definite plans for departure. says thector general denuclearization of the peninsula is the goal of the historic trump kim summit. it is also to address the suffering of the people. >> we are seeking 11 million u.s. dollars to the immediate needs of the 6 million most phone herbal people. people need our generosity and help. mark: he says both men should be commended for their courage pushing for a diplomatic solution on the korean peninsula and added the world body will assist with the verification process for denuclearization if requested by both sides.

spain has stepped up and offered to take in a rescue ship with hundreds of migrants including some pregnant women and dozens of children, some of whom are alone. this came after italy refused to take in the vessel, which was in the tested the weekend. >> that is why we are asking to immediately authorize this. other political issues makes this -- mark: the rescued migrants, it would run out by tonight. global news 24 hours a day on air and on tick tock on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton.

this is bloomberg. i am mark crumpton. this is bloomberg. julia: lies, i am julia chatterley. we're 30 minutes from the trading day. global central-bank action. what didquestion is you miss? >> history in the making or less than six hours away from president trump passes meeting with kim jong-un. more on the high-stakes gamble. trade tensions take a turn for the worse. president trump called the canadian prime minister to sonic -- dishonest and weaken while navarro said there is a special

place in hell for justin trudeau. so what happened now -- what happens now? investors watch for s of a steady pickup in inflation tomorrow all before the fed is seen waste -- raising rates on wednesday. julia: a countdown to the historic summit. president trump will be the first sitting u.s. president to meet face-to-face with a north korean leader. the possibility of several decades of hostility, the threat of denuclearization and easing isolation all hang in the balance. joining us now from singapore is bloomberg's chief washington correspondent, kevin. clearly in an incredibly exciting moment to witness. just describe what is taking place and can you give clarity on the fact that it seems the north koreans have dictated the timing of the wrapup of the meeting? >> right. now, our crossing

colleague jennifer jacob citing sources in the administration at say president trump was once willing to -- here in singapore and after the one-on-one meeting just after five hours with kim jong-un. the north koreans made plans for the north korea leader kim jong-un's departure already and that left the u.s. delegation saying they wanted to get out as well. beingr today, mike pompeo told that things are moving quite rapidly and we anticipate they will come to their logical inclusion even more clear than we had anticipated. there was a suggestion that things are moving very quickly. just in the last couple of hours so a remarkable turn of events in terms of the op tech surrounding the summit. taking out on the town going to

various restaurants in downtown singapore. meanwhile, dennis rodman, the nba all-star also reported here in singapore. there has been a lot of that going on. in terms of policy, president trump will wake up at 8:00 p.m. new york time and they will head to the 9:00 meeting with kim jong-un one-on-one and each will have a translator and then the delegation goes for a couple of our meetings. we are expecting to hear from , 4:00ent trump himself a.m. new york time, about how he thinks everything went down. >> cannot wait. also cannot wait for the pictures that emerge of dennis rodman and kim jong-un. i understand the u.s. promised not to bring up human rights in the summit there any other ground wars -- ground rules that we are aware of?

>> what is interesting according to sources i have spoken with in the administration, the president is likely to bring up the issue of japanese at the t families. this is something if you remember back to last week, president trump gave the word that he would in fact raise the issue but largely, the agenda is sticking toward getting north korea to agree to a long-term the -- denuclearization plan p or i have been speaking with sources in the last 24 hours to republican members of congress and they are all concerned the president would get to a short-term but not a long-term deal. they want to see a long-term deal that they feel would be of the better interests of the real marker here in terms of not just what happens tomorrow and a couple of hours but what happens after that and beyond. joe: we know it kim jong-un has been doing somewhat, what do we

know about what the white house and trump are doing and the final hours? i assume trump is sleeping now but he final hours leading up to the week? >> president trump met earlier, yesterday rather, right when he landed from quebec at the g7 and arrived here in singapore. he met with singapore prime minister lee and had a trade talk. according to officials, that was a talking and president trump went behind closed doors and really began preparing for a about 45e meeting, minutes to one hour with the north korean meet -- leader. he is preparing for quite some time. in terms of really a central question. will north korean leader kim jong-un agree to denuclearization question mark in the past couple of days, we heard from the secretary of has metke pompeo who

with kim jong-un twice already and he suggested the north leader has already agreed to do it. if you look at what has happened in the last day or lost 24 hours, -- he has just abolished that kim jong-un is here in singapore meeting with president trump. leader has already agreed to dovery fluid -- fluid back-and-forth, becoming more fluid in the past couple of hours. >> i know that the president made it clear that he thinks he will know in the first minute whether kim jong-un on is serious in the summit. is there anything all that we can dissect? >> this is a thirtysomething dictator who has only made three hisrnational trips prior to trip to singapore. visit very closely

to take hisdecided sister as well as top administration officials out on the town. reading into it that he is perceived to be smiling and lasting. downtown restaurant and hotel and singapore. he seemed to be in good spirits and not, you know, nervous at all for what is without question the most notable and significant dictatorship. >> i cannot imagine the pressure president trump is under with the world watching in the g7 and the tensions that created as well. termsre we expecting in of the press conference on the world watching when these ?eaders ultimately get together handshakes and hugs potentially if we replay what happened between kim jong-un and him when they met as well?

how do we see this playing out his week? it is a political convention of sorts. heightened political theatrics. 4:00 a.m. new york time, following the conclusion of the summit. we have heard rumblings that the president would like to see some kind of peace treaty signed between north korea and south korea declaring an end to the korean war, but we do not know korea --lly what north and what the international community will offer them in return. the president says he has additional sane is willing to slap on north korea if they are not willing to cooperate.

but what will they ease off potentially? and he will potentially need congressional approval and i have got to bedid. i talked to a lot of hawks on capitol hill in the republican party who do not like the sound of acne off sanctions of north korea one bit. >> i would not imagine. coming up, we will analyze whether the central bank will maybe trumpet up. this is bloomberg. ♪

scarlet: will the federal reserve take any nic western allies and trade tariffs? joined with more.omics, we're give us a sense of where the attention is in the federal reserve meeting? >> the rate hike is not even news at this point unless they surprise us by going more aggressively, which is not going to happen. we will watch, most importantly, for the three verses four hikes in 2018, i suspect we will not get the answer to the question ch later this year. i think the camps will be evenly divided and it is not until we get a sense of how these conditions are raining and economic activity that we will have some certainty over that sen. menendez:.

it is really about a 50% probability for the meeting. meetings right where they want them. looking to change the economic , to see if they are changing says to the funds rate, those are bigger picture issues they can deal with later down the line. >> the unemployment rate has fallen faster than the fed expected. almost 3.7%. seems to be picking up a little bit but not in some wild way. what it is not a boil over. >> right. toh the fed be willing continually run hot? >> in the minutes of the last

meeting, there was a significant camp of policymakers that felt like the underlying inflation trend had not actually pick up and maybe it was an idiosyncratic factor like the financial service costs and it created a perception that inflation had accelerated at the underlying trend had taken place. growth toe the income support it. you will buy less in a broader and more jelly instead. until we see the sustained picked up in the labor cost and all of the wage inflation metrics, you will not have a pickup in inflation. trend, we're not yet running at a pace that would convince policymakers that we are centered on 2% inflation just yet. we are not really running hot

just yet. >> the markets are doing their best to look through trade tensions and what the fed found yesterday is interesting. input price inflation which surely argues or at least could that couldication happen. >> that is interesting angle. central bank meetings that are happening. there are no real surprises or uncertainty in that regard. import prices and industrial production could give some early dicationof how tariffs impacts are percolating in the economy. were a journalist at the press conference, what would be your question for the chairman #>> a very good question, i would focus on this angle of if he sees the need to really overshoot interest rates, and how they plan to orchestrate that year there have no interest rate -- instances where the fed has been able to without

ultimately ending up in a recession. so how will they orchestrate that this time around? i expect the answer to that to be further gradual normalization. >> back to tried and true. the mystery is over for the stock of the hour. the owner of the pancake chain, . hop renaming itself ihob. what does the b stand for? julie hyman is here to explain. julie: one of my husband's favorites. not just brexit. that would make sense. it is burgers, apparently. this is a marketing thing.

they said we are changing our name to i hop -- ihob. event todayarketing and set it is actually "burgers." age, if you can master the twitter marketing, that is kind of the game. was ihop doing badly? it hasn't been doing great. it hasn't been doing badly. take a look at the bloomberg. we had comparable sales. you can see the stocks are doing well. andarable sales of i hop applebee's. applebee's is white here and ihop is orange. same-store sales of both of them were rising and then we saw a dip.

it is actually closing down applebee's and paring back to improve things as well. been trying to make some changes. it is interesting the whol i ihob thing,whole which they say won't last, it would be lower burger prices for them. this is someone on the consumer team pointed out. i thought it was interesting. ground chuck prices have been going down. inn 14% from a record high 2014. if you are pushing burgers, now is a good time to do it here the margins can benefit from that. with even blockchain. >> it was something that was speculated upon. the question is when you have shake shack and five guys, there

has been a lot of competition. we will have to see how it works out. bloomberg intelligence also point out the company highlighted 45% of its customer base our age 34 and younger but baby boomers are still 27% of sales. we will see the demographics and what their reaction to this sort of rebranding is. they will still have pancakes. not like they are going away. >> julie hyman, thank you so much. list toe they arequestion has g frequent. >> we have for you can't miss next. this is bloomberg. ♪

markets.broader u.s. we have a look at what the rest

of the markets look like. that looks at the s&p 500 when you back out tech and telecom versus the s&p 500 overall. you see it starting at about 2013. there it goes, gently declining. it shows the telecom 500 underperforming in the broader market. to its lowestfell level since 2001 which means tech stocks are starting to dominate the s&p 500 just as they did during the lead up to the bubble burst. there is the peak. we're looking at the s&p backing out versus telecom. there is a peak in early 2000. thanks to jim for putting together this chart. says it is pretty eye catching. joe: it is a cool way to look at it, flipping upside down. different perspective. speaking of tech, obviously, a lot of interest in those stocks

but a big story in recent days has been about the sub level. a lot of tech stocks that you haven't even heard of. here is a look at recent tech ipo's. maybe you have heard of them. these are all household names, right? people are charging into anything tech, anything fresh, anything that hasn't been rallied yet, looking for a tech winner. if it is tech, it is rallying, a big thing for something to rely on. >> looking at the gains, it is not the king of the sector. can see the valuations.

big like disney and comcast, these are charging $11 per month. you the revenue of this to give you a sense of how they are outperforming. fraction ofa diversified businesses. is really important to her brings in a fraction of revenue. million to nearly $2 into of months. comcast can generate that much cash in around a month. on the right-hand side. fight over access. you understand they are fighting

over 21st century fox. the rewards are here to be seen. >> i like the charge today. planned might not have it but we planned it. this is bloomberg. ♪ . .

julia: "what'd you miss?"

ground into the clothes as investors await the summit and central-bank action this week. i am julia chatterley. scarlet: i am scarlet fu. joe: i am joe weisenthal. if you are tuning in live on twitter, we want to welcome you to our closing bell coverage, every weekday. scarlet: we begin with our market minutes, and u.s. stocks begin with gains, albeit smaller gains than what we had seen in the last 10 minutes of trading. the dow finishing basically unchanged. the nasdaq up by .2%. i was going to say that u.s. equities shrugged off the tree drama, and that might be the case depending on how quickly the news flow is moving. joe: not much action today. it definitely feels like a holding pattern before headline

days ahead. scarlet: president trump meeting with north korean leader kim jong, the federal reserve meeting on wednesday, ecb thursday, boj as well as the end of the week. plenty of catalysts. in terms of equity movers, we're keeping an eye on him in a developments. j" reporting boston stein -- boston s scientific gaining. again, this is according to the "wall street journal." energy moving lower by about 1.5%. synergy shares of the biggest game ever as elliott manement and blue skin called for a sweeping overhaul including southg companies, american utilities, lng as well. pg&e growing about 4%,

despite a report that blamed pg&e for fatal fires in the north last year. said the report is a significant reliability f fires. let's take a look at the government bond market, starting with the u.s. not a ton of action. the two-year yield inching up slightly to 10 year yield unchanged. of course all the action is later in the week. we have the headlines with the cpi, central bank stuff. i think we will see rate volatility later on, at least in the short-term. another wild move in the short on the italian debt market. a stunning move h a massive economy. this time it is a huge rally in short-term government bonds as the new finance minister strongly reiterating the new government's intention to stay in the euro. they have said this all along that they have no interest to

pull italy out of the current union. they are saying it with a little more gusto now. julia: let's take a look at currency as well. some of the risk currencies like policy, kiwi, aussie, kiwi, yen as well. you can see the dollar weaker, the mexican peso as well. all of the tensions in light of the g7 press conference, justin back-and-forth and forth with the president. you can see in the currency a deal of concern. euro is higher, points of what we have, and obviously as the centralioned, bank created this week and the brexit hotlines -- headlines.

we have to watch theresa may, sterling as well. i mentioned, the fallout of the aforementioned market currencies, equities last year, it gives you a sense of the one-day price here, on the downside, 2.7%, the mexican peso as well down from 1.4%, as i already mentioned. so a mixed bag. see, if we can tie that anyway to the trump-kim summit and the potential outcome, we shall. joe: pretty quiet day on the commodities again, continuing this theme of a slow start to the week in the markets world. crude oil, about .5%. those are today's markets. scarlet: for more on today's market moves, let's bring in ed qma managing director. are we overstating how big of a deal this is? ed: we can never overstate it. [laughter]

julia: it is a huge week. ed: potentially historic. the markets are really counting on a great deal. but the possibility of something dramatic happening. itrlet: what about when comes to central banking? the ecb -- julia mentioned brexit. think the central bank separate much telegraphed what they are going to do, so i would not expect a tremendous amount of drama this week. the issue with central banks is what happens a year from now, and did they eventually go to far, as they almost always do. lot there is obviously a coming in at several days, but before we talk further into that, why do you think markets did not care at all about what a mess the g7 turned out to be? because you think that would have implications for nasa, which is a real economic story, the fact that relations between the u.s. and canada are so bad, canadian dollar getting hit, but rick evans did not seem to bat an eye.

of there was a lot name-calling. it is our biggest trading partner but i think markets have seen this before, where there is some drama, but it does not necessarily have an economic impact at the end of the day. julia: they have been through headlines where the president is concerned. ed: i think that is right. if we do have a trade war, real economic activity as opposed to name-calling, then obviously markets react negatively. scarlet: you did research on what typically causes their markets, you have a great acronym for it, recessions, shocks, valuation, and policy mistakes. which one can we write off? have come down, and we will get a 20% jump in earnings, so we will give a little bit better of a value. that has come down. shocks, it seems like there are a lot of potential shocks.

by definition, you cannot predict it, so that is why call it shocks. the two big issues are -- when are we going to the next recession, and what policies are along the way? i think recession is stl at least a way out, and on the policy front, it looks like in the short run, we know exactly what the fed is going to do, and it is just a question of does it get to the point of too much in 2019 or 2020, or later? julia: so it comes down to earnings growth as the stock market goes. and it has not been bad. ed: yes, we are about 5% up about halfway through the year, so we are on track for a 10% year, which is a very good year. the markets are always better in thng run. analysts so far at least expected to continue into next year. joe: it does not feel like a year in which we go up 10%. ed: i think it is partially that

we had such a smooth ride last year. this is what the market is like. this is the way it normally behaves. joe: lately we are on a pretty nice run. i do not know how it happened between february to have all of these valleys and pretty intense hills, you could probably tell a lot of stories, but would using it is over right now? over.would not say it is this is normal, not abnormal. this is what the market typically does. most of these headlines have basically been one-day events. scarlet: the headlines that have stuck, that have been consistent and persistent qamar what you have been talking about with currencies and emerging markets. julia: yes, and we see that l week as well. you are adding to the e.m. exposure here. ed: yes, we have been adding, but through a strategy that is not always the emerging market. it looks for value in currency and interesting pairs, and then

it looks for around the world, and it is finding a lot of them in emerging markets. if you look at india from a top-down perspective, if you look at software stocks, those are pretty expensive. software stocks look like a pretty good value compared to the rest of the world. i think a little bit different strategy, but one that has an opportunity to find value in many places around the world. julia: if you are saying indian software stocks, what are you upsetting that with? ed: i am overweight bonds. we're overweight stocks, especially u.s. stocks, emerging-market stocks, and we are dramatically underway bonds in the portfolio, at least from the constraints that we have. that is where we find these traits is being underweight bonds. trade so you do not do a in the end, you look at indian and another country and do that, it is a way to offset with a short-lived. right -- ed: that is right. joe: being underweight bonds, is that specifically on rate

concerns? if so, where do you see rates potentially go? ed: in my opinion, rates will potentially go higher. they will be pretty strong this year, and the combination of the fed raising rates and continued strong growth will push the 10-year above 3%. it will be hard to make money in the bond market this year. scarlet: do we get to 4% on the 10-year? ed: i do not think so. we are fundamentally in a low, long-term inflation. it is hard to measure inflation. prices and the internet, it is actually keeping prices quite low. julia: do we get that, though, if the economy can sustain it? if the curve is higher, and actually that is a problem for other asset classes, or do the fundamentals actually suck it up? echo eventually. sometimes they go too high and result in a recession. , it isat will happen

conceivable, but we do not think it will happen this year and maybe not next year. [laughter] [overlapping chatter] julia: not this year. ed: and again, you never can tell. the fed not know, i do not think real, knows, what the sustainable, long-run interest rate is, and fortunately, we have asked us who are among those who stare these issues more than anyone else. scarlet: ed keon, thank you so much. julia: qma managing director. 200% tariffs. this is bloomberg. ♪ this is bloomberg. ♪

martin: i am mark crumpton with first word news.

united nations secretary-general antonio guterres said they will is watching how the trump- kim singapore summit works out. committed the he leaders of the democratic people's republic of korea and the united states for pursuing a diplomatic solution. guterres also said he will likely assist with the verification process of denuclearization of the peninsula if trump to by both parties. parliamenttes in over theresa may's eu withdrawal bill or at the defining moment. it was described today to bloomberg television. -- if we get it wrong, it will have an impact on our country for decades. this is probably the most important vote of a generation for parliamentarians.

ar i.that they think the vois week an the votes taking place in october will define the generation of mp's. lords definede of the amendment. prime minister may is asking conservative party mp's to vote against it. they vote tuesday over giving parliament the decisive vote over the final deal. they vote again wednesday over maintaining customs union with the eu. security officials in yemen say heavy finding between pro-government forces and shiite rebels have killed more than 600 people on both sides. beennment rebels have advancing along the western coast in recent weeks as they battled the iranian-allied who's houthi rebels.

the closing on a report city that is a pipeline for yemen's food and medical aid. accepted the resignation of three bishops, including the one at the center chile's clerical sex abuse scandals. last month, a bishop and 30 offer their bishops resignations to francis at a vatican summit. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. julia: "what'd you miss?" flying from a summit of allies to one with north korea, president trump sets himself -- separates himself from unity among major economic powers that the g7. pressat follows a conference in a played out on twitter, escalation -- escalating issues with canada, a

country that buys the most u.s. goods. he double down on justin trudeau. >> there is a special place in hell for any foreign leader that engages in bad faith this policy --h president john j plum diplomacy with president donald trump, and that is what trudeau did with that press conference. julia: our guest joins us from ottawa. great to have you with us. pressne outside this conference believes they were hearing nothing from justin trudeau, so what did the president and his advisers around him see in the press conference that enraged him so much? josh: they absolutely were not trudeau.anything new from justin i covered him since he got elected. he did not say anything new. i think it is maybe a possibility that the president heard something new, and there were two, set jumped out, one

that canada was insulted by being hit with tariffs on steel and aluminum. r, etc..ilitary, nafta --ough said he would not trudeau said he would not bow down. he has to fight for canadians' interests, and that is what you would expect the leader of any country would say. including president trump would say it about americans. heads are shaking. the g7 with a world, you can imagine, with how it keyed up, and i think trump just tweeting that minutes after the it putqué was published, it in a further state of disarray, and the questions are is how they can trust the president to engage. joe: josh, let's talk about canada's protectionism, particularly with respect to the dairy industry.

there is a policy of" in-quota tariffs and out-quota tariffs. onlained the pricey taxes dairy products. josh: canada has sort of two prices based on a system called supply management. they manage supply, and they tried to do that so that their farmers can make a living that they can live off of. quotaare within the that canada sets for milk and other products, then you pay one rate. -- the surplus rate is a much higher rate. 241% for milk, 314 percent is the highest, they are punitive, for sure. these could be outliers of canadian policy. s are within tariff range from almost equal to the eu, western nations.

trump just found a figure that he can grab onto and look like an point to and say the u.s. is getting a raw deal. but that particular figure that he is pulling on is for a small subset of trade of a product that, by the way, the u.s. has a trade surplus with canada. so it is a bit perplexing. scarlet: that 270% jumps out at you. talk about about the nafta discussions. is very covered with a nafta at all? but trump wants it to. they want to end this system entirely over 10 years. that is politically explosive in canada. there is no way trudeau could agree to that, but trump wants them to agree to it, so we will see. trump also raised the threat of auto-tariffs, an issue that popped up a few weeks ago that would impact canada as well.

both of these are centerstage in nafta, but really it is more autos that they are talking about. dairy, frankly, has not been part of the discussion. they are using it until they get an agreement on autos. if they get that, then they will deal with dairy, but it is not like nafta is talking about dairy everyday, with his left people eat more confused. joshet: bloomberg's wingrove, thank you. julia: can i defend president trump really briefly? i cannot imagine the pressure he the northoing into rea summit, and joe, i know you will disagree with me some kind of reaction like that, -- joe: he does tweet when he is not about to meet kim as well. julia: [laughs] admittedly. however -- scarlet: he is a grown up. think even he can have

a moment of madness. scarlet: well, he is also in charge of -- julia: i know. scarlet: still ahead, we hear from ever core's retail analysts who say they are working to adapt to the digital era. this is bloomberg. ♪ erg. ♪

scarlet: "what'd you miss?" just 2018 the year the nightmare ends for traditional retailers? after falling 15% last year, the s&p posted almost 40% gains this year. that has led one industry analyst to declare the retailpocalypse over. bloomberg spoke with omar.

turnine key point for us was watching the follow-through in the first quarter, even with the tough weather we have had, those are big signals to us that there are going on here, structural changes happening in the industry that are sustainable. number one, inventory management, number two, digital marketing. >> you also double upgraded macy's in this report. from short to long. macy's has long been the poster child for the struggling retailer. why this change for macy's? omar: it is the traditional old world retailer, leaner, disruptive, kind of scary online players, amazon and others, and we have come to the conclusion that this company has a lot of assets and levers to pull, and they will benefit as well from

centralized inventory management in a digital world. you decentralize demand through a central pool of inventory, inventoryor faster returns, cash flow production, increasing profitability, less promotion at the end of the season, and it allows companies to take more risks from the curve of inventory and do more fashion, because you do not need to carry as much. if you look at those factors plus digital marketing, which macy's is figuring out as well, and the management is willing to try new things, it is interesting. >> macy's is welcome other same-store sales did better. we have a chart at g #btv650. you think they have a lot to do, perhaps closing some stores and revitalizing the way their stores wor you look at their outset, based in low-cost, low cost real estate, we see it as an area where they could really create a tremendous amount of value for

the shareholders, closing the top0 stores am keep a quarter of those stores, the traditional wholesale model, maybe take a quarter and sell them back to landlords to put in pharmacies, restaurants, coffee shops, or other experiential-driven shops. oarlet: that was evercore's mar saad speaking with bloomberg's emma chandra. we will speak with vincent deluard of international fcstone financial next. this is bloomberg. ♪ mberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. mark crumpton. bloomberg has learned the kim set a time deadline and definite plans for departure. trump. has talk aboutberlin to ending fighting between the ukrainian troops and the russian-backed separatists in ukraine. they have considered the

possibility of sending u.n. peacekeepers to the region where the armed conflict has killed -- since 2014. it is the first meeting of the so-called "normandy group" in a year. unilateral action on trade after a difficult summit in canada. prime minister may addressed parliament and talked about the e.u.fs imposed on the avoid tit-for-tat retaliation and the u.k. will support a dialogue. we do not make progress by ignoring each other, but rather by addressing them together. >> there was an e

nd-of-summit communiqué that was not endorsed by the united states. and to face espionage embezzlement charges after being extradited by the united states. president from 2009-2014. air is powered by 2700 journalists in 120 countries. i am mark crumpton and this is bloomberg. the equity markets of softened into the close and you can see them at 0.2%. you have the consumer staples and energy was high and outperformed. week is so much data this

and there is a slight pause that makes some sort of sense. well, slicing and dock sing in -- and dicing in the stock markets is no stranger. he spent a decade stumping for the theory and is making a case against smart beta. he is with the cross-asset reporter. let's step back a little bit here. smart beta,an of but why have you turned against it? wast could be that there nothing to start with. keep in mind that there was hundreds or thousands of factors that can be data-mined.

you focus on factors and you will find some of them but moneyrm well, can be an issue. we have $800 billion in assets in small beta. we will see $1 trillion going to a strategy and things end in t ears. to thing that investors need look at at strategies is the valuations. go ahead. host: that is a good point. sara is not the only one. a, isa founder of smart bet also skeptical. give us the example of how quickly that has grown in equity etf's. curiously, a founder of

smart beta echoes that valuation issue that caused a ruckus and said that part of the reason really succeeding is because the increase in popularity and the forecast that inflates valuations. one day, they will crash and we ick ineen an upt popularity and the asset umbrella is nearing the $800 billion mark, nearly triple. estimates that will reach -- by 2022. that is the smart beta phase. portfoliold a dumb that was excluded from the smart beta and you compare

that to an index of funds that were equally weighted. draper said that the tests were kind of a hodgepodge. at a pure exposure at that investment scale and doing that analysis, we had data and we found that the hodgepodge of ede equally weight outperformed eight o of the 23 years and using the smart beta 16 of the 23 years. that, at anye point of time, you have factors rform.utpe ways, slice the market 50 25 of them will outperform the market. thati can respond for me

use the largest categories and focus on the index to look at my list each year and, at any willt, a small beta outperform. you see the momentum each year doing well. how likely is it that you will see which factor performs well? if you knew that, it wouldn't be a thing. weighting on anomalies is the one. host: there was some that really stuck out. you have time, which you don't have the luxury of because you started the experiment in 2016 and there are different factors that are supposed to work in different environments that you would not necessarily a woolly

weight. equally weight. you don't necessarily want to beat the market at all times. you might want to buy something to increase dividends. >> part of this is true and part of it is amusing because this is the argument the classical active managers give. they will say that you should performance. it is amusing to see the etf industry that has dismissed these lanes as ridiculous -- ridiculous, now embracing them. are: all of these corresponding to deals and we have had low interest rates and falling yields.

now, we expect a rising rate environment. how do you expect the smart beta strategies to perform? >> this is the problem with any strategy. we have seen a falling yield. 0% and it is hard to run a back because you don't have good at data. -- good data. predictability, high and yous, high buybacks see interest rates. the thing that investors need to ask is how likely it is that ormingwill keep outperf

and this is something that the quant studies cannot answer. host: this is something that people will jab at as interesting. there are a lot of different factors out there and there will always be new discussions and research about different factors and the smart beta conference whetherpanels debating momentum was a factor after liquidity or whether it is just another word for "size." >> so, a bit of an existential crisis for the smart beta etf's. a reminder that you can catch me discussiong the latest trends in the market. once we look for to that. we will hear from the ceo and how machines affect the world of trading.

this is bloomberg .

host: what did you miss? high frequency traders are a risk to markets. we talk about the threat of algorithms. w you look at the speed with decisionsnes make versus humans and there is a discrepancy and the machines look at the world in microsecond time. the world have slowed down for them and they react to different pieces of information. goldman report and tore is a susceptibility

volatility spike. you have to dive deeper into what is high-frequency trading. this can capture spread and, in times of all until it he, they will pull back. there are also strategies that are purely out there and looking to trade in an aggressive and predatory way. you have a combination in the market that moves downward where raw and peoplehd aggressively sure to stock. can lead to volatile moves the goldman discussed in the paper and, what they said -- and what they said. a lot of people forwarded that to me and i agree. >> so, the risk is "compared to what?" i compared to autonomous vehicles.

over time, we will be safer with the machines. >> the question is the role of the exchange in determining traders who are trading on fundamentals vs. speed. 1/1000th of the blink of an eye. they went aggressively against the speed bump. we are saying that there are moments in the market where instability exists and we look pause to allowf all the participants to react on a more level playing field. that was not acceptable to certain people. so, we are past the point where

speed benefits and it is the role of the exchange to balance the market for all the participants. eryone cares about the participants. it is a job to be a referee. >> is the job getting harder because of one the chicago stock exchange closes? you will be the only one that is not owned by a giant parent. thehey are gobbling up exchanges and they are keeping them open because the goal of the exchanges to match buyers and sellers. you have to question what the exchanges a rock to. -- are up to. nasdaq has three exchanges and the goal is to keep the investors apart to create room for middlemen to increase trading volume and give the

ability to sell market data feeds. the exchanges are making more and are not matching buyers and sellers. the role in the market is twisted. as an independent, we are predicated on bringing together sellers and i see our position growing. i think it will continue to grow and i think, again, a lot of people do not realize that we are larger than the toronto or swiss or australian stock exchange. we are trading at a lot of volume. we are 2.5. are you growing faster in the market? are you continuing to take share? >> yes. shares the trade here do not

trade elsewhere and we were 1.6 % of the market and we are up to 2.5%. the company is growing and it has been a great couple of years. this will be our second full year of being an exchange and we see a bright horizon. o speaking tohe ce bloomberg earlier today. theslowest in decades for americans going out for drinks to celebrate. insights.e data th bloomberg.

>> the u.s. cpi and retail sales are released. for the charts you cannot miss, let's bring in mac. in is the name of my chart and it shows one falling off of the cliff and the insurance contribution. back, you can see these components of the price index and motor vehicle insurance and cable television have been boosting the core consumer price index and both of thenegative ie starting to see that come down a little bit. we see this in the inflation take the major legs that prop up inflation out

of the picture and that could be an interesting wildcard that not a lot of people pay attention to with the components like this, but this adds a lot to the index and it is starting down. spid in september and we have this in september and march. >> yeah, it is really interesting. this has been a sustained upward movement and boosted the overall inflation rate. shows theythis contribution to the numbers and you get the sense of this going back a couple of months with a few basis points and it was 15-20 basis points. >> not at all. >> not at all. talk about retail sales

aner spending. have the retail sales with food services and drinking and how much we spend on restaurants. >> the growth in the retail sales looked good, but this is an interesting area. you look at the spending of restaurants and the growth slows down and use see that based on retail spending at restaurants going lower than the 2001 recession and lower than the last 20 years other than the recession. there was spending in 2015. the wage growth going up and restaurants passing through the wage increases into higher price increases and the blue line shows inflation. we haven't seen that much pass-through. restaurant caso along

the higher prices, the sales go down and people go elsewhere. it is competitive and it makes you wonder. if the inflation is this low at restaurants and consumers are not even willing to allow that, what is the outlook going to be as the wage growth continues.s -- continues. >> we will see if people will pay for the jack-in-the-box taco s. you are looking at cpi. e got the capacity utilization line here on this chart and you can see that factories are only running about 75%. up and it isoing below the levels that we have seen in previous cycles that were closer to 80% or 85%. we are looking at the core cpi

and this is interesting because you can believe that the prices are set by supply and demand and you need the higher capacity utilization to get to the point where the prices are for stop because the demand is outstripping supply and we are not seeing that. >> the capacity utilization, how do they know that the idle factories are tooled for making modern stuff? >> a good an open question here. it is not clear how much this even matters to begin with, but it seems like necessary, if not sufficient condition for higher inflation. >> it is something they pay a lot of attention to. thank you. >> coming up, what you need to know for tomorrow. this is bloomberg.

>> they gave up their gains but .e are in a holding pattern don't miss this. president trump and kim jong un.

they shake hands at 9:00. >> we were just teasing. u.s.c.p.i. numbers come out tomorrow. >> and at&t will take place tomorrow. > "bloomberg technology" is up next. >> have a great evening. ♪

emily: this is "bloomberg technology." bit coin tumbles over the weekend after a south korean crypto exchange says it has been hacked. and can the market recover. the f.c.c. has rolled back net neutrality with the old rules expiring, but could those get the upper