thatook selloff proves tightening may be happening. bank of japan buying and limited lawns, and traders bet on changes to its yield curve control policy. that boe and the fed are on deck. and, les moonves is under fire. his future will be discussed today after explicit sexual harassment charges, but who is really in charge. >> welcome to "bloomberg daybreak." the are here in a new york, a lovely weekend weather was. we hope you had a nice time. >> yes, there was a lot of tod lanter indoor play. a lot like july national a lot play.dler indoor how does that happen in gillette in the new york. >> any kind of shareholder it was all the conversation all weekend.

>> the board also, the reports were that they spent all week and on the telephone. they had a schedule that is meeting, -- they had a meeting that was scheduled, we will see today.ey discussed >> let us take a look at the market check, pretty flat for should point out that the dollar-yen is what we're watching into that ug meeting tomorrow. oil is up about 1%. big oil earnings are really not good on friday, so it is interesting to's it how they will capitalize on the higher oil prices. >> that is good, we're looking that.d to time for morning brief, we are looking at what is coming up this week, a big week particularly for central banks. the bank of japan will discuss the monetary issue come out some expectations for some monetary policy tweaking that has already moved yields up. on thursday, the bank of england is expected to raise key rate is the news surrounding brexit.

and on friday if that is not enough, we get the u.s. payroll numbers for the month of july. . a big week coming up first, we joined by stephanie flanders, bloomberg senior executive editor of economics, and tracy alloway, "bloomberg markets" editor.e i will start with you, stephanie, we will put up a chart that shows what happens with the 10 year yields, the japanese government bonds. why are they tweaking, if they do tweak? >> we don't know that what they are doing might actually lead to the thinking, we know they have a cap oncommitment, the 10 year yields, which at the time, was the most extreme move on monetary policy, but it is putting a lot of pressure on them and it involves an anonymous amount of bond purchases, and there has been a lot of expectations of they need to have a lot more flexibility.

theme.t is an ongoing i don't think he will get that much out of it this week, there was always a concern. they did not want to take the blame for seeing a big jump up .n the yen >> loss of people are watching that us to a clue as to what was meeting. this but to discuss the point of the boj locking up the market, how the controlto see of the curve. he also mentioned that it is a huge week for central banks. there is a fed meeting, i don't think it comes with the press conference, but since everyone has been talking about the yield curve, what the boj does will be important. especially when you consider that the fed is controlling the ,hort end of the yield curve while the other banks are having more of an influence on the long and. >> the other part of the central boe. is the

stephanie, you had a great interview with mark carney. let me just show our next port of what happens. you talked about the interest rate over all, globally for central banks. he said that if you talk in absolute terms of interest rates, if you have to talk about quantitative easing, it is more likely than not, that the equilibrium level of policy has begun to rise. the balance of savings and investment is such high, that there are extreme pressures that have begun to abate. this is the question. what happens to central banks? >> this is what happens, mark carney is very fluent and interesting to talk to when he is not on the record. but like any central banker, he gets a bit long-winded, particularly mark carney,. when he asking questions on that it was an interesting conversation, if you could strip caveat. of the

i think what we will see on thursday is the result of their analysis, what they think the long-term neutral rate is in the united kingdom. we have seen from the bank of england economists, one of the most influential studies of what the global writ, might look like in the future how much it has fallen over the last few years, whether that will continue in up.future or go we are expecting them to show that long-term, we are still on a very low neutral rate, compared to what we might remember. >> what about the change in their policy? we have had that in the fed, but what caused them to do this? stephanie: i think it is a bit transparency. . one of the things that is happened under mark carney, and he talked about it in the interview, is making the bank more transparent. not just in his straightforward policy, but not being too scared of having research come out, and saying, that is not necessarily our view, but this is what is coming out. interview, andt

you can check it out to the "bloomberg markets" next issue, it is on digital and newsstands right now. do not miss stephanie flanders interview with mark carney. it is still earning season, it will be a busy week, second busiest for s&p, more than 500 companies reporting. we had apple on tuesday, tesla is also coming, and then he have workers and ubs and credit well. as tracy, over all, how would you categorize earnings season? tracy: i think it has been fairly good, but it's thunder has been stolen the what is happening with the faang stocks, obviously. we speak about the importance of faang stocks to the rally, and 90 have a result of what can happen when those stocks get knocked. a few people were surprised that we did not have a broader impact on the s&p 500 when we saw the netflix. facebook and

goldman sachs said to do that one reason a minute have happened is that we saw a lot of the holders of tech stocks that were getting hit, rotated to other stocks, so they propped up way.ally that but when you think about it, the faang stocks have been responsible for the rally this year, there and responsible for the momentum which is based on confidence. so if investors lose confidence in them, it can turn ugly. >> yes, if you look at what we saw this week an, we have seen some investor saying that it be time to start losing a little bit of confidence in the faang stocks. shift inis a boj policy, or hawkish word from mark carney, what do you think at happen? stephanie: one of the things we talk about is, you have the momentum that comes from something like banks when the analysts for many years, have -- when youthat

somea move, if there are momentum to follow, you can have a much bigger swing then he would've had in the past. when you get to the late cycle, in the stock market, is that turn going to be more dramatic than a meta-been in the past, purely because of this built in momentum from passive switching. i think we saw that, and it is interesting that even the fall from facebook, which was extraordinary, was not enough to do the. but it is certainly something we are watching. , a cbs, there was the new yorker explosive these, the chairman and ceo of ces, les moonves, six women coming forward on the record and accusing him of unwanted actual advances over the years. you can see that the cost -- the stoxx limited immediately.

we don't know what the allegations are, but tracy, this is a case study in corporate governance that we are seeing play out. how does the board handle this? tracy: there was something that i find really interesting about what is happening, the fact that they are having the board today. we know from people at the new yorker that they were working on the story for a very long time, that they were in dialogue with it is from the cbs, so surprising to me that we are getting the response after the article was published, is of a coherent response ahead of it. >> stephanie, even worse for that, this did not come out of the blue. that was already an outside investigation, there were looking into cbs news and allegations about 60 minutes as well. this has been going on for some time. so is there a question that whether there wa a corporate culture that kind of allowed this to go on? stephanie: i think so.

anything that seems a good fundamental problem of leadership, you have to come out with your coherent strategy, reeducating all of our employees, the have suspended three other people because of these concerns -- it is very odd that they seem to be on the back of this, when the new yorker kept them informed from day one. alix: such a pleasure to have you both joining us on this monday. as a reminder, you can have another look at all of the other interviews and have on the bloomberg terminal, as well as all of the charts were pulling up. coming up next, we talk about the big risks that could come from the boj, ecb and boe this week. this is bloomberg. ♪ his is bloomberg. ♪

dug up this is bloomberg daybreak, i am emma chandra with your bloomberg's is this flash. heinekenn profits by forecasted this year. in.r beer business margins.s lower . heineken. also says that higher raw headwindsosts and currenc will weigh on profits shares fell the most in more than three years a massive bet has been made against nintendo but could way down profits. fornvestor mark predicts but.

costs have not hit the lowest yet, particularly in china. . tom: you. tom:. alix: to. alix:. a bloomberg. tv that equities face multiple headwinds, and he is expecting a 30% decline, but stocks have been far yet. . will investors appetite for risk continue despite the selloff the markets held up, over the last year, seeing big increases central banks though, could change that. economic adviser is here joining us, willem h buiter. thank you for being here? willem: thank you for having me. alix: what is the risk of that boj does that, how does it filter through? willem: if they would, it would surprise me, if they did. anything material on the yield curve, it would likely lead to a , ofificant strengthening the yen, which would not be good for japan.

so that is i believe that they would do anything. they are uncomfortable with the juncker going that high over the there arears, but still below the expectation this point, to pull the plug at this point on expansionary policy, would be an admission that they cannot do anything, so they might as well minimize the effect on the banking sector. clearly come of a young curve is hurting profitability, but it is not the same as hurting financial stability. >> i have a chart here that actually shows the yield curve -- the 10 year jgb, and how it shut out of here, on reports to your point, that the bank of japan may be getting concerned about the pressure on financials institutions.

this has been going on for some time, it is not near on japan. so does it make sense for them to say, let us change it in order to give some relief to the banks? willem: not really, you cannot do it without damaging your sentiment of object is. and financial stability, if you can do it without damaging them, then that is good. that ecb has been doing that. other central banks have done that. that if there is a trade of and you throw in the towel on the jgb inflation target by doing twice. would think they would have no estimates left, and no central bank is willing to make that admission yet. alix: what i think is interesting is that it has brought to the forefront what happened to the global market if a pivotal central bank at the boj tweaks policy, the outflows and other asset classes how it rejigger's all the flows. how do you look at it? willem: it would definitely be a shock. implicated on japan, but

places.er the weakening of the u.s. dollar and the euro would also be disruptive, but in and of itself, a weak dollar can be better for em stability. so it is not necessarily all around turmoil and turbulence and pain. [laughter] alix: so, dramatic. some big newsere this weekend, treasury secretary steven mnuchin coming out and saying he sees 3% of growth for the next four or five years. >> we can on the project a couple of years in the future, but i think we are well on this years.r several out of think this is a one year or two your phenomenon, i think we are definitely on a period of 4% or 5% -- four or five years of sustained 3% of growth.

david: this is not necessarily the standard view on economists, we had a very bullish print on friday, but they said yes, it is going to come down again? growth this the year is a markable, given the fact that the potential for growth is only no higher than 2%. to go to 3% growth for the next five years, i would say from your mouth to god, but also your dreams, it is not going to happen. they do not have the supply-side animism to deliver that kind of growth. alix: and the rhetoric on friday was really also about the net exports getting a huge boost. if you look at this chart, you can see the net exports gotomeeting 1% to gdp growth. the white. part is the increase we saw in the last quarter. that really is about tariffs. we have been getting ahead of the tariffs, when do you think the short-term trends reverse? willem: it may not all be about tariffs. alix: what is it about than?

willem: it really doesn't mean match, it over estimates at once point.he' of the data especially as you measured, the gdp data. -- it is part of it, undoubtedly, given the anticipation and the reality of higher tariffs, but i am not expecting any drastic reversal anytime soon. where we are going to see reversal will be sustained growth over the next quarter, it accumulation. but again, that is short-term demand kerfuffles. we are not talking about potential output growth in the u.s., productivity growth, ecological dynamism, taking the economy to 3% for the next five years. david: let us talk about the increase.

in steven mnuchin were here, i suspect he would say that you are not taking into account increase productivity and increased capital investment, because of the changes from tax reform. why is that wrong? willem: he is absolutely right that there will be an increase in capital formation, as a result of the full expansion of investment. was to have full expansion of , they arependiture not expensive it at all. there will be some effect, which is where we have raised our view of output growth from 1.7% to 2% in the u.s.. but to get it to 3%, he would need to see a much larger increase in capital expenditure seen, and also come a whole host of regulatory reforms on the labor market that we haven't seen yet. alix: wrapping it up with your experience in the bank of england come out looking at the meeting on thursday -- you are already laughing and the question -- if we see a rate

hike, is it one and done, how do you see it? willem: i think they will have a it --ike, and able keep there will not be in a news in the brexit side, but if you could filter out bags it, and just look at growth -- if you could filter out brexit, and look at the tightening in the labor markets, the net migration flows, yes, there is a case for tightening. but of course, the massive uncertainty, mostly downside risk of brexit, makes it bestble that rates today that they would be a rate cut in november, which would look a bit silly. david: thank you, he will be staying with us. coming up, we discuss what is next on the news of sexual misconduct allegations in cbs. live from new york, this is bloomberg. ♪ omberg. ♪

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david fish shockwaves rippled through the media world on the news of sexual misconduct allegations against the cbs chairman and ceo, les moonves. cvs stocks dropped about 6% almost immediately as a result. we welcome our bloomberg opinion correspondent to talk about that. they have scheduled a meeting today. >> yes, the meeting was scheduled in advance of the release of the quarterly results. this meeting takes on significantly more importance. we had reports of a that weakened the cbs will look at forming a special committee in order to investigate the allegations against as ceo, to decide on a course of action forward. my problem with that is, how do you possibly form a special committee of independent investors? this is happening at a time of significant drama for cbs. we have some directors aligning andselves with the ceo,

others are trying to get in the middle of what could be a merger between cbs and viacom. so who is really independent? david: part of the relegation is that most of the boat members are actually beholden less -- the board members. all of them said -- allegations are to be taken seriously, we have a committee to investigate claims that fire late the company's clear policy, in that regard. so the board is trying to send a message that they take it seriously. >> they really aren't, though. they say that even though it is legal action and they continue to support current management -- it is a weird statement where they are backing him in one respect, but also calling for an investigation. which goes to my point, how independent are these board directors? a lot of them are conflicted and tied up in this legislative against sharon redstone.

alix: it also brings to me, what -- why isn't somebody already primed and ready to take over. yes, who should the succession go to. sharon redstone one of the head of viacom to be next in line, he wanted somebody else. to stephey asked les aside, he would be the one ahead. >> it seems that there was a lot of management involved in this. so we are looking for something that is more significant change. thank you very much for joining us. got a perl or earnings are on deck. it will break down the numbers. this is bloomberg. ♪ his is bloomberg. ♪

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alix: this is "bloomberg daybreak." i am alix steel. closing are still up at at a two-week low last week,

leapt lower by facebook and twitter. s&p features nearly flat. asset classes singing a selloff across the bond market. the underperformer in europe is the u.k. in the currency market, it is a probably weaker dollar story with the exception of dollar yen , pushing its way to the upside. all speculation depends on the doj, what they do with their yield curve control policy at the meeting. new york crude getting a big boost, up by over 2% after trading around that 70 level. a lot of earnings reporting this week. caterpillar is the latest david: it appears that beat expectations on revenues and earnings per share. a little beach. earnings per share, it was two dollars and seven cents as opposed to $2.73 as the estimate -- it was $2.93.

about theit is also earnings call and what they have to say. here, karen ubelhart is bloomberg intelligence senior machinery analyst. and upllar has been up appeared looks like they beat again on earnings per share. karen: i do not think people we said -- will be surprised that they beat. they have material costs down. alix: earnings on the high end. a pretty substantial raise for them. over 25%,umes are up and they are across every region line.very they have cost problems. still is up. they have the tariff issues, and there is china. the cost issue is if

there is a lag with the tariffs. could this be a second half issue as opposed to 2019? karen: it will start showing up probably at the end of the third quarter, fourth quarter and people will see cost issues. material costs up a lot. that is where the pressure will be the most for them. that the fears are that there will be a broad global war. there is equipment they make in china, so it is a domestic business for them. from what happens with tariffs, there is uncertainty, so can that cause companies to put off some of the big investments they would otherwise make with equipment? karen: i think there is a risk of that, but you are not seeing it in the numbers. the commodity prices are strong. there is a replacement argument, particularly on the mining side. there were four down years for mining equipment, so there is

some catch up to be had. alix: on an idiosyncratic basis, will we be able to determine the winners and losers in the industrials? the first half, everything gets hit, and you saw that in the numbers. i think there will be some differentiation. the conglomerates and multi-industrials, probably less impact. people are looking at the real steel-heavy equipment type companies. periodthey had a long that was dark for caterpillar. what are they doing to position themselves to take advantage of the uptick? issuesd to take drastic on cost cutting. karen: the incremental leverage they are seeing is much higher than historical because of all the cost cuts. there are some things they cannot do much about, like steel

prices. alix: stock up over 2%. karen ubelhart, great to see you. caterpillar feeding on earnings and revenue. atl-year forecast coming in $2.97 for the second quarter. willw of s&p 500 companies report earnings this week. there was a, and call over the weekend saying facebook's plunge last week was a sign of a strengthening market. i want to ask our guests, do you agree? >> i am not sure i would call it market.g i would say, is this a sector rotation or just a catch-up of the market leaders? you have to seek new leadership, back. these stocks are priced for

growth kind of at any cost. they were looking at the growth and saying we will pay anything for that would with facebook, we saw a change in the profile. suddenly, the math starts to change. we will see what happens, but i think you will see sector rotation. david: as an investor, there is positioning that gets retrenched and it is time to change, as opposed to larger macro factors, such as tightening or a backing off of easing, such as potential trade risks or global growth risks. >> i do the micro bids. it is clear that late cycle, in and the especially, equity market generally are generously valued in the u.s. as for long values, high-tech stocks, including the faangs, if any correction is taking place,

that is where you like to see it first. cycle,ith of the late you then bring in the macro and the trade uncertainty. a person recently imposed tariffs are expected to impact material costs in the second half of the year. they expect some supply chain onllenges and pressure freight costs, as well. how do you factor in the macro when you look at your call on global growth? effect onthe actual the prices of whatever tariffs you have seen. the demand effects. then there is uncertainty surrounding what else can happen and impact on expenditures. that is where the prediction becomes informed guesswork. both have to be negatives, that is clear. a lot will not see 3% growth over the next five years.

alix: some say they will try to offset those index or midyear price increases. what industries are companies can't pass on and have pricing power and what do not? to be the differentiating factor in the back half? the things is, is your brain strong? people, they will not want to switch out. in some cases, you will be up to raise prices to it some cases you can appear this is where inflation questions will come in. it will start looking like higher prices across the board where it is not transiting into higher wages necessarily because that is not but this is about. things get tricky from a u.s. growth perspective, and you do not know if you'll be able to pass these prices on or the benefits down the chain.

of whate have a sense could happen if there are general could worsen the negative effects. have we properly thought about what happens of those go away? there is a supporter of president trump who admonished over theof protections weekend, saying the urge to protect herself from change, the protectionist mindset has destroyed countless businesses. republicans have taken notice. we see the backdrop in europe. there is nafta. do escape trade laws or even serious trade conflict and stick to the occasional skirmish, it would be good news domestically and globally for those economies. 3% for the next five years, that would help. alix: based on that, how do you put together a portfolio?

you look for places where you see pockets of growth anyway, places that are domestically inflated to the moment. i am thinking mid-cap and some of the larger caps. metal lindner company dert will be -- metal ben company that will be looking at the prices. you have to look to places are that uncertainty will not be the biggest thing to worry about. it is also part of the macro picture. if things slow down enough, everyone will get hurt. domestically, the energy energy -- energy industry is still doing well. oil prices are still high-powered you can see a pathway and a short. we do not have a huge long-term vision right now because of uncertainty. agree, what happens with the u.s. and eu, and then markets were up the next day across the board because it was a great

relief. david: how much of this is real and for the metals and how much is just anticipation? are we seeing a decline in global trade at this point? >> not yet. david: so it has not shown up and fundamentals. says far as data, i would no trade woes yet. david: it had slowed down to pick back up again. the was a spectacular series of recent years were growth fell below gdp growth. growth, butbout gdp not back to the heyday. conversation we had earlier, we talked about growth in the next couple quarters but no way to sustain it. and you can look at earnings estimates for 2018 and on the revenue side, as well. when do you need to start rotating into defensive names?

i think people are going to start looking at what those valuations are. i think a lot of the growth this year was from tax reform. it did not start until the first quarter really. i think some of the earnings growth was a one-time thing. i think people will start looking at a lot of those valuations on the defensive names, and they have gotten cheaper. defense has gotten cheaper over the last couple quarters. we are seeing some of the consumer staples come down, too. that you look and go, wow, they have come down a lot, but they are still not cheap. it is not as if these have become so inexpensive that you think i can buy these here. but they have the dividend yields, and if people are worried about growth my think they will look for that alix: willem buiter of citigroup and sarah hunt of alpine woods, thank you. david: emma chandra has first

word news. emma: president trump is raising the chance of the government shut down, saying he's going to shut down the government if congress does not give him what he wants on immigration, including money to build a wall on the border with mexico. a shutdown could take place a little more than a month before midterm elections. and charles koch says president trump's tariffs could put the u.s. economy at risk for recession. he runs a house of policy and political network. he told sources that every nation that did this to not wars.there is a chance that theresa may could get a post-brexit trade to from outside the u.k. italy's far right dividing minister says his government would u.k. in trade talks. he accused the european union of try to swindle sources out of the decision to leave the eu. global news 24 hours a day on

air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am emma chandra. this is bloomberg. alix: coming up, nintendo has a new villain. we discussed the $400 million short against the japanese game maker. , six degreesis guy of separation, only two degrees of separation. i have not seen him in a long time. this is bloomberg. ♪

emma: this is bloomberg jaybird. i am emma chandra appeared coming up, a bloomberg exclusive interview with the galaxy digital ceo. -- this is bloomberg daybreak.

alix: we cover three things wall street is buzzing about. the automated feature, a swedish bank cuts its staff and invests in robots. and nintendo's new villain, a massive short back against the japanese game maker. and one cbs shareholder holds almost all the voting rights, balance of power. david: we welcome lisa abramowicz. talk about this swedish bank story. they are the only swedish bank to really reduce their stuff significantly. here are the only global systemically important bank in the nordic region. costs to jump 11% in the second court or from a year earlier. staff fill it percent. they are making a dent. is,big question people have how, where are they investing,

and are they adding staff in the automation units? how are they identifying the areas that can be automated? can you automate all trading? where do you actually put those computers? index ceo said we will have half as many people working 10 years from now. dealing with a bank anager recently, and he said couple years ago i managed 30 people at this local branch and now i managed hp at he thinks it will go to three over the next few years. david: you cannot do everything with a robot. a lot of the big banks say that is where we want to go. alix: it is a competitive business. lisa: a lot of executives are saying, look, we're going to produce these tasks people do not enjoy doing to give people time to interact, to help alix with her grandmother's estate.

but how do you do that quickly enough to adapt to the modernization of all industry? alix: four hours. was -- had a trader that left and formed own form, melvin capital management, $7 billion, and has a massive short position and nintendo, a $400 million short. i know him from college, by the way. he dated my best friend. [laughs] i have not seen him in a million years, but it is so funny when i see his name in the news related to hedge funds. lisa: nintendo's switch became one of the vessel and devices in the company's history. it is doing well, yet its shares are down more than 8%.

people are scratching their heads with the short position, wonder, making people what does gabriel plotkin know that we don't? that the gabe know rest of wall street does not? something? he know it is a hedge somewhere? lisa: a lot of equity funds are doing fundamental research, and they do intensive on the ground research to try to understand the dynamics, talking to people around the company. not insider trading. cohen being convicted in every situation he was accused of. there is a question, does he know something or have a sign of some slowdown that other people don't?

that is what people are responding to. that is being done in a way that is not been done before, creating value. and cbs, allegations appeared in "the new yorker" on friday, and we do not know if they are truer not, but they are against les moonves, the ceo. the question i have is, who is running the place? normally you think the shareholders would step in and take control, but there really is one shareholder that has like 80%. lisa: meanwhile, the board is half shari redstone supporters and half les moonves supporters. shari redstone is in a much better position. the futures are up about 4.6% for viacom. david: look at the disparities. four shareholders, 80% for the top, .8% for the four.

there is a different governance issued here. they almost structure the company to be immune from normal pressures. alix: and when you have ceo and chairman in the same role, the qb pressure to have a vote to break up that role to be able to have oversight. if you have that kind of disallocation, that raises big issues. redstonehough shari has no love for les moonves and probably would be happy to see him leave, but there is a bigger question here. a lot of people accuse cbs of turning a blind eye to these issues if this is all true. they want to look at how much the governing board and shareholders are willing to make a change. shari redstone may not be the person because she has been a major shareholder for a long time. david: cbs news are already under investigation by an outside law firm. alix: where were shareholders?

david: how many times have we asked that question? alix: a lot. david: many thanks to lisa abramowicz. secondup, caterpillar quarter earnings beating estimates. alix: and check out tv and watch as online. ask us a question. this is bloomberg. ♪

david: caterpillar announced second-quarter earnings, and it eat expectations on earnings and revenue. shares rising in premarket. welcome back brooks sutherland. she is from bloomberg opinion. was it just last quarter that we had that high watermark? sounds like it was not right. brooke: they blew past that number in the second quarter and percent higher profit per share than in the first quarter.

they raised their guidance again, at which i cannot know the people were expected because caterpillar is exposed to commodity costs. i think a lot of people were expecting a dampening of enthusiasm on caterpillar's part. instead, they raised guidance to prove differs quarter was not the high water mark for the year. people ahat is giving lot of optimism. they should see the shares up significantly. alix: and it shows what the impact will be in the back half of the year, so they were going to raise the prices. that was a surprising statement. brooke: there on the high end from what we have seen in industrial companies. a lot of multi-investors have said the index will be negligible for 2018 numbers. caterpillar thinks it can offset price increases and operational excellence, so continuing to cut costs. do thathey cannot

unless there's growing demand. brooke: right now, all of caterpillar's markets are growing favorably, including in china. they saw a big uptick in sales in the asia-pacific in the first quarter. i think the demand is there and they can push the the price increases. the way they are offsetting this is the higher prices. they have experience with this. at a certain point, you wonder, does this start to curtail demand? alix: great point. brick sutherland of bloomberg opinion, thank you. , troy gayeski of skybridge capital will be joining us. this is bloomberg. ♪ this isn't just any moving day.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. alix: bank of america says the facebook selloff proves the

market is seeking to shorten fang stocks. buys unlimited bonds to catch a rally in the 10 year yield. traders are betting on changes. the ble and fat are on track. deck. boe and fed are on david: welcome to bloomberg daybreak. i'm david westin alongside alix steel. alix: we have the earnings coming in really strong and the macro overhang -- you cannot price and yet. david: i have to say you don't root for companies i feel good for caterpillar because there are so many quarters where they came in short. they got beaten up for so long. alix: last quarter that i had a great quarter. sank. and the stock price let's see what happens on

the call. s&p futures off by about one point. the dow jones futures are in positive territory's. dollar yen is the interesting one to watch. the boj story headed into tonight's boj meeting. all about the yield curve control policy. well they let the backend to steep and what that means for the end. .- for the yen crude, up by 2%. story.dependent oil interesting to see their execution results. david: pretty fascinating what's going on with the u.s. and oil. alix: exxon on friday it was unbelievable to see the stock fall that much. david: time for the morning brief.

tomorrow the bank of japan announces its latest monetary policy. expecting tweaking. the federal reserve's turn. nobody expects much of it change from the fed. the bank of england is expected to raise its key rates despite uncertainties surrounding greg's it. we will get u.s. nonfarm payrolls numbers for the month of july on friday. alix: the big week for central banks kicking things off with the bank of japan. joining us is troy gayeski and stephanie flanders. her recent interview with mark carney is the cover story for bloomberg markets magazine. we will talk about some of that interview. troy, you can see what's happened to the 10 year yield over in japan. 1/10 of 1% is where it sits. as a traitor, investors, what do you need to watch for?

troy: if you see material moves higher, a basis point or two is not considered a material move in japan, perhaps we will see a steepening of the yield curve in europe and the u.s. one of the reasons we have an artificially low back and of your curves is because of central discontinued central bank intervention. , ecb isoj starts moving going to be tapering more aggressively predicting future hikes. if the fed continues on their path we could see the yield curve steep and backup. alix: it's hard if you like that is a huge move. in terms of capital flows what is the significance of a change? stephanie: the bank of japan has been the final frontier for the global bond market. that yield control policy was one of the things you thought about when you thought about what he thought about the global anchors for yields. you're in a different environment because you still

have the ecb, the bank of japan doing all that they are doing on the market pushing it down at that and. economists, he thinks this is overdone. we were expecting a tweet to this policy. we are not seeing a reason to see a change this week. they will be nervous about the yen. that is always a touch point for them david:. let's turn to bank of england. how it's referred to the wonderful interview we had with mark carney. take us into their decision process this thursday because they have a tough situation where they can't just pay attention to fundamentals of the economy. they also have brexit looming. stephanie: he's now spending half of his time on brexit. that was barely on the radar when he became governor. you can see how it has hijacked his period at the central bank. they've had communications issues. how they are tying to -- how they are trying to telegraph interest rates --

you asked about that he said i think our communications are good. stephanie: i think what the real problem for them is, they feel the potential growth rate of the economy has been affected by brexit or is likely to be affected, and they have to feed it into their expectations. even though they are not seeing it. we are looking at a materially weaker economy. alix: to that point, it looks at the rates expected from the boe the end of this year. the purple line is one hike. the yellow line would cost two hikes. you see them moving in tandem and diverging at the end of april. virtually no one expects any hikes throughout the end of the year. when we talk about central-bank

divergence versus convergence, how do you play it? is it a quantitative tightening story? troy: obviously the reverse of easing is tightening. ,ur positioning in particular one of the areas that underperformed expectations would be the banks. we own bank credit. they still benefit from a steeper curve. we are focused on the curve steepening up which should lead to better fundamentals for the banking system. that is something we are rooting for, more normalized policy, less aggressive or continued easing. david: let's talk about the united states. the secretary of treasury going on tv and saying he anticipates growth in the next five years. >> we can project a couple of years in the future. i think we are on this path for several years. i don't think this is a one or two your phenomenon.

-- forin a period of 4% five years of sustained 3% growth david:. i'm not sure a lot of people outside the white house agree. stephanie: the beginning of the year certainly the beginning of trump presidency there was a lot pooing among economists. we have seem an extraordinary growth rate for the last quarter on friday. you look at how economists have raised their forecasts as they see the boom we have had over this last year. no one is expecting that the last. people are expecting growth to get close to 3%. it is hard to see where you get -- if you look at household incomes, just not the growth to give legs to this kind of growth going forward. david: as an investor how

different would your decisions be if you thought it would be 2% versus 3% over the next four or five years? troy: we are not into high-growth exposures right now. we would have similar outcomes slightly less upside. if you look at the gdp report and you think of the forecast, having sustained 3% growth and 2% long-term trend is a different outcome than having 3% peak growth and 1% to 2% long-term trend. , it is exposure we have encouraging to see the data coming in as strong as it has. the other key point from the recent revision was how much higher the consumer savings rate came out. that has not gotten a lot of discussion. more shock absorption capacity in the economy. more room for them to spend without delivering their balance

sheet. so that was encouraging. that coupled with last week's -- shows the plus data economy has the room to continue to grow without excess inflation. stephanie: we should not over read the ride it -- the rise in the savings rate. small business owners having more wealth, not necessarily last of houses with more money to spend. growth comeat either from productivity or having more people join the workforce. neither of those things is looking strong at the moment. labor force growth will be a fraction of what it was over the last decade. how you get more stuff in an economy made is looking more challenging the next year. troy: i on hundred percent agree however it provides small businesses and households to potentially spend more without remembering.

absorption shock capacity, important for the sustainability of this expansion. whether we get four or five years of 3% growth, for the time being 3% looks like the trend. alix: stephanie flanders, great to see you. troy gayeski will be sticking with us. inc. of america says it's time to short fang stocks. this is bloomberg. ♪

emm bloomberg has learned that the board of cbsa: will discuss the future of a less moaned les m -- sd oonves of sexual harassment. a law firm to investigate the claim. harley davidson plans to build a more accessible smaller motorcycle for selling emerging markets in asia. harley plans to fund the strategy through reallocation of planned investment. u.s. areerators in the jumping into the sports betting business. sports gambling operator gbc holdings is teaming up with mgm resorts international. aegis putting up $100 million to offer sports and online betting. seasons will start taking bets and casinos in new jersey and mississippi . alix: are you a gambler?

david: i'm not a gambler. alix: texas hold 'em play with friends? david: if i go to las vegas i play craps. i had a couple of serious players teach me. it is a social game. alix: another big week for earnings, apple on tuesday and tesla on wednesday. bank of america's call over the weekend to short apple and the rest of the fang stocks. joining us now on the phone is a and troy gayeski of sky bridge capital is still with us as well. mark, do you agree with the call from bank of america? mark: i think it is hard to parlay a tough quarter out of facebook and say that apple is ready to fall. i think they will be successful dealing with those. i think the macro call for companies like apple is not to

short the stock now. a stocky one to own. -- a stock you want to own. alix: if you do have some kind of washout of rotation it could be severe. to you have to protect yourself against that? mark: this is obviously a credit sector. these have been where the majority of gains of markets of 2018 have come. one of the reasons they are crowded is they have been the leadership of the market. one of the things i've said for a long time is internet economics leads toward monopolies. we see it in content out of netflix and advertising. apple has the core of the brand for the best phone on the market, the best content.

david: apple is in some ways a more mature tech companies and other tech companies if it is indeed it's tech company. -- the facebook indicates saying it's going to keep growing at a rapid rate. is still making money, still growing. people are expecting ridiculous rates of growth. mark: i think that's a great point. facebook had expectations not the 40% growth for the core business. apple, their main business is the phone expecting nor the 40 million units this quarter. this is a seasonally weak quarter. not as frothy as the facebook or google numbers reported. i think there is a bit of growth expectations. apple's multiple is not as frothy as the other names we've talked about. .xpectations are tempered a lot of growth of some other services business what we've seen in the cloud and apple

music. that i don't think will go down. that is why apple i think is a reasonably priced stock which moves towards services. apple to get some of that benefit overtime. alix: for overall tech can you still buy it? the bloomberg and this is the forward p/e ratio of tech versus the s&p. do you buy tech? troy: if you believe the economic forecast there's no reason not to still be on tech. political risk shows up and that affects the business which is a key for facebook, it affected the business finally. not only do they have to spend more on compliance for growth is lower. you will be in for some pain. shorting fang is a recipe for

disaster if the economy grows at 3% for the next four years. -- that is aunds great way to lose money fast. clearly there's going to be problems. at some point there will be valuation compression. if you are a long-term investor there is no reason not to have a healthy allocation of tech. the volatility is going to be higher than it has been for the last several years. what hasstorically slowed tech down has not been the government. it's actually been competitors. at one point.ft do you see any -- you said that the economics really promote monopolization they could be game changers that cut into a facebook or a google. innovating is clearly

important. look at what facebook has done with instagram. instagram which is a platform they bought around their ipo and has morphed into a competitor of snapchat. they have developed a platform that has one billion users and a quarter million daily active users. if my kids are any proxy instagram stories are beating snapchat stories. that is something they have done . they have other applications that are large and those are programs that are in their infancy with video. i don't see a competitor to that on the horizon you got to be careful. in this world things can change rapidly and adaption is quick and the people who use these products are not very brand loyal. i don't see a competitor of facebook. i've not seen a lot of people of my friend group how many people decided to go off the apple platform. it very often.

i don't think people will go from apple to some other platform anytime soon. mean with that facebook's stock down 18% in the last three trading days you don't want to buy it? you want to keep selling? mark: you have an opportunity to own this 20% lower than it was a few days ago. the stock went from 100 the to 215 in the rise of the last 100 days after the first cambridge analytica scare. i think the core user on the facebook landform and the core story is intact. it will take a while for them to figure it out. it's going to cost them in earnings overtime but over the course of the next two to three years i see that core ace book and the other applications being the drivers applications overtime and you want to own the stock.

alix: caterpillar shares rising after the company beat earnings estimates in the second quarter. we will discuss next. this is bloomberg.

david: caterpillar beat on earnings and boosted its full-year forecast. -- industrialsll overall have done just ok on their beats on earnings and revenue. industrial stocks have reacted most favorably up over 2% so far. andelcome karen ubelhart troy gayeski is still with us. you had a chance to look over this. which makes you most about caterpillar? karen: pricing. they could partially are set cost. with terrorist they are only getting worse. they're doing a midyear price increase. we knew about that but it's highly unusual. they've done a good job on costs

. operating leverage was really good. volumes were great. i did not think they would raise and if they were going to raise conservatively. david: where does that pricing power come from? everywherend is up over 20%. every product line. you could say offshore oil and gas but everything else is up regionally. volume, they get so much leverage on any volume. alix: do you like industrials? troy: we don't have any industrial soldiers right now. particularly regionals and financials. regional and community bank. from an economic standpoint you look at -- it was not so long ago that people pined for inflation. big question for equities is how much multiple compression you

could have. looks to be little evidence to that. you can't read too much into one quarter for any company. it's confirmation of the economy is on a steady rate. david: karen you referred to -- what aboutto the other side of trade and what they could do to the demand side? have they given indication of how badly tariff disputes could hurt business? karen: 100 million to 200 million in the second half. impact from the tariffs. that is not that material. i think the fears were overblown. t produces in china for china. they don't bring anything in .rom china -- to the u.s. that is largely a domestic business. fearstime there are trade going to get hit. it's been getting hit since january.

alix: if you are on the call will you be asking? karen: i'm pleased by the cost. people are concerned about the second half for china. 50% but it has high visibility. go little deeper into the tariffs. our they seeing impact on that from the customer point of view? those are my concerns. alix: coming up energy earnings underway. barclays head of energy markets. this is bloomberg. ♪

alix: happy monday. it feels likealix: a summer but there are -- there's lots of news. and nasdaq up

futures in positive territory after the nasdaq hit a two-week low on friday. i'm watching dollar yen, also watching euro dollar. it european confidence slipping at a year low. we willar yen is where see the bank of japan drama percolate. it should mean a stronger yen. how much can japan take of that? the curve continuing to steep and. wednesday, and mirrored central, that is how the new shin can affect the curve. mnuchin can affect the curve. david: this week it is the independence turn. m a chandra is here with a recap. emma: big oil drag down the broader market. exxon and chevron missed estimates. 27% lower than predicted.

the stock fell about 4% at one point then recovered to close percent off.75 friday. at the end of trading exxon had lost most $10 billion in market value. exxon reported cash flow down almost 40%. all oil majors free cash flow over the past few years. exxon in yellow. it was not enough to cover its stocknds let alone buybacks. shell struggling to take advantage of the uptick in oil prices. oil majors are struggling, what about u.s. independets? ,e will hear from new field apache and eog. the permian basin was a bright spot for exxon and chevron. alix: we just heard about the big oil burning smith.

coming up it is the independent. joining us is michael cohen, also with us to a troy gayeski. permianersation for the is going to be about how regional prices are so much lower. what are you looking for? :ichael i think we will see more pain before this is all over the end of the year into the beginning of the next. a couple pipelines will be coming on over the course of 2019 that will alleviate some of that stress but overall if you oil production broadly outside of just the permian we are seeing growth in colorado, in eagle ford. we're seeing production growth upwards of one million barrels per day just from u.s. production alone. otherou look at canada,

places within non-opec supply, there's more growth coming and that is not getting into the growth we still could expect to see from other opec countries into next year. not opec supply growth is offsetting demand growth next year. alix: in terms of energy stocks, it's one of my favorites, a disparity between oil energy stocks and what's happening with actual oil prices. the you want to buy energy at wti 70? troy: most of the energy positions we've had recently, we kept those very small. there a lot of technical pressure on the stocks. furthermore that valuation gap has been excessive overtime. we get the theory to have a catch up played now on energy services. oil is trending higher. from our standpoint if you want , belong on oil.

some we could start to see activity moving away from the permian and two other regions. do you feel like that is a game changer? i feel like earning pure plays is what you wanted to do and now you have to wonder if you want more of a diversified independent instead. michael: i think that is possible. back to levels that we weren't seeing from 2014 and 2015. bok and is -- it is hard for me to give a recommendation on one particular company. the macro backdrop is going to become more diversified and the companies that have that diversified's that of assets are going to move their focus into other places while we get through this hard time in the permian. sense, whyhe broader

isn't it the case that when the oil price goes up overall the earnings to the oil companies goes up? if yields go up and the yield curve steep and's we assume banks do better. why aren't they doing better? michael: one thing i would mention, the question over longer-term. valuations look at more of a four to five year time frame. a lot of uncertainties when we look at the sustainability of demand growth, the question of whether there is going to be additional supplies from other opec countries as we get into 2025 timeframe. i think that is one thing people are looking at and give investors cause for concern. these are questions that people -- are we going to see a rapid vehicles?electric

that is something that is very much on the top of investors minds. alix: m and a. from bhp billiton. >> right down to $40 per barrel. two dollars 25 we are very happy with the deal we got away today. a huge upside potential in the numbers we laid out if investors this morning. we have a midstream business in terms of painesville. get access to permian which is a key part of this transaction. alix: i wonder if there is an m and a play. a lot of people in the industry talk about how over executived the oil industry is. investorsthing bullis -- bullish investors have been pining for for quite some time. that's been one of the sectors

the hedge fund industry is focused on least in terms of anticipatory mna. the communityin --king system there is david:david: we don't want to leave oil without talking about iran. what are we expecting in terms of the sanctions and how effective is the united states going to be in shutting down exports to our allies? michael: what's clear to me is there are a lot of different cooks in the oil price kitchen. everyone is trying to keep around.anged , the secretary is trying to just fromressure i the expectation. our expectation is we will see output down between 600,000 barrels per day. it's going to be iterative. much more severe affect in the

first round. different counterparties will walk back from it. the u.s. will likely walk back. a lot of oil to come off the market at one particular period of time. there is a focus on the physical volumes that will be taken off. i think that is not appropriate when we have oil prices moving higher, price times volume could mean we don't necessarily have to take as much iranian oil off to get a significant reduction in terms of payments of iran to those importers. alix: different from what president obama's administration -- you have to factor in how much the oil is costing. a conference for barclays over the last couple of days. what was the biggest concern? what is the thing we don't know that we should focus on? michael: how much the trade issue and the broader bilateral

relationship between the u.s. and china or the u.s. and india is going to play into this relationship or play into this importive to reduce the of iranian oil. from a letter of the law perspective it's clear this administration does not want to be perceived as being less than ther less strict prior administration but at the same time there's a whole host of other factors, including the oil price, that are playing the role this time around that were not playing the role. alix: overall when you look at the political risk have you do it? troy: you have to ask how long or how short are you. if you are exposed to the u.s. economy you are partially short. from a standpoint there's been a big driver of spend for the last several years. the u.s. economy is more neutral toil prices than 10 to 15 years

ago. there is no reason to read long oil -- no reason to be short oil to hedge a downdraft in business conditions in texas. it's more academic. back to the point you asked before, the biggest concern we've seen, the boom bust nature . we've been under investing for the last several years. without iran production taken off the table. of a price shock to the upside could constrain consumer spending which is the opposite of what people feared two years ago which is amazing when you think about how much oil is flung around. alix: great to see you. exclusive conversation with gratz.l nova this is bloomberg.

>> there was a surge of companies listed in canada and they all treated poorly. regulators got nervous and set let's make sure we know what we are seeing here.

emma: this is bloomberg daybreak. coming up in the next hour on bloomberg markets, mohamed el-erian. this is bloomberg. david: mark nova graphs is hoping to bring crypto currency to the mainstream. erik schatzker sat down with the galaxy digital ceo for an interview. erik: not quite at the finish

line but your close. what would you say are the pros and cons of using this shortcut? access capital markets couple years before you would in other places. in the u.s. you need to .5 years you need to .5 years. you could take a new company public. you get access to robust markets. in hindsight maybe you would have done things differently. and you get public. companiesre public come with a response -- come responsibilities and restrictions private companies don't have. erik: you and i were talking about this months ago and you were really excited.

it sounds to me like you might have a few regrets. mike: i would not call them regrets. just realistic of where the markets in canada are. you could've tapped the markets for tremendous capital and jay gray february. stock that trades at 2.3 times book and you can raise capital, better prices than that and timesing in assets at 8.7 . the wonderful business model. erik: what you are effectively saying is you did not time limit the market well. knowing what you know now would you do it again? mike: that's a 50-50. if i knew what i knew now and i knew the crypto markets were going to swoon as much and it was going to take so long -- erik: you knew the regulators were going to torture you. mike: i might have stayed private and gone public for

another year or so. there's an advantage now that we are public even if the stock market -- the capital markets are week now. two months from now that could have turned. a lot ofhis was companies that should not have gone public went public. garbage companies or companies that were overvalued. some were ok and others were not. i don't want to specifically pick on these guys but a lot of the mining companies were widely overvalued. erik: crypto mining stock. mike: crypto mining currencies. a couple of months pickling will move back toward 10,000, the rest of this enthusiasm i see all over the globe shows up back here you will see the capital markets pick back up. erik: bitcoin is in the $8,000 neighborhood now.

you think that is a step on the way to 10,000 or 12,000 or another fake out like the may rally? mike: i think this rally is being generated by a few things. all the enthusiasm i talk about is slowly working its way back into the market. i said that in korea we can go and i say it now. part of this is anticipation of an etf that will hopefully get approved. if that etf gets approved in the next few weeks we will go to 10,000. i don't think we go through 10,000 because there's a big ceiling. a lot of retail investors got caught buying at-bat prices last november, december. i don't think we go to 10,000 until we get custody solutions announced and implemented by trusted names. erik: what do you suspect will happen to galaxy stock when in the listing goes live? mike: if the stock goes down, by moore.

i honestly think two things. years, the, three decentralized blocked chain ecosystem is going to be you will start seeing how each of these businesses generates real revenue and will continue to build and talk about book. i think our stock will retrace as a proxy. we're the only real public company where you can get exposure to the entire

ecosystem. erik: i wonder if it's not possible that in between now and $10 millionsses -- of optics in the first quarter. with many fewer people. the number is only going up. mike: i look at elon musk as a hero. we're not that bad. east coast guys, we tried to make enough money to fund our business and i think we will. each of my business heads are focused on getting themselves profitable by first quarter. this year we knew we were going to spend money on building up in business. you don't just set up a trading desk overnight. there are hurdles to go through, licensing, hiring. we knew we would burn money for the first six months. asset management is paying for itself.

we have enough fees that come in to cover the broad cost of asset management. end of the year i'm hoping all three of the businesses are cash flow positive or break even. i fundamentally believe this is a big opportunity and we are taking a long look at it. david: people love the path to profitability. cash flow positive is one thing. -- income positive >> you have been part of companies as they build busines, goldman, fortress, one thing you have not ever done is be a ceo. how is that going? i am learning. -- mike: i am learning. know myir, i weaknesses.

when putting the team in place to try to supplement the things i'm not as good at. putting a team together is a challenge. easying businesses are not . you hit it. .t's an exciting part of it ask me that question in a year, i will to you how i'm doing as a ceo. novogratz was mike speaking with erik schatzker. moonvesuture ofes after explosive charges. this is bloomberg. ♪

cbs will beard of discussing the future of ceo les moonves after that new yorker article that posted on friday. joining us on the phone, cfr a research and entertainment analysis area what are you

looking for how you keep a buy rating on shares with all of this turmoil? >> that is a great question. we just downgraded the shares to a hold a moment ago. we are looking very closely at the history of these kinds of allegations. friday istake on perhaps this is an isolated case. reviewing the details of the allegations i think the timing inauspicious. as the board meets, at a minimum i think we see this overhand continuing to cloud. we've seen a statement from aari redstone demanding transparent investigation. will bethink investors increasingly concerned and this

is going to constrain shares that have been trading sideways. david: i really look at the move from a buy to a hold how much a short to medium-term? let's be honest, not even les .oonves is indispensable the entire industry is going through a transition. you look at disney going to 21st century fox assets competing with the likes of amazon and netflix. how important is that longer-term? tuna: there's no question les moonves has had a stellar track record as ceo. a darling of the wall street community. the issue at hand rises above and beyond his expertise as a manager. we have seen what happened in other instances. steve wynn, who is arguably more

attached to the brand that les moonves. the sensitivity of this issue is such that the board is going to want to show the appearance of -- just to stave off prospects of extended litigation. they brought up questions that will come into play as the board decides on how to move forward. amobi, thank you very much. el-erian andhamed jonathan ferro. happy monday everybody.

inathan: from new york city, am jonathan ferro. 30 minutes until the start of trading. this is the countdown until the open.

coming up, looking ahead to a week full of central bank decisions. the administration's outlook. as policymakers are obsessed overt trade wars, caterpillar manages to boost their year's outlook. future is going nowhere ahead of a jampacked week of action in the financial markets. in the fx market, a touch of dollar weakness. treasury yields, along with core number bond markets worldwide, yields leading higher right three basis points on the u.s. 10 year. the u.s. growth rising at the fastest pace since 2014. analysts expecting the pace -- putting them at odds with the trump of ministration's outlook. >>