but it has not been used -- his words -- "as it should be." praised the leadership of the organization. mariana lowboy -- spain's prime is ready to crack down on catalonia. meanwhile, catalonia is looking at how they may stage declaration of independence from spain. ofqa has been declared free extremist elements. it is a major defeat for the islamic state, which captured raqqa in 2014, but has seen its terrace story -- its territory shrink since last year.

an international children's agency said that they are refugeewith squalid camps in bangladesh. one in five children in the area is acutely malnourished. global news 24 hours a day, powered by more than 2700 journalists and sin more than 120 countries. i am mark crumpton. this is bloomberg. ♪ julia: live from bloomberg world headquarters in new york, i am julia chatterley. scarlet: i am scarlet fu. joe: and i am joe weisenthal. julia: we are looking at six straight weeks of weekly gains. joe: but the question is "bloomberg markets --"what'd you miss?" ourlet: we will speak with

guest talking about big data analytics from wall street. illinois's governor will join us in an hour to discuss how he is developing an education to entrepreneurship project and how that could get amazon's attention. julia: happy friday. "what'd you miss?" momentuma theory that investing can produce severe your returns, but does it work in practice? the chairman of research noneiates says that outperform the benchmarks, and he joins us to discuss his white paper. thanks. talk us through the study. this is i wore at her in -- this is i watering. momentum is thought to be

one of the most reliable factors in investing, and on paper, it is. or if you're sampled -- if sample sizes large enough and you go back far enough. stopped working in 1999. since then it had a crash, a recovery, a crash, a recovery, and it is a little below where it was in 1999 and that is before trading costs. talk specifically, what does academic research say about momentum and the returns it theoretically could be delivering, and what the funds are in gauging in this strategy, what they are actually delivering? that invest in u.s. core stocks, there are six mutual funds in the last order century that have the word

"momentum" in the name. the naming of a fad is a market exercise. if you put the word momentum in your name, presumably you are presenting yourself as an expert on momentum. there are also's expedia's with that name. the six mutual funds with the word "momentum" in the name, zero out of six have been able to beat their benchmark since inception. six etf's withso that name. momentum outperformed by three annum,er and him -- per while these funds were live. momentum on paper was doing this. momentum in live experience was doing this. that's not good. the etf's there were two of them that did eke out a small gain and 4 underperformed.

the average was 2% underperformance. is there aab, standard definition everyone adheres to? a form of momentum called standard momentum, but it's not the only form -- right, exactly. there is, to use a technical on terms.azilli there's idiosyncratic momentum, there is still momentum, there is fresh momentum. the list goes on and on and on. the folks who use momentum say, we do not use standard momentum. it does not work. we do our own proprietary method. that invites the question, all right, why doesn't it work? it does not work, i think, for a variety of reasons. mainly trading costs. if you are incurring 200%

turnover per year, your trading costs will be huge. it better work. discipline.e sell momentum -- most factors, most strategies work, if they work, work, then start to peter out over time. momentum is unique. it works beautifully at first, rolls over and dies, and gives up all it gains, and then winds up in the doghouse at the end. it's the only strategy that does that. that means if you buy a high momentum stock, you must turn around and sell it, or you are going to lose all of the benefits of momentum. and i think many momentum managers do not know that nuance. the stocks and the take profit are essential -- more the stocks in the take profit. rob: yes.

if you don't turn around and sell, if you wait until the momentum is negative, you just gave up all of the gains that you had. questions.ve two the world momentum index averaged gains of 7.3% over the last two decades, more than double the etf's given the benchmarks. and back to the definition of momentum changes and people can have momentum in their name whether or not they are running a momentum fund of some sort -- to what extent do you think the results could be us. in that you are including the performance of -- results could because you are including the performance of funds -- rob: right. was six.he sample size

we looked at all mutual funds. and we said, let's look at the 5% of funds with the highest correlation with momentum. every month in the last decade, that's over 100 funds. you are looking at over 100 funds with high correlation with momentum. at so whether they call themselves momentum or not, they are momentum funds. on average, they underperformed by 1.5% to 2% per year. the academic literature suggests that momentum is one of these factors that outperformed, and you said yourself, on paper the strategies work well. it's just the implementation is the problem. is there a way to use this knowledge? is there a way to use this research in a positive way, even if he straight momentum strategies are difficult to execute? rob: yeah, the whole purpose of my paper was not to come in and say, momentum is dead, let's bury it. the purpose was to say, can we save it?

yeah, you can. trade it more carefully. exit the momentum positions before they roll over and type, and figure out better ways to use momentum. what if you can use momentum without trading? how do you do that? suppose you have a value strategy. the value strategy wants to buy a stock because it is cheap. momentum can be used to block the trade. don't buy it. look at it again in the month. what is that month going to cost you? not much, most likely. once the file seems to be over, now buy it. costs you nothing. for your time you on the nuances of momentum investing. and automation out -- machine algorithms encroaching on work performance by money majors, -- money managers,

traders, and analysts. earlier, we had a discussion about the robots sweeping across wall street. >> when you look at the speed of development of technology, it continues for another 20, to five years. remember the iphone -- whatever, much power ass as the most powerful supercomputer in the early 1990's. it's very hard to get your head around if you extrapolate that. that's 25 years. over the next few years, the answer is most of the automation is a way of making us smarter, more efficient. no one would imagine trading today without a bloomberg, without a computer. we all use technology every day. a bit of it is trying to get humans to focus on the bit where --y haven't edge and letting were they have an edge and letting technology take care of the rest. >> how do you know that

technology will work? onain, this is the gazilli dollar question. how do you pick the right one? >> yeah, look, if it's not going to work, you have to do a lot of trial and our. you have to be very careful before you make assumptions on things. -- you have to do a lot of trial and error. have onethat you system that takes care of everything and if you have to change it, it's incredibly complicated, that has all fallen away. andre much more in a plug play world which means you can use technology if it doesn't work, or if another one comes along you unplug that and plug in a new one. when it comes to trading, you need to do an awful lot of processes around making sure the research is valid. what have your employees set

about it? was their uneasiness, or have they embraced it? says onirst thing it her website is technology empowered. i don't think there is anything we do and the firm that is not driven by technology. so, i don't know -- everything is powered by technology today. is, we havece thing people who are embracing it rather than fighting it. so, obviously, in the quantitative side, you have people who are naturally au fait and relaxed with technology interested in creative things you can do with technology to find better returns. but there are lots of dinosaurs out there who say, no, i don't want to use technology. the ones we have. within our discretionary business, people like the tools that make them smarter.

today, humans are much better at doing an interview. you can't do this with a computer yet. maybe it will change and 10, 20 years. >> we are keeping our jobs. >> better to focus on you doing , and getting fed information through the machine, rather than you having to sit there and long-term look up charts and draw lines and so forth. >> that was the ceo of the man group speaking earlier today on bloomberg. scarlet: what will the impact on sunday be -- with the super majority lost due to an impending storm. a lot of things coming together all at once. this is bloomberg. ♪

scarlet: "what'd you miss?" japan heads to the polls with a snap election on sunday with safeseeing the poll as a bet for prime minister shinzo abe. showsr a poll from nikkei be a push toy change the constitution. reporter: japan braces for a monster of a storm this weekend which could impact the turnout on sunday. 310, that was the magic number we were looking at to see if one of the coalition parties could maintain the super majority. it seems that they are 10 seats shy of doing so, making it a shinzo abeharder for to push for his more divisive

policies like revising the constitution, also less of a freer hand in starting the hike inion sales-tax 2019. but given the disarray of the opposition, the really was no alternative here. the continuity of abenomics may have been an issue, the continuity of the boj's monetary policy, and just have been the of momentum by the opposition, making this more attractive for shinzo abe, paving the way for him to be the longest-serving prime minister in japanese history. yvonne man, bloomberg news, tokyo. it is time for the bloomberg business flash, time for a look at some of the egg business stories in the news. seeing opportunities in asia and companies based in the united states.

they are seeing shares climbed 47%. businesses00 u.s. raised a combined 26 billion 26 billion dollars. these singapore-based gaming moreny c limited raised than $18 million from its u.s. ipo today. it was above its initial price range of $12 to $14. a source familiar with the past $1ays it could billion if an adoption to sell additional shares his exercise. goldman sachs is offering .nvestors discount advice pay $200 per user a year. goldman is also offering a $5,000 service for a 25-user

client. --ls fargo is that is according to the wall street journal. it is the latest problem to hit the bank, which is still struggling with the fallout from his bogus accounts scandal. and that is your bloomberg business flash. wow. cheap, cheap, cheap research. the beginningy be of cashless society's. julie hyman is here with the story. they make atm's? julie: they make atm's, and that is where the company is seeing weakness in his business. they are down, worse than .nalysts estimates the stock revenue has fallen the most in three years, at its

lowest in about a year. in the statement today, the chairman and ceo, bill mooney, talked about this, saying atm orders are being impacted right and weakness in the middle east and africa, and the upcoming conversion to windows 10. this is a little bit like the situation with phillip morris we talked to buy yesterday. it has reference businesses and er businesses are not growing enough to make up for weakness in the legacy business. you have atm on one side and software service on the other. if you look at the bloomberg, we have the breakdown of the three business lines. this does not go back that far because they have not been breaking it down that way for that long. 15% ofe accounted for the company's sales. the ceo said the atm orders were delayed, but the problem is analysts do not necessarily

believe them. managementaid, assured that orders were delayed, not canceled. we cannot believe that anyone believes them. it is the biggest part of their business -- joe: so the implication from analysts is this a shift or slow down, not a real change? julie: potentially so. i was speaking to david ridder of bloomberg intelligence. and he does not cover in co -- nco specifically. he says that there is then -- banknd closures. all right,arlet: coming up, small caps jump to percent as expectations are higher. the charts that you need to see. this is bloomberg.

♪

scarlet: in scarlet fu. "what'd you miss?" -- a record run for small-cap stocks as well as big cap stocks. look at this. investors went back to tax reform and inflation expectations started to creep up as well. shows howline broad-based it is. it's a percentage trading above the 200-day moving average and right now it is at 70%. two months ago it is below 40% when this latest like up again. of course, after the election, you can see the percentage was actually about 85%. there is plenty of room for that to widen. our analyst from bloomberg

intelligence says that tax cuts would help because they have a versus the 28% of the big caps. that --ut do we get don't even go there. of his lee, we have had ge and focus today as a result -- obviously, we have had ge in focus today as a result of their painful earnings. b-sharess normalized of 2016 and just to give you a sense of the underperformance of ge stocks relative to the market in the s&p 500, if you look on the right, you can see we are talking about -- quickly do the math -- 41 percentage point year to date. however, what we got from ceo john flannery today was a reality check, a massive drop in the earnings forecast, the etf forecast as well, and the acknowledgment they will sell a 15% over the next one to two years. we spoke to the scott davis

earlier, and he says they're actually need to be a lot more cuts. let's listen in. >> he said 15%. i think moore. julia: you say more? how much more? >> 50%. chop in assets, not 15%. watch this space. joe: all right, here is something i really enjoy. this is when it investors just by a bunch of stocks because of something in their name. we have seen this recently with companies putting "block chain" in their names. the shanghai free trade area -- any stock with shanghai in the name surged automatically last night. here's a couple examples. just straight up. it does not matter what it is. if the stock had the word shanghai and the name, people were just buying it. very fun behavior. orrlet: do we blame humans

do we blame algorithms? joe: blaming humans. scarlet: less than four minutes before they close. guess what, guys? record highs for u.s. stocks. this is bloomberg. ♪

♪ julia: all three equity

benchmarks posted a record. u.s. stocks heading for their sixth weekly gain and the dollar touching a three month high. i am julia chatterley. scarlet: i am scarlet fu. joe: i am joe weisenthal. we want to welcome you to the plug-in go coverage every weekday from 4:00 to 5:00 eastern. scarlet: we begin with the market minutes. u.s. stocks rallying into the close. the dow is up 154 points, the dow adding 0.7%. a sizable move these days. joe: this is huge. yesterday it was 70 basis points as a huge selloff, now this is a huge rally. scarlet: we got a leg up at the close. the nasdaq up 0.3%. we had economic data which did not do well because we are not focusing on that. all right, the individual banks. general electric, ugly day for

ge, although they did close up. it one point get fell as much as 6.3%. quite the turnaround. this is after a big earnings miss and the company cut its guidance. the ceo called a result completely unacceptable and promised sweeping change. brutal assessment, there are no sacred cows, and people we speak with say there is a lot to work on, falling by 50%. julia: talking the talk today. that is reflecting the today performance. scarlet: this was dropped the most -- there is the future disease drug, that analysts have been expecting to be a blockbuster. futures up 42%, the most since the company went public 18 years ago. wider profit margins, but let's face it, the estimates are coming down. and paypal is up 0.5% -- 5.5% on

the back of earnings. joe: bonds in the u.s., sizable moves for the two and 10 year. 2.38%.year up to it has been rising the last couple of weeks. let's look at the one-year chart on 10-year gilts to get some perspective -- yields to get some perspective. through early september has been a grind down, but a steady move. remember job stable we were up 2.4%? now we have been going back. upper moments thanks to the rally, a more hawkish ships coming in, but definitely eight thing to watch. julia: that was the theme in the dollar, the iron ore, both turning. and john taylor keeping that hawkish transition alive. i was feeding into the dollar.

up 0.5%.ee the canadian dollar was dropping to the lowest since it has been august 31. it got lower with api. further seeing down the expectations. time. down for the third also watching the yen. i have talked about that every day, 0.8% higher. the lowest against the dollar since july 14. we are seeing investors rebuilding their short yen positions ahead of the election and despite all the back and forth, expecting to return prime minister abe. a continuation of abenomics. joe: and a quick look at commodities today. not a ton of action here today. crude basically in the same range in has always been in for

the last several weeks. $51 a barrel on west texas intermediate, and gold down a half percent. those are the market minutes. scarlet: we are getting new excerpts of an interview that president trump conducted with fox business news. in the conversation, he said he likes fed chair janet yellen a lot and he said, i really like her a lot. he said he has three people he is looking out for the fed chair and others. joe: that really narrows it down, three plus a couple of others. scarlet: it is a new way of framing it. joe: it is. scarlet: let's talk about u.s. stocks with the market at record highs. they can continue a remarkable run. this is the wealth management director, and he writes for bloomberg profit. you had a long consistent gains for u.s. equity index, whether it is monthly or quarterly, yet the average absolute daily price change year to date is fairly

minimal. you have it at 31 basis points. for all the talk this is a late cycle rally, this could go on for a while yet. promisedave been second half, but it has not happened yet. i think a lot of it has to do with good reasons, people say it could be quantitative. people say investors are complacent. i think a lot of times these cycles go too far in either direction. we have too much volatility in 2008, 2009, and other pendulum is back, or it was biased people are -- bias. people were ben: uncertain about the future. ben:joe: there are all kinds of ways to look at the volatility. this is one way. btv 2581 showing the days we have gone without a 5% drawdown.

you can see that big spike. we have not seen -- a time like this since the early 90's. what do you do? there is a lot of people anxious . there is a lot of people looking at numbers like it cannot go on forever. at the same time, being cautious and not buying the jets has lost people money. -- dip has lost people money. thesehe tough part is open eyes tend to cluster. if we do this today, we are this year5 new highs alone. and the worry is one of those will be the all-time high where we see a drawdown. there is a right or wrong answer. the biggest thing for most investors is not to go to extremes. people with cash and the market melts up, you will be kicking yourself. if you go all equities, your kicking yourself as well. if you look at the 64 polio in

and, that was 40% stocks 60% bonds, if you left that untouched, it is closer now to 80% stocks. if you are really nervous, but something like that, taking it to the extreme is tough. these things can go on longer than most people realize. scarlet: for years. do you see any evidence investors are getting too complacent? we talk about the vix going down, but is there any real evidence investors are getting too complacent, or is there sufficient anxiety we are reaching the end of the cycle that limit the euphoria? ben: if they are not complacent, they are plenty of reason to be. the largest peak to trough tear down is 2.8%. if that were to stick, it would be the lowest in a year since 1965. lois was in 1995 and stocks fell 3% from high to low.

there happened 2% gains or losses this year. in 2011 there were 35. in 2008 there were 55. investors are giving reasons to be complacent. i guess time will tell whether the next drawdown happens and people panic or not. joe: historically are there any patterns to what is extended and markets? -- in markets? ben: not really. markets of grass from high valuation and low valuation. peas were at single digits in the early 1980's, and the stock fell twice. now they are above 30. highuld make sense from valuation levels, but they are not guaranteed to. there is no rhyme or reason because at these levels, it turns into more of a human nature type of thing. you are trying to guess what people are going to do, which is not easy.

that is what i will do tomorrow. scarlet: outside equities, do you see where investors are taking more risk than they should that could provide the sparks for a correction in u.s. equities? ben: i think investors have been forced to take risks because there are not many other options in terms of fixed income. yields are lower across the board. i think investors have been pushed out a little bit. it depends what the needs are. it is hard to say. a lot of people point to the cryptocurrency. whether that is really an asset class. but that is something to say there has been a lot of speculation. carlson,all right, ben a bloomberg profits columnist, thank you so much. julia: tax reform has cleared one hurdle on capitol hill, but what does the road hold ahead for donald trump? we will discuss. this is bloomberg. ♪

♪ mark: it is time for first word news. suicide bombers struck to losses in afghanistan during friday's prayers. a shiite mosque and a sunni mosque, killing 63 people. there was a statement condemning both attacks and saying the security forces would step up to fight when he called the terrorist who targeted afghans of all religions and tribes. no group immediately claimed responsibility for either attack. it has been a month since hurricane maria devastated puerto rico, and only about 20% have power. to geternor was pledging 95% by the end of the year. the hurricane struck at a bad

time. the electric power authority filed for bankruptcy in july. it has put off badly needed maintenance and just finished dealing with outages from hurricane irma in september. in japan's election on sunday, shinzo abe's ruling coalition is expected to get a two thirds majority. that is according to a nikkei poll. the impact of losing the majority would be that abe would find it difficult to revise japan's pacifist constitution. a new study put the global price tag on pollution, $4.6 trillion and 9 million dead per year. this was published by the british medical journal lancet. it said diseases caused by pollution account for one of every six deaths. 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. ♪ trump steeringt

towards the economist john powell for fed chief. he has an interview set to air on fox news this sunday. the pairing of a central bank is a possibility. let's go to the washington bureau chief. the speculation continues. he also said he likes yellen a lot. i really like her a lot, according to this newspaper. round and round in circles we go. >> is the name game that will keep us working through the weekend. bloomberg news reported exclusively tonight -- last night it was coming down to john taylor or jay powell as you mentioned, but donald trump cannot let go of janet yellen in this box -- and this interview did mention her a someone he likes. our sources are telling us a lot of this is concern on the part of the white house of upsetting the markets, moving too quickly from janet yellen who has been around through good times for the markets in the past few months. i'm not saying he is not taking

her seriously, but we have been told powell or taylor wanted that. trump himself likes the idea of traction in washington of a possible vice chair dual appointment. i am not sure we know the order yet. a lot of names in the mix. those are the two or three i would be most focused on. joe: is it safe to say yellen has no contingent of support, like it is possible trump had a meeting, liked it, her name is in the mix, but among his advisors and people, there is no one pulling for her? >> i believe that is accurate. we talked to a lot of people in the white house and outside. trying to do our stories and their job, we had never heard anybody coming out with a full throated endorsement of keeping yellen around. it would be stability, consistency, but the president gets a few marquee appointments. supreme court justice, fed chair, they are among the most

important. it is hard to picture him sticking with janet yellen. obama had bernanke. given how much trump talked about yellen on the campaign trail as being pro-obama and running pro-obama economy, it seems hard for him to see her -- see him sticking with her at the end. but one person is trying to put out the signal he has not made up his mind. we are not ruling anything out, but we have not talked to anyone in the many weeks reporting on this who is going to trump and saying, you want to pick yellen. scarlet: i am glad you mentionedscarlet: taylor and powell. we were talking with omar sharif , and he said if you were to do that, it would create confusion because those two do not see eye to eye. you would have one chair and the other with a -- other one saying something that undermines. that ae -- for trump, is problem? that is what is happening now.

well is confusing to us as . bloomberg news has a story now two moreannot pick different people and powell and taylor. it is not like they are in the same line of thinking. they are very opposite. maybe trump is thinking it is a tug-of-war that ends of keeping everything safe. i like the market would see it that way -- i don't think the market would see it that way. the one thing janet yellen still has in her corner is the notion of, stock markets going up. we know with rigging records all over the place, do you want to change horses in midstream? that is a compelling argument. if you were to do a taylor-powell combo platter, are you adding confusion when you want stability? this is something that we are obsessed about. we are following it every day. if the viewers are confused, don't feel bad.

so are we. julia: and let's talk about the great news of the last 24 hours. that is the senate narrowly approved a budget for tax reform. so how far along are we? >> still about michael eight or 10 if you want to use a marathon metaphor. -- mile eight or 10. we talked on this program and elsewhere about the vote around the that could go all night -- votearama. they ended at 10:30. everyone voted for the budget except rand paul, now they have a senate plan. more good news for donald trump with the reading caucus, that cadre of conservative members say they will sign on to the budget plan. the good news is stepping up. freedom caucus put one condition on their support. they really have not written these bills yet. they don't have legislative

language. that might be a bridge too far, but you see the stars aligning to clear the budget out of the way to let congress it on to the issue of tax reform so with a chance of meeting trump's goal of meeting it by the end of the year. scarlet: the washington bureau chief, appreciate your time. tonight we take to daniel mettler, about where he sees ai heading on wall street. this is bloomberg. ♪

♪ joe: is wall street ready for the revolution in ai and robotics, and what will happen to the rank-and-file of the industry as technology changes? bloomberg has been reporting the accelerated automation in the

industry. daniel mettler is from pinchot technologies. he joins us now. thank you for joining us. let's start simple. what does pinchot do? we build software that allows humans to benefit from machine learning as to parse large amounts of information quickly with the aim of allowing them to make decisions with higher conviction and increasingly accelerated rate. joe: give me an example if i am a traitor on a desk, with does this scenario, where can shows -- kensho could help? daniel: if you need to get up to speed on something. digital payments have been big. you can imagine someone needing to get up to speed on that quickly. that involves millions of pages, transcripts. what is harder is the way digital payments are subscribed across those varies.

there is block away and others -- block coin and stuff. some to get up to speed on any topic quickly would be impossible without technology. what we do is use natural language processing and not only parse millions of documents quickly but to understand the different ways and types of documents that might speak about or think about any given topic. i am interested in digital payments technology, and i want to use your software to help me find a trade. what would i ask, and what would be the output of your software? daniel: the point is a lot bigger than recommending trading strategies. the financial distribution company that can take the longest history of data in the financial industry and allowing a human to parse it more quickly. if you want to know what the cfo of the given company said about

where their company is on the issue of bitcoin and digital payments to try to find that piece of information, whether you want to long the company or short the company or see that topic, would previously be rather difficult. you would have to find the relevant section of the earnings transcript. you would have to know the way they would be talking about that subject. so we are building technologies allows you to get at it quickly. that, it is upth to the human. i think that speaks to the broader issue in this, is there still a real -- rule for the human? the computer will not tell you, should a given ceo's position on bitcoin meet you have got to get somewhere with them, it will simply tell you -- tell you what is that at least the. it is up to you to take a position. joe: i want to know what the cfo

of mastercard or visa says about bitcoin or blockchain, intuitively it is like i could google it. what is -- trying to grasp, what is that would be different? daniel: one of the issues with googling it is, what term when you google? what natural language processing does it take the various ways humans speak about the main topic and try to build connections across them. you might go into google and say, what does the cfo say about blockchain? that he might not ever use the word blockchain. so your google results will come up empty. so that you see he has nothing to say on blockchain, and that would be false. he said we will use a distributed ledger. to us human, you can understand political and emotional considerations people use different words in financial statements and earnings transcripts. companies that operate in prison will never use prison.

it is trying to re-create the way a human thinks and trying to track the different ways people talk about these different topics. joe: you mentioned the technology can go beyond a mere i want to suppose take it a step further and i want to say, some companies talk about this topic. some are reticent. how are they typically done? so your software can help me if they said ask historically -- x historically, that has led to over performance. daniel: yes. humans ensure that software that we build to help humans. what is said on a issue, what are involved, and when you service those things, what does the market follow? if you have a company that takes a position or follows a policy in response to a key technology, how does it trade in the weeks and months that follow? joe: so real quickly, you have

investments from impressive sources including goldman sachs. give me a characterization of that. daniel: we have the six largest global banks and investors you mentioned. s&p global is a good example a very it is long-established company, synonymous with the market. it has this big data set. they have been very forward-looking and saying, what are the ways we can use technology to extract the hidden and varied information? -- buried information? it is not just individual users. joe: thank you very much. scarlet: coming up, companies like aetna have been announcing plans to leave connecticut. it is a corporate exodus putting pressure on the state. we will talk with timothy blake of moody's about this. this is bloomberg. ♪

i amcrumpton and --mark: mark crumpton. it is time for first word news. answers twomand weeks after ambush in the african nation of niger killed four american soldiers. mattis and mccain spoke privately. emerging from the meeting, the defense secretary pledged better lines of communication with congress. mccain, frustrated with what he says is a slow response for information from the trump administration, has threatened to issue a subpoena. the state department says two more u.s. government workers have been confirmed to be victims of invisible attacks in

cuba. the tally has inched upwards since the u.s. disclosed in august embassy workers and their families in havana have been harmed by unexplained mysterious incidents affecting their health. officials have not identified a weapon or culprit. they say 24 people have been harmed, nearly half of the american government workers stationed in cuba. prime minister theresa may says there is still some way left to go on brexit talks after little progress at the european union summit. speaking today in brussels she said both sides were nearing agreement on citizens' rights but still have work to do. >> i am positive and optimistic about where we can get to in relation to the future partnership we want with the european union because it is not only in the interest of the british people, it is in the interest of people across the remaining 27 members of the european union as well. r.d.u. partners agreed

today to begin discussing herther joint position -- they s e.u. partners agreed today to begin discussing their joint position before the next formal summit in december. turkeys president has criticized western nations over their support for syrian kurdish fighters in the wake of the liberation of the syrian city of raqqa from islamic state. join celebrations, the syrian posters ofsplayed the leader of the pkk. the president denounced the display during a speech in istanbul. he accused the u.s. and european nations a publicly calling the pkk a terror organization but allegedly protecting the group. global news 24 hours a day. i am mark crumpton. this is bloomberg.

joe: let's get a recap of today's market action. obviously, green across the board. substantial move by recent standards. 165 points higher on the dow, new record. s&p up .5%. nasdaq gaining .3%. a typical green across the board day. scarlet: we have seen many of those. "what'd you miss?" 30 years ago, many companies flocked to connecticut. now businesses are lining up to get out, threatening a state already contending with a crippling budget deficit. joining us is timothy blake, head of public finance at moody's. this is reflected in your credit rating for connecticut, the third lowest rated state. >> that is right. connecticut has been underperforming the nation economically. few people realize this but the state only recovered 80% of the jobs it lost during the

recession. the most important industry, the financial services sector, is also significantly down. over the last 10 years, they are down about 10% in jobs. those are the highest paying jobs most important to the state's tax revenues. scarlet: what has connecticut done wrong? was this forces out of its control? >> we believe a big part of this is connecticut's nature is a small city and suburban state at a time when young people and companies that employ them are looking for the larger urban areas with the more technically focused workforce. the northeast does continue to lose people to the south and west. connecticut also has this factor that it does not have a large urban city. they are saying it is cold and boring. scarlet: it does have an advantage. it has a highly educated

population. proximity to boston and new york city. that should put it in good stead. >> it is a high wealth state no doubt and has a deep tax base. but it is not growing. at the same time, the expenses of the state are growing. very heavy, long-term costs for pension benefits, that service, retiree health care -- debt service, retiree health care. julia: 30% of the budget goes to get service payments and retiree health care. >> similar to illinois which is having struggles as well. julia: they are operating under executive order now. if you look at the things they are cutting, it is the cities, things that come down to essentials for attracting people going forward. >> yes. the economic and rising expenses are long-term problems for the state that will persist beyond this budget clash.

one of the things in a possible tax reform bill being debated is the elimination of the state and local tax deduction. were that to be eliminated, you could imagine a lot of angry rich people in high-tech states like california, new york, connecticut. they say you better cut my taxes or i'm going to move to florida. have you looked at the potential impact of the state's finances were that to go through? >> we have. eliminating the state and local tax deduction would be negative for all state and local governments across the country. not just the high tax places. there's tax avoidance sentiment in some areas. that will not get easier if the deduction goes away. it is true the deductions' value is concentrated in coastal states. budgetbefore the recent

crisis, it downgraded connecticut to a1 in may. what are you thinking now on their current ratings? what do you need to see from them to change it in a more positive direction? >> the downgrade earlier reflected the long-term factors i am referring to. for the state, that is where the focus is. the current budget clash puts pressure on the local governments, the towns, cities, and school districts, because one of the levers the state is looking at is lower funding for the lower levels of government. we put about 30 towns and cities in connecticut on review for possible action. scarlet: one city in particular is in trouble, hartford. he sate is likely to default or file for bankruptcy or both in the next few weeks. >> hartford is the most significantly stressed of the local governments. they have all the long-term problems the state has. they also have a property tax

base, 50% of which is exempt, state offices for instance. it is exempt from taxes and tax rates are very high. the options for hartford are in the hands of the state at this point. blake, head of public finance at movies. next, we will be talking to the illinois governor about his plans to improve the state's economy including a pitch to amazon. that is next. this is bloomberg. ♪

julia: "what'd you miss?" illinois has released 10 sites they have pitched to amazon for a second headquarters. the project could bring 50,000 jobs to the state.

one of the sites is a planned 62-acre campus for innovation. illinois governor bruce rauner and the university of illinois to thed the plans discovery partners institute in chicago. governor rauner joins us from chicago. great to have you with us. talk about the innovation hub you are launching and why it would make a perfect headquarters, second headquarters for amazon in your view. >> this is a very exciting new initiative we are undertaking with the university of illinois. we are fortunate. greatest one of the research institutions in the world. the students and faculty have founded dozens of the most successful companies anywhere in the world, whether it is youtube, paypal, yelp, oracle,

haveape, even tesla motors been cofounded by university of illinois students. what we are doing is helping ofand the engineering school the university of illinois and opening a major new facility and research institute in downtown chicago so the pipeline a brilliant technology and computer science students are right here, right next door to where amazon can use them to recruit new employees and search innovative new services and products. julia: it sounds fantastic. i look at the finances of the state and see that you are cutting financing for higher education. you have billions of dollars worth of unpaid bills. i wonder how you will pay for this. how are you going to pay for this? >> it will not be that hard because it is mostly going to be done with private donations. u of i kicked off a $3 billion capital campaign.

we have many businesses who would like to partner with the institute and university. this will be privately financed fundamentally. it is such an exciting initiative. not only will be u of i be involved but also the university of chicago as well as northwestern university. we are the only metropolitan area and region in the country that has three of the most trusted just -- prestigious research universities in the world. we have three universities that can transform illinois. we are going to make it happen. it will be very exciting. julia: we have seen a recent succession of disappointments. we had the potential for a foxconn factory, the mazda toyota joint venture. these jobs want to other states. why will amazon be different? how do you go to amazon and say don't worry about future tax

rises as a result of the finances of the state? >> i believe we are far and away the best location for amazon's next headquarters. frankly, we are outstanding for any headquarters for a national or international company with our people, our location, our transportation network, university system which is second to none. o'hare international airport. there is no greater airport anywhere in the world. we have every attribute amazon is looking for. i believe we are going to win this competition hands down. julia: talk more about the finances. you have the big bond offering next week. $4.5 billion. what are investors saying and how do you expect that to go? >> investor response has been very strong. i cannot comment much because it is in process. we are refinancing some bills. when i became governor, there

were billions of unpaid bills. we had a huge backlog. illinois has been running deficits for decades. i came in. we are transforming state government making it more efficient and transparent. we have shrunk the cost of government. we've taken out millions in waste. we have innovative contracts with unions based on merit pay and different management process. we are transforming state government. we are refinancing old unpaid bills because many by law have to pay interest of 9% and in some cases 12%. we can refinance that and save hundreds of millions of dollars and lower interest rates by going to the bond market. that is what we are doing now. julia: your credit rating is one above junk. maintaining the rating is essential for the state. what more can you do? >> we are transforming the state. unfortunately, we have been financially mismanaged for 35 years. i ran for governor as a business

person. i am a private investor. i came in to shake up the system and transform the government. we have achieved major changes in a short time. still work to be done no question. but the combination of good financial discipline as well as restructuring our government and shrinking the layers of government across the state and cutting bureaucracy and red tape and regulations. we have already cut about 15% of regulations on business. our goal is to cut one quarter by the end of next year. we shrink the cost of government. come up with innovative new union contracts. reform pensions and the government health care system. and then we recruit outstanding with the like amazon incredible university of illinois. we graduate 10% of the nation's computer scientists in illinois. we have an incredible workforce.

we are going to transform our economy and grow our way out of challenges. julia: i'm glad you pointed out your finance background. would you be buying illinois government bonds at this stage? >> illinois has an outstanding feature. natural people, resources, location, transportation, university system, we are second to none. we will be, with the changes we are working on, we will be the fastest-growing state. amazon knows that. that is why i believe we will bring them here. julia: thank you so much, governor bruce rauner of illinois joining us from chicago. next, hbo'sing up "game of thrones." does it bear any similarities to our own world? from new york, this is bloomberg. ♪

scarlet: "what'd you miss?" around 20 part by infighting with ambitious leaders engaging in the section, betrayal, and more. this is familiar to "game of thrones." but also to many people work in an office. i sat down with the actor from "game of thrones" who is also a u.n. goodwill ambassador and ask about what the show can teach about leadership. >> that kind of depends on who you root for. in the dragon are girl camp, you want to annihilate all of your enemies with fire. that kind of those the same for cerciei.

most of them are ruthless. it is a terrible thing. last season, tyrian has been advisor. he has tried to be kind and gentle and not be ruthless. it has been a long disaster journey for him. the show is basically saying use workforce. scarlet: according to the blogs, all the main characters except for jamie minister -- lannister show leadership. jamie would rather be an individual contributor and walk away. >> i am biased but i think he has done well. he was sent out to capture this and managed to do it without killing a single person. i think he has seen enough violence and death in his time to realize that is not the way forward. scarlet: there is a popular theory that the white walkers

represent climate change. do you think it is a useful metaphor? >> it is difficult not to see the parallels to our world. we have the wall of ice, we have the ice caps melting. the wall of ice has been broken by death. death is coming for us. you have a world where the leaders try to ignore what is happening and would rather fight amongst themselves. worldeat thing about our as opposed to that world is we have the whole world coming together saying we've got to deal with this. this issue is so big we cannot not do anything. that is so wonderful. of course, it was disappointing when president trump decided to withdraw. the great thing about that was the response from the rest of the world. one could have feared other

countries would have done that. they did the opposite and said we will step up. in cities in the u.s. stepping up. your, chicago, -- new york, chicago, l.a. mr. bloomberg himself stepping in. it is all of us. even ift about one guy it is the most powerful guy in the world. it is about all of us. did is a global threat and we have to deal with it globally. scarlet: final question. given your advocacy for gender equality and climate change, how would you like the program to end? give them some ideas. >> yes. you know, i what a big, beautiful sing-along with they all hold hands, kumbaya. exactly. scarlet: we defeat climate change?

>> the ice king will come down. it is about love. scarlet: that was my conversation with the actor and u.n. ambassador. joe, you are not a fan? julia: i have never -- joe: i have never seen it. asked howould have the program finishes. scarlet: he said it will be about love. king, the ice representation of climate change. joe, sorry. i interrupted. joe: i have nothing. julia: we will get you watching at some point. you will be hooked. scarlet: that will be what we work on this summer. julia: it is time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. procter & gamble posted

quarterly profits with better-than-expected sales. company reported weakness in some divisions. in france, they keep lowering the fees it will charge for research under the sweeping new rules. is marketing a basic package at a premium service. last month, it said single tier research would cost $24,000. over the summer, it promoted a package for more than $140,000. revelations about the steel scandal involving fake data. managersry since the -- a newspaper reports they kept falsifying data even after it launched its own internal investigation. that is your business flash

update. i love that story about the research costs. a race to the bottom. joe: coming up, what you need to know for next week. this is bloomberg. ♪

scarlet: "what'd you miss?"

record highs for u.s. stocks. don't miss this. japan is heading to the polls on sunday in a snap election called by the prime minister in september. joe: i will be watching theresa may as she makes a statement to parliament on monday on the progress of the brexit talks following the latest european summit. scarlet: for lack of progress. trump they hold a policy -- julia: they hold a policy meeting where it is expected to announce a stimulus plan for 2018. what are they going to do with qe? "bloomberg technology" is next. joe: have a great weekend. this is bloomberg. ♪

alisa: i am alisa parenti from washington. you are watching "bloomberg technology." president trump says the united nations has to this potential but has not been used over the years as much as it should be.

the president spoke during a meeting at the white house with the u.n. secretary general today. mr. trump also praised his leadership in the organization. damage estimates from california wildfires are rising. officials said today 7700 buildings have been destroyed by the blaze. the number has gone up as they assess damage from the series of fires that broke out earlier this month. the fires have killed 42 people and caused more than $1 billion worth of damage. yes house speaker paul ryan says the republican tax overall plan includes a fourth bracket for the wealthy. it has not been decided whether the top bracket will remain at the 39.6% rate. he says it will be finalized in a number of days. it has been one month since hurricane maria devastated puerto rico. only about 20% of people on the island have power. the governor is pledging to get that to 95% by the end of the