult to come up with a guess on who it will be. -- therehe candidates is continuity with where the fed is at the moment. it is among different dimensions. the bottom line is, do you think there will be someone representing the current idea

where they are going? or do you think it will be someone where we do not know what exactly they are going to do? scarlet: if it is someone like steve mnuchin, what kind of candidate would a steve mnuchin support? >> i cannot guess what he would say. but given his background on the street, you would guess that generally speaking, they would be listening to markets and saying who might be the right candidate, who might be the wrong candidate, what might be good and bad. that does not necessarily make it easier. joe: as you have these conversations with clients, can you point to previous situations in fed history in which the pace of policy was so hard to ascertain in part because personnel was unclear? backdrop is, for the last several years, there have been many unfilled seats on the fomc. if you go back to last 50 years,

we have not had as many open seats as over the last decade. seats, the newed chair is going to be powerful, because the new chair would like to have a strong say on who the other three should be. in some meetings, i hear clients and i agree with this sentiment. a tough job we have at the moment. it is of no use. chairs when it gets to the beginning of the year. this seems to be the believe that rates are not going to go up. you could have a whole new committee and a whole new. chart when it comes to the meetings in january and february. julia: the people we talked to our diverse. some said we need a good politician. continuity is important. but ultimately, communication for the fed, not just the united states, but globally. of all the candidates, who do you believe would be the best communicator?

that is incredibly technical in the meetings, in the press conferences. apples andally oranges. some people like someone who would communicate, and others like explanations. person hasges, the to sit in the press conference. you could get asked questions from your bloomberg reporters that are incredibly complicated and difficult to answer? if you end up as the new fomc chair, it would give you a sense you do not know the details of what you are being asked about. did yellen and ben bernanke -- incredibly careful. delicately articulated. if you risk that someone is going to say things in a slightly wrong way, you would have a market reaction that could be volatile. julia: who is the most dangerous? >> it is unfair to kevin rose in and gerry cohen and others,

because they have not been sitting in the seat recently. janet yellen is doing and outstanding job, in my view. j powell knows very well. walsh or not mean that gary cohn or others would not be able to do this. they have skills that would be better sometimes than what powell and yelling can do. scarlet: communication skills also extend to the president and congress. there was a comment about how the fed commitment to gradualism is cracking. if inflation remains mired below target, what will take the place of the current projections? the fed is -- decide is responsible for low inflation? does the fed chief need an answer? janet yellen basically admitted -- >> this is her famous mystery. this is critical for financial markets.

-- thest domino break low vix, equities, credit spreads being tight -- if you look at the expectation -- if you are on your bloomberg screen, type bcfc the quarterly profile, you can tell the core pce -- the quarterly profile today, it is expected to be 1.5, the next several quarters. this is the annual. terminal enthusiast. -- only 1.7 in the second quarter of next year. this tells you that if this consensus forecast is right, you will also have a relatively dovish fit. they do not need to hike rates. absolutely, the thing you discuss every day -- why is inflation so low? will the consensus forecast continue?

those inputs turn out to be extremely -- julia: at one point, you have to have a region. joe: republicans for a year said they were going to repeal obamacare, got into office, and the constraints of having power prevented them from doing that. i wonder if there is a similar phenomenon with fed chairs. you could have people who write op-ed's, who slammed the chair for not raising rates, but were they to actually get into office, suddenly the institutional constraints of the office make policy creativity a bit harder. over janet who takes yellen's role find it is not as easy as they might have imagined to set a new course? >> absolutely. the staff at the federal reserve board -- there are 300 out of m.i.t., and if you say it is wrong, there is institutional knowledge. it is writing working papers

that we discuss all the time. those things are really important for how they think about things. if you say this framework that all these people have been thinking about all these years, here is a different framework -- there is going to be quite an uphill battle. tangleas to be some between the fed staff that is relatively powerful and whoever the fed chair might be, even if it is a phd economists. julia: we did not mention how resilient they are to pressure from the president. we will come back to that. the bloomberg knowledge as well. i have learned a lot. the chief international economist at deutsche bank. thank you for joining us. , analysts are revving up , making its for gm our stock of the hour. from new york, this is bloomberg. ♪

julia: it is time for a look at some of the biggest business stories now. kellogg's is buying chicago bar company for $600 million. chicago bar is known for its healthy bar introduced in 2014, which appeals to younger customers. there have been industry pressures due to price wars and shrinking margins. this is kellogg's first acquisition under the new executive offer -- officer. cosco trading lower. the warehouse are posted better-than-expected results. there is a drop in membership for new will fees and margins. cosco raised membership fees earlier this year. the world's best bar order goes to the american bar at london's savoy hotel. it took the top spot in the best bar awards. a spokesperson activated the

unique coast-to-coast menu, which aims to give every guest a "once in a lifetime" experience. things include "a frosty reception,: which includes virtually cooler -- includes pink liqueur and peppercorn honey. scarlet: time for our stock of the hour. gm shares -- the stock is going to hit another all-time higher. -- high. analyst action is giving the stock some pop. abigail: there have been a lot of upgrades. this story is interesting. there could be a paradigm shift or a dynamic changing underway. citigroup is very positive on gm, saying they see a pathway to a tripling on this stock. i know. that is exactly what i said. analystsn all these

are so positive is the electric vehicle movement, plus the possibility that this could come online in the next year or two. .he call of around $134 for gm it has to do with valuation. if we take a look at the eqrv function, gm is trading 7.5 times. this analysts saying it should trade at 15 times. these blue dots tell us gm is trading historically rich. the reason it is so interesting to me is the paradigm shift, suggesting that tesla has really changed the dynamic in terms of valuing these automakers at a higher multiple for the electric field called -- electric vehicle possibility. we will have to see whether it works out. to changehe pe dramatically, the point the analyst is making is that something will switch in how investors perceive the company.

not something they are going to do better, per se. a rethink or realization. abigail: it is a bit of both. it would be the perception shift. tesla, they do not even come earnings. investors are betting on the future. while gm has the old, traditional business, there is also the idea they could enter into a newer business that deserves the higher multiple. a big perception shift. , thislook at this chart is a year to date chart. down on bottom, we have the likes of bmw, daimler, and volkswagen. right here, we had gm spiking higher, pulling away from the pack. i spoke to kevin tynan. he was saying other automakers are not getting the valuation, that the german automakers may be next. a paradigm shift, perhaps, with automakers. scarlet: suggesting everyone

gets their turn. maybe the german automakers next. thank you so much. the market closes next. i think the way to put it is, stocks are taking a breather after a record run. the dow falling by 11 points. ♪

♪

julia: stocks closing pretty much unchanged this friday. on this of tensions offset some elements of strength in the u.s. economy. i'm julia chatterley. scarlet: i am scarlet fu. joe: i am joe weisenthal. welcome to the closing bell 4:00age every weekday from to 5:00 eastern. scarlet: let's begin with market minutes. u.s. stocks taking a breather after record-breaking runs. points.off seven little changed, the nasdaq is little changed. the s&p is the big mover of the session. julia: i love that. clearly unchanged on friday. scarlet: for the week, we are higher. let's move on to individual numbers. costco is better than projected results, not enough to please investors. the stock is down on a drop in minute -- in membership renewal

rates. massachusetts attorney general's office has an open investigation into the industry practice called payment for order flow or routing revenue. not good for e*trade. and look at the pharmacy companies. they took a spill, off by 5%, on the report amazon is heading into drug sales. that is the amazon effect. anything amazon is looking into, you see decline and weakness in some like walgreens and cvs. joe: the government bond market in the wake of the jobs report, two-year yield up to 1.51 percent. the highest in a long time. it is a long time ago. the 10 year yield up to 2.7%. the basic takeaway, the market looking at the wage number, unemployment and saying more rate hikes are coming. andlet: i told into the si

function, and -- sin function. joe: how to go a long time before we saw that. julia: and with joe mentioning the payroll, we saw average hourly earnings, you can question with the details mean. what we have seen for the u.s. dollar is the highest in almost three months, on track for a fourth straight week of gains. we have seen a break and out of the downtrend. i am showing whether it holds above that. for sterling, heavy for its worth, we have all sorts of questions being asked with theresa may, saying she has the support of her cabinet. we have the double whammy of the next economic headlines and the politics continuing to weigh on the pound. and wrapping up with

commodities, oil and gold. oil fading of it. supply concerns that broke -- built up during the hurricanes, easing a little bit. , belowe nice selloff, 3% $50 a barrel. gold giving a little pop, but not a lot. 1277.40 an ounce. those are the target minutes. julia: let's bring in mike regan, the senior market editor. as we were saying, we are at record highs even with today's s&p andp in the snd -- nasdaq. we are doing this without any fundamental news. earnings season doesn't begin until next thursday. mike: a lot of it is the great moves we have seen from financials this week, and is continued momentum we have had. we had an interesting post earlier this week looking at technical strategies people

trade with. since the election year to date, buy and hold. someone is smiling. it is hard to say. the market wants to go higher. the earnings outlook is robust. there is a lot of optimism about the tax plan. whether that is misplaced, i tend to think there could be bumps along the road as far as getting that tax reform package in, but the market is shrugging it off. scarlet: you look at the technical, this is a chart you brought to us, 7089. you can see we are in overbought territory. anything at the red line is overbought. earnings season looms, we can stay overbought for a while. michael: i used to really like seeing it later because

especially the big heavily ,raded indexes like s&p 500 despite tracking it, it has traditionally stayed within the 70 and 30 level on rsi. in the election happened, and nothing mattered. if you back test all of the main track nickel -- technical strategies, -- that chart points out normally you would sell 70, that line at the top. now it flattens out. it has not really hit the level of 30 because it has been a straight line up. joe: here is another way of looking at the market that screams the crisis is long over. start core inflation falling to a 15 year low. it is an cliched -- it is a cliche. it is not nailed to the floor so to speak, you don't sale to -- sell to everyone. it is a good sign. michael: you never know.

i think it is indicative of a shifting narrative of the market. for a long time it was banks were very accommodative. we had the slow, steady economic growth. now that has changed, the fed tightening, so people are repositioning and going with financials that benefit. joe: in theory i could imagine fundamental managers saying get out of your etf's and go to active managed funds, some do well. are they taking advantage of that would work scarlet: are they capitalizing? [laughter] michael: the proverbial stockpicking, which i have heard since i started at bloomberg, this really does indicate the potential is there to outperform. based on some of the numbers i have seen recently, the performance is getting better. they are not trailing hedge

funds as much as they were. that is good. that chart is important to explain why the vix is so low. stocks are moving like a flock of birds one way or the other. you have to hedge against the whole flock falling out of the sky basically. if they are going everywhere, the market is still going higher, you don't need the vix hedge to hedge against the class and everything. we will see. volatility can pick up quick. julia: optimal conditions for now for investing markets. that is what everyone is talking about. michael: yes and no. es -- there is more risk. if you look at the earnings, it is very strong. somewhere like 18% earnings growth in the future. if you look at that valuation turned their, e.m. -- valuation

chart there, e.m. is discounting expected earnings in the feature -- the future. this is the average discount it has been. that tells me people are skeptical about earnings outlook for e.m. if you think of the fed tightening, e.m. has a lot of tightening risks. this side of the coin where the u.s. economy start slowing down because of tightening, the fed will put on the brakes, but e.m. has all of the risks without the benefit. betty: that uptrend, downtrend break. michael: that is a risk for e.m. because commodities, inverse correlation with commodities. that would explain why the am violations are looking attractive. there is skepticism. julia: great to have you on.

thank you for that. resolution run is doubling down on his vague warning. his remarks about a calm before the storm. tensions with north korea and iran. this is bloomberg. ♪

♪ mark: it is time for first word news. wright has -- white house press secretary sanders has to explain cryptic comments from president follow-up during a last night, the president said this could be the calm before the storm. meant, he what he said you will find out. was he hinting at military action? >> he doesn't want to lay out -- game plan for

our enemies. if you are asking is the that,ent trying to do absolutely. mark: in regards to north korea, she reiterated all options were on the table. figures.restored the number disappeared from the website last night. critics say it was to improve perception about the trump administration's response to puerto rico. electricity. the washington post reports the trump administration has permanently lifted sanctions in sudan and is ending the economic embargo. officials are speaking on conditions of anonymity and believe the northern african nation is addressing concerns about terrorism and human rights abuses against civilians. last month sedan was the only

country removed from the list of nations whose citizens are restricted from travel. steve scalise will throw out the first pitch between washington nationals and chicago cubs. he was treated with a standing ovation when he returned to the house last week more than three months after he was wounded practicing for an annual charity baseball game featuring members of congress. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪ during an event earlier today, elon musk making some comments in the last few moments he is going to be diverging resources to fix -- diverting resources to fix some models on numbers that were announced earlier this week. he is also diverting results from the [indiscernible]

the model three, so that is where they are shipping resources. he will increase battery production for puerto rico and affected areas. elon musk of tesla doing what he witho support puerto rico the troubles they continue to face as far as energy is concerned. president trump was asked about a remark he made last night on posing for photos with his top military leaders. he said the gathering might represent the calm before the storm. his response today -- >> what did you mean before that? >> thank you very much. you will find out. >> find out? >> we will see. julia: [indiscernible] joining us is megan murphy of bloomberg businessweek magazine.

you always have the answers. >> i am not sure what storm he is referring to, whether it was the secretary of state calling him a more on, whether it was his response to puerto rico, throwing bounty plenty -- paper towels into the audience, every week there is a storm. what is so surprising, and what we have seen repeatedly is our foreign allies are watching us. north korea, we have potential escalation again, with iran, they could decertify iran's compliance with the partnership agreed. russia, china, european allies, and these kind of comments taken out of context create more uncertainty, more concern about a truly trusted partner in the white house they can count on to respond to ordinary channels and measures. no one knows what he was referring to. julia: you said the

international community is watching. he is trying to send a message. megan: as opposed to -- prompt us into this war of words, which does no one any favors. it is consistently inconsistent and jarring and very difficult. it is sending white house reporters out on a rapid rate. raid.bid scarlet: it is also trying to keep foreign partners off turn. they don't know where to go. they don't know whether the president speaks to them or not. megan: i can think of few are times where we actually need to have such unity among our key allies, given the kind of problems we face when we see things like going on in spain,

populism, we have gravity of the north korean situation, hurricanes in puerto rico, islands worked out. having this constant destabilizing process is difficult for senior service to really get across. joe: wasn't like john kelly going to come in and make the white house a tight ordered ship? megan: to give credit to john kelly for what he has done, he has been able to -- our own that with rex tillerson he has kept him on longer. nobody thought he would state there long. long.y he can stay till 2018. we saw he has been able to stop tweets in the early morning and making really off-the-cuff remarks which are alarming. deeply alarming to anyone who sees them. scarlet: scarlet: rex tillerson,

his rift with the president appears to be on repairable even though he came out earlier this week and said they are fine and he is good with staying on. it is only a matter of time before he is out, because he is kind of isolated at the state department. what are they waiting for? megan: that is a key point, and it is isolation that will get him. allies don't trust he is a part of trump's inner circle. they don't say what he's -- trump cut him off by the knees and say it is not worth negotiating with north korea. what is anyone waiting for? you have to imagine the kind of leader rex tillerson came in as. he was a ceo, not to be touched. he was coddled for years. he had little touch with people, now he is not treated as part of the inner sanctum. it is difficult or both. -- for both. julia: cia director is a

potential replacement. what do we think of that? that is someone in the in there circle. he deals with trump megan:. megan:definitely in the inner sanctum, someone he regularly interacts with. highly similar situation like general mattis. earlier today we were not hearing any new names, someone not just in the administration. they will have to shuffle the deck for what is internal already does that of going out -- instead of going outside. sessions -- attorney general sessions mentioned religiousfreedom, the -- it does not get any easier. as soon as they find to lead -- finally get their ducks in a

row, potential conflict will continue to calm. scarlet: we are ready for any kind of announcement. it is friday. megan murphy of bloomberg businessweek magazine. -- the new show is out on new issue is out on newsstands. a lawyer beat big tobacco and how he once did that and now is taking on the opioid industry. tropical storm nate as towards the louisiana coast after causing damage and central america. what would this mean for u.s. energy reduction? this is bloomberg. ♪

♪ onia: tropical storm nate is track to strike new orleans

overnight saturday. it could cause $1 billion in damage across central america and the united states, following the most powerful hurricanes on record. we have a meteorologist at bloomberg new energy finance. talk to us about when tropical storm nate is expected to become a hurricane and what energy we are talking about. >> tropical storm nate is heading into the gulf of mexico. it will strengthen a little bit thanks to really warm sea surface temperatures, but because of upper-level wind, it will not be as strong as what we saw with hurricane harvey or katrina. joe: in terms of the energy assets on the way, which is something markets are watching, what do we know about what is in the path? is in the past, and that is what we have been looking at. over one million barrels per day are at risk with the tropical storm nate. that is what we are looking at.

scarlet: this is the bloomberg, aqr are go. .ou can see the purple cone we have highlighted the stoxx and different refineries. some are operational in green, planned incidents, and red is unplanned. we can also look at the oil and gas rigs that would be affected, and they are on the gulf coast line. let's look at that more clearly. you are talking about potential localized rain and risk of storm surge. are only five to seven feet. there is a risk of significant flooding damage in particular surely. >> storm surge can do quite a bit of damage included -- in terms of coastal flooding. .ain, 6, 7, 8 inches up to a foot in localized areas. that can do a bit of damage. julia: we have seen citrus

damage and hurry -- in florida. >> here is the risk is more with cotton crops, alabama and georgia big cotton growing states. we are looking at impacts there for sure. scarlet: one thing brian was telling us, that is going to be a fast-moving system. that is good because if it were slow, the damage might be worse, and it could pick up more strength. shunondo: it is a good thing because a quick moving storm will mean less overall rain for the area the storm passes over. joe: how much longer is the season going to go? is there anything else we should be watching out for? shunondo: the season is active, and we cannot rule out the possibility of more tropical storms this year. the pattern we are seeing in the tropics, the setup of the

atmosphere and the storms, it would not be outside the realm of possibility. scarlet: hurricane season ends around november. is there any indication it can go past november given how warm the water has been? shunondo: a tropical storm in december is rare, not that we have not seen in the past. we have had hurricanes in december, but they are uncommon. this year nothing is impossible, but it is quite unlikely. joe: many people argue climate change may have contributed to this extraordinary hurricane season, especially the one we got a few weeks ago. as we look into future seasons, how much about the conditions set up this year were on a trend, and how much were unique? shunondo: it is important not to attribute one angle storm or one .eason to climate change

what research has shown is a warming climate could make the frequency of major hurricanes higher. we have had active hurricane seasons before. , do weas the question of have a higher number of active hurricane seasons in the future, that is something only research will tell. 15ia: let's say over 10, years, is there a trend of increasing hurricane ferocity? shunondo: not really. that is not something we have seen. the data shows about the same number of hurricanes on average per season. the number of those hurricanes that are major hurricanes, slightly higher. julia: thank you so much for the insight. the meteorologist at bloomberg new energy finance. currency exchanges are trading on a peer-to-peer basis. we will hear from one industry executive next. this is bloomberg. ♪

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choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to xfinitymobile.com. mark: i am mark crumpton. it is time for first word news. tropical storm nate continues strength.traight -- it is expected to hit the gulf of mexico as a hurricane on saturday. bhp are among companies shutting facilities in the gulf ahead of the storm which has left at least 17 dead in central america. they account for 17% of u.s. oil output and 4% of gas production. a law enforcement official says stephen paddock bought 1000 rounds of tracer ammunition a month ago. tracers contain a pyrotechnic

charge that illuminates a so shooters can adjust their aim. president trump held an event at the white house this afternoon to mark's bench heritage month. the president has come under leaders fortino what they say is his poor response to puerto rico. today he said he is praying for puerto rico and predicted the island will come back strong. north korea is planning to test a long-range missile that might be able to hit the u.s. according to two russian legislators who just returned from a visit to pyongyang. they said the north wants to show it is ready for confrontation. the missile would likely have to travel over russian territory. it could theoretically be able to hit the west coast of the u.s. news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton.

this is bloomberg. ♪ scarlet: we have breaking news from general electric. the company has said the c.f.o. is leaving the company. jamie miller will be the new c.f.o. the comes as john flannery, c.e.o., has just taken the helm at the start of august. in addition, we have other developments. the vice-chairman is 60 and retiring from g.e. beth comstock is retiring from g.e., 57 years old, vice chair in charge of business innovation. julia: jamie miller was the c.e.o. of g.e. transportation and is now the c.f.o., so it is an internal hire. scarlet: g.e. is grooming is on people and making sure they move up the ladder. in the meantime, let's get you a recap of today's market action. not much movement for u.s.

stocks. the nasdaq finishing marginally higher. the dow literally unchanged for the week. all three are higher and basically at record highs. joe? "what'd you miss?" increasing number of firms are seeking to streamline cryptocurrency trading on a peer-to-peer basis. one of those pioneering firms is airswap. i'm joined by the founder, michael oved. thank you for joining us. when people think about cryptocurrency exchanges, they think about the risk of getting hacked or regulatory clampdowns that affect their ability to trade. what does airswap offer? rswap is building a decentralized exchange. it is a confusing concept for a lot of people.

an lives in one place. livesntralized exchange on the blockchain network. joe: explain the structure of the exchanges we have heard about that got hacked and how years differs --how yours is different. >> in the case of the other crypto exchanges, in addition to the wall street exchanges, these are centralized. they are run by central party. joe: people send their coins there and they live there. dle it. han with the new technology, we are able to keep control of their entire assets. there is no need to have centralized parties anymore. joe: how does it work specifically? how do you guarantee delivery? what is the mechanism? if it isde, decentralized, what is the mechanism to make sure i get the

coins from you and you get the money from the? >> that is the beauty of the ethereum network which allows for smart contracts which are code you can store in the blockchain. you can program an atomic swap to happen between two assets. means there is no way for one to move and the other not to move at the same time, so there is no need for a clearinghouse now. joe: we saw a lot of figure currency exchanges in china shutting down. with a decentralized exchange make it impossible for a regulator to shut it down? >> i don't think so. we have the utmost respect for the chinese government and what they are doing. i think china took a conservative approach. that market was overheating and growing like crazy. they shut it down. they will put in the proper regulations. that government is very pro-cryptocurrency and pro-blockchain.

i would be surprised if they did not open the market again. joe: airswap will have a token of its own. explain what that is an why it is necessary for the system to operate. >> to have a token, you have your local software platform. the software platform itself is governed by tokens. the token allows you to access andplatform, the network, in our case, it allows you to vote on updates to the platform itself. joe: explain what that means. >> if you are a holder of the token itself, you get to govern the platform. joe: we have seen some issues, concerns about the token market in light of the sec warning against the sale of unregistered securities. what are you doing now to make sure you will stay on the right side of regulations? >> of course. we have very good lawyers. we are working with top people.

we are taking this project very seriously. the sec is doing a great job. it is substance over form. if you are launching a digital version of a security, it is still a security. joe: explain why you do not think your token will be characterized as security. >> we have done a lot of analysis. i do not mean to speak for my lawyers, but in this case you have the utility token. that gives you access to govern parts of the platform. joe: the difference is security in theory represents ownership. of yours is different in that the token is integral to the functioning of the network. going back to the trading over airswap in general, what is offered? can anyone trade any currencies? is there going to be some set list to trade? >> good question. we start with the token standard in ethereum. standard for people

to launch tokens on the ethereum network. the started out as utility tokens. our prediction is these will move into real-world assets. moree will start to use traditional securities and bring them onto the ethereum network. that is exciting for us. joe: do you have a mechanism for deciding which erc20 tokens get listed and which do not so those that look like securities will be visible? >> we are coming up with a mechanism now. we are working with consensus, our joint venture, and we will have a mechanism in place to do that. joe: what about non-ethereum tokens? would bitcoin be traded on your network? >> we are fans of all chains. we want to get everything. we started with a theory and

because we think that is where the growth is and where developers are focusing. we will eventually support cross-chain transactions. oved, founder of airswap, thank you for joining us. scarlet: great interview. coming up, what crucial details fell through the headlines? we have the charts you might have missed from this morning's nonfarm payrolls report. this is bloomberg. ♪

scarlet: do "what'd you miss?"

the busy weather report. we saw strong trends under the noise with unemployment falling to a 16-year low. what important details might have gotten missed in the headlights? matt is here to give us the three charts we missed. thanks for coming in. >> you back. you bet. the jobs report is broken up the two surveys, establishment survey which pulls businesses and the household survey which pulls individuals. my strategy was to focus on the household survey with the labor force participation rate. it was not affected by the storm. this chart shows the percentage of people working this month said they did not want to work the month before. that was 3% of employed

americans last month. we are pulling people in from off the sidelines come outside the labor force. they are streaming back into the workforce. joe: this has been a key color of the dove argument, that there is shadow slack and a robust economy could pull in people who for years dropped out of the labor force. >> this is total validation of that. it is going gang busters. the orange line shows the 12-month average. we are almost back to the highs of the year or two ago on a 12-month basis. there is a lot of momentum. it seems hiring continues to pace. there is not as much of a struggle to find workers. julia: where are they coming from? are there still prime workers on the sidelines that can come back in? >> absolutely. this is a chart i like to show almost every month because it gives to the idea trade this

chart shows -- julia: flight technical error -- slight technical error. pull up my chart. >> this shows prime working age americans are coming back into the labor force. the nonemployment rates for these groups of people between 25 and 54 are coming down. they made new post-crisis lows 25 toonth for 35-year-olds. younger people as well almost made that low. i want to focus on the red line. group athe 45 to 55 age lot of people had written off in the wake of the crisis. look at this chart. this is post-prices low. we are not even back to the highs of the previous recession yet.

we are not even back to the levels consistent with the previous expansion, but we are almost there. there has not been much of a slowdown in absorbing that group of 45 to 55-year-olds. it seems there is a lot of momentum. there is no reason to believe we are running out of steam or approaching full employment. scarlet: someone say there is a lot more way to go. anotherare looking at chart, the durations of unemployment both coming down. what is the significance of these charts? >> this is a similar idea. the white line shows the average duration of unemployment is still 27 weeks which is unlike anything we have seen in the past before. it surged during the recession. there was a big spike in september. we will have to see if that reverses or was a real thing or not. the bottom line here is this is still very elevated.

normal labore near market based on historical trends by this metric. the other point to make is it has been coming down quickly. there is no sign we are running up against the limits of what we can achieve here either. julia: we are not normal yet. >> but we are normalizing at a steady pace. there is not much reason looking at this data to believe that cannot continue. julia: brilliant. scarlet: encouraging. julia: thank you. next, why president trump might not be that far off base with his plans for wiping out puerto rico's debt. bass sat down with erik schatzker and we will bring you that interview next. from new york, this is bloomberg. ♪

scarlet: it is time for the bloomberg business flash, a look at some of the biggest business stories in the news now. amazon could be selling prescription drugs by 2019 according to partners expect the announcement in the next year or two. amazon poses a direct threat to brick-and-mortar drugstore chains. amazon recently sold it start up in drugstores.com to walgreens which sold it last year. amazon did not respond to request for comment. findings show they sold the jets at 80% below fair market value. imports ofapply to 150-seat civil aircraft. the commerce department said levels of 220% following

complaints from boeing. the united states post office is raising prices starting january 21. of the cost of price will rise about 1.9%. most shipping service products climbing an average of 3.9%. in august, the postal service reported a third-quarter loss of $2.1 billion. that was your bloomberg is the/update. julia: "what'd you miss?" why investing in puerto rican bonds may be crazier than president trump's plan to wipe out their debt. the chief investment officer set down earlier with erik schatzker to discuss order because crisis on multiple fronts. they also -- discussed puerto rico's crisis on multiple fronts. >> puerto rico is a simple math 101 question the way we see it at our farm. puerto rico has $70 billion worth of on balance sheet

debts. they have $30 billion of unfunded pension liabilities that are cute. they have $100 billion worth of debt. 3.59 people in puerto rico. only 1.4 million have a job. 60% of those work for the government. a situation made vastly worse by hurricane maria. the hurricane is a tragedy. i think the trump administration and the united states should be doing everything we can to help. these are two different questions. should we help with the hurricane? absolutely. on the debt question, i think you have to be a little crazy to debt $100 billion worth of or even $70 billion of on balance sheet debt is worth anything with 1.4 million workers in an economy like puerto rico. erik: if you were holding puerto rican debt today, what would you be marking them down to? >> didn't they trade down? erik: they traded into the 30's.

>> i just got back from greece. i heard they traded 20% lower in a day or so. erik: even lower since the president talked about wiping out puerto rican debt. >> when you look at the history of sovereign defaults, recoveries in wipeouts are $.10 to $.20 on the dollar. that is what i think people will end up with. each situation is different. in the big picture, there is $70 billion worth of debt. 1.4 million people work. s will not sell of their assets. they will get as many hedge funds as they can end in default. that is what they are doing. erik: does it make sense that many hedge funds piled into puerto rican debt? >> it does because there are a lot of suppression -- special situation funds that love working on things like this. they are the people that hold

sovereigns hostage. they have holdout positions and take people through the courts. they are wiseguys. in the end, what is the true value? i saw a bloomberg he's the day -- piece the day president trump spoke. sayingeing pragmatic they cannot repay this debt, we are going to have to white it out -- like that out -- we are going to have to wipe it out. i think it is getting wiped out. erik: we need to touch on china. i hate to call you a china bear because your view on china is very specific. do still believe as strongly as you have that the chinese banking system is going to suffer a crisis? >> sure. it is simple. systemnot grow a banking 1000% in 10 years and not have a loss cycle. even the i.m.f. in their most recent forward view called china's credit bill that dangerous and said in all the

instances they have studied, almost every civil time there has been a banking crisis. warningalready seeing signs from someone not very good at calling negative events. they are going to have a loss cycle. it is not the end of the world for china. it is happening now. the government needs to hold on to get through this national party congress in the next month or so. then i think you start to see real financial reforms happen. afterwe will see that october 18 when they hold the national party congress. >> my guess is they're laserlike focus on exchange rates and dealing with the trump administration is going to be relaxed when he consolidates his power. their electoral cycle is different from ours. their mpc's happen every five years. this is the end of his first time.

he will solidify a second term. we think he has consolidated power. is quickly becoming the most powerful chinese ruler since mao. the question is whether he will have a third term. when this consolidation of power is over and the mpc is finished, i think you will see more natural economic forces acting on their banking system. bass, that was kyle founder and chief investment officer at hayman capital management talking with erik schatzker. i wanted to pick up on a couple of points he made which i liked. on president trump's comments, he said there is an element of pragmatism in the approach on puerto rico when you're talking about a country with $74 million -- billion dollars debt. he said it is one piece of the municipal bond market. it is not the entire thing. i think we have to remember that. he is talking about one particular territory. scarlet: when it does come to

resolving the debt issue, it will make its way through the courts. we were reminded it is hard for him to imagine a judge that will not consider the humanitarian crisis and putting that in context thinking of that first rather than bondholders. julia: the hurricane crisis comes first. joe: coming up, what you need to know to gear up for next week. this is bloomberg. ♪

scarlet: "what'd you miss?" u.s. stocks ending the week little changed at record highs. that minutes are due out wednesday at 2:00 eastern. julia: i will be looking at wells fargo and j.p. morgan reporting earnings. joe: i will be looking for cpi data for september on friday. scarlet: we are watching hurricane nate as it travels toward louisiana. it is strengthening. you can see the blue dots

alisa: i am alisa parenti in washington and you are watching "bloomberg technology." the white house declined to elaborate on president trump's cryptic message last night when he called his photo op with

military leaders the calm before the storm. sarah sanders says trump is not looking to project details of military strategies. jeff sessions issued a memo to federal agencies advising them to follow 20 principles based on the d.o.j.'s interpretation of existing laws. among them that religious employers can discriminate in hiring. the trump administration plans to roll back the centerpiece of president obama's efforts to slow global warming. the e.p.a. says the real exceeded federal law by setting emission standards power plants could not reasonably meet. a u.s. soldier who went missing in niger has been found dead after an ambush by extremists during a joint patrol with local troops. the soldier was one of quattrone u.s. troops and four from niger