committee he remained stubbornly optimistic there would be an agreement for britain leaves the block in march. a divorce agreement hammered out why theresa may's government to keep theroposes u.k. close to the regulations in return for free trade and goods. the rightk it is balance between preserving our trade of the eu and the ability to strike. we think this is the best approach. there are other options being considered. mark: they were 80% of the way to a withdraw deal. urged the eu to show pragmatism in the negotiations. the german foreign ministry said

if written was led to keep the good points of membership under -- other eu states why are we members of the european union at all if an exit doesn't mean any disadvantages? at a joint news conference the gpu negotiation are said negotiations with written had reached their especially difficult final stretch. vladimir putin made concessions scaling back plans for a pension reform package that increase the retirement age for russians. in adent putin said retirement age for women will be 55sed to 60 from the current instead of 63 previously proposed. they have weighed on president putin's approval ratings which have dropped below 70% from his lowest since the 2014 annexation of crimea.

global news 24 hours a day on poweredictoc on twitter by 2700 and analysts in 120 countries. this is bloomberg. caroline: live from bloomberg world headquarters in new york, i'm caroline hyde. mins from the close of trading. s&p 500 on track for another record close. tech leading the gains today. joe: what'd you miss? caroline: holding out for the right deal. prime minister to do is trying to reach a trade a grim with the u.s. by the friday deadline but will not compromise on quality. amazon and out of that getting a big green light from morgan stanley.

their target makes it the biggest bowl on the street. argentina's currency crisis taking a turn for the worse, afterng to a record low he asked the i have to speed up payments -- asked to speed up payments. officer said to be taking a leave of absence from the electric vehicle company. he has been working at the company since may 2017. she is going to leave. she declines to comment further. the chief officer taking a leave of absence after a year at the company. >> tesla has been known for turnover. that she woulda- taking a leave of absence. >> and the state of play. elon musk comes under more pressure. >> many are calling for elon musk himself to take a leave of

absence himself. with or without you. that was the message to canada that the nafta deadline was not negotiate over -- negotiable. justin trudeau said there was a possibility of a deal by friday but insisted as he has throughout the negotiations he would hold out for the right deal for canada. shawn joins us from washington with the latest. can canada get a deal the liberals will not look like they have been steamrolled by the u.s.? >> that is the game. everyone is looking at constituencies. it is a great big game of chicken between the canadians and donald trump. donald trump wants to look strong malecki uses leverage that his aggressive trade policy has forced canada into a deal and justin trudeau wants to make sure like he doesn't look like

he has been steamrolled into a deal. there is a lot of noise around these negotiations but the sense you get here in washington is optimism. the canadian foreign minister is going in later today to see her american counterpart. bob light heiser. they are going to do high-level negotiations. they work through the night. racing towards this friday deadline because we have the labor day holiday coming up and because donald trump wants to notify congress he will be signing something in 90 days. >> what does canada have to lose? >> the u.s. is their biggest trading partner. they are the u.s.'s biggest trading partner. it is a huge relationship at stake.

everyone has it in their interest to get a deal. there are people in canada to say a collapse of nafta could trigger a recession in canada. that is never good in terms of politics. people in the u.s. saying leaving canada out of a deal would be disruptive. inada does have some allies the u.s. business community and congress. struck by the details. they are exhausting and hard to follow. i couldn't tell you all the different minutia being hashed out. most people can't. is this all about optics? it could be the exact same deal, it doesn't matter? >> if you stand back and look at the deal monday from you look at the deal that more like a tweaked version of the original

nap than a great revolution in trade. this is not going to result in a flood of jobs back to america. you would fear that is the case from the president but a lot of economists say this is a tweak at the margins in a lot of cases. on.auto industry and so is this going to reduce the trade deficit, probably not. that is going to be a reality for many years to come. donald trump wants to sell a win on trade ahead of the midterm elections and he's under pressure from his party to prove this new aggressive policy is it just about slapping tariffs on people generating real trade deals and change. joe: there is no real momentum happening right now in u.s. china trade talks.

the president is pouring cold water on that. the rhetoric aside, does the seeming conclusion of the net talks suggest people should have optimism the president would maintain the existing relationship with modest tweaks, or is there something fundamentally different about the goals when it comes to trading with china that will make it harder to secure a deal? >> there is something fundamentally different about the china relationship. in washington there is a bipartisan consensus china is an existential economic threat to the u.s.. you don't get anywhere here in washington by being a friend of china nowadays it's teams. donald trump knows that. ,n terms of bob light heiser this is a man, the u.s. trade representative who has spent a

long time preparing for a fight with china. this is the fight he wants to have i think. , ata is the opening rounds practice that. beyond china if you are in europe, sitting elsewhere in , to and japan, the message read the tea leaves, the sense that you would take away from this is donald trump is a man who was ready to deal and negotiate for us. we have seen a lot of his extreme positions, him actually not back down from per se but be willing to find a compromise on. that is encouraging to anyone who wants to talk trade with donald trump. lisa: thank you for joining us. coming up, u.s. stocks keep

climbing. healthy rally or dangerous?

joe: stocks are nearing overbought territory. strategists are unfazed and boosting year-end estimates. let's bring in look. you wrote about the market meltdown. up.elt we saw a series of charts that shows the exuberance in markets. what are we looking at? isolatee to try and

where the fear is in markets. there has been some odd things happening. that hasm correlation broken down. there is at the broad level. the yellow line is below the one your average. for teched volatility heavyweights is not the premium in terms of implied volatility. people are piling back. rotation, that stops. >> why is this a bad or good indication? why do we care? weight is not going up.

it is an index of performance. it shows the correlation between the two. it is positive. they are both going up. want to plays catch-up they might have to boost their exposure to risk assets. ,ust as we see the sell side hedge funds have to play catch-up. i'm going to bring my own chart to the table. i saw we were talking about nearing overbought. that signals we are in the overbought territory. the cell signal doesn't come until we hit the red line.

what we saw in january, we solve this overbought signal. we did see a correction. is it all about that? there has been a lot of pent-up time to wait before he could explode. signal get the risk off once we go back below. there could be a lot of pent-up sidelines the underexposed to risks. strength or the s&p 500 versus the nasdaq 100. they look pretty similar. what is the story? >> it is just what we went

through. it has been so long since we have the facts that we have not had much with the fundamental back drop. this is all about people willing to buy equities and file into the growth rate. >> january felt like we are breaking into that. i think this is very telling. this could be just the start of that big leadership that we had in january. 35%.e day it is

caroline: what'd you miss? great terms for tech. falling by the most in six analysts noted its investment proposition weakening for some years and dropped to the lowest on the street. not afraid to stick their neck out. the highest price target, the lowest price target for indo tax. >> it is a retailer going from great to good. a company on the hot road streak . they have 8000 stores globally. 4000 stores in europe. emerging markets.

it gets harder and harder to eke out growth. the other thing that is interesting is these guys, for so long we're leaving the more specialty apparel's in the dust because they are manufacturing with so much faster. >> i have to think, well with the shares of the parent company, there were other retail companies that were suffering. coal, they are down significantly today. how much are we seeing the shakeout where the weaker hands are having to face reality after a long battle with amazon? shakeout.seeing a for each other, dick's sporting

, one of the things that weighed on them was under armour sales. hot.s, blistering losing to his fellow old-school players. we see that stronger old-school change. mentioned after having a long time to go through this phase by themselves, they are seeing competition. who is doing that well? ball,ou look at who is a who should we be watching? >> urban outfitters, when they

reported earnings it was their fastest inventory ever. it was their lowest markdown rate ever. their speed to market is getting better. they are having fashionable stuff on the floor. , macy's sawbrands the retail up in the first half of the year. we can credit that to them doing more full price selling than having fashionable stuff that is more competitive. caroline: not sure how much you look at how the share prices ?re, are there any looking going to have more of a morgan stanley hit? >> lululemon will be interesting.

their shares have been on a tear. they have been strong performances. we dealt know what his strategy is going to be. there is a question. ? lisa: interesting to see lululemon shares up 76% so far this year. up nearly 30%. this is bloomberg.

lisa: time for the bloomberg business flash. the biggest stories in the news right now. the justice department is charged and analyst in insider trading. prosecutors gave -- say he gave tips to a linebacker to play for the philadelphia eagles. he made a million dollars in

profits and analyst got tickets to eagles games. he now plays for cleveland. moody's has dropped its rating of inaugural bond deal. to keepot have enough grading its worthiness. that is your bloomberg business flash update. people mocks their community adjusted, moody's did not get paid to raise those bonds. that could be one of the reasons why. caroline: we thank you. breaking news, shakeup at tesla. the chief people officer is on a leave of absence. for more, david welch from detroit. how much should we read into

this? many were calling for the chief executive to take a leave of absence and instead it is the hr function. elon may not be related to and the times. we are looking at more turnover. they lost their head of autopilot, which was fairly a time a mess. they lost their head of engineering. he was gone after that. you have seen this with tesla for a while. in addition to the fact it is just not good to keep losing top executives, the short-sellers probably the most high

profile short-sellers in tesla. so, it is never a good sign. we are seeing more of it. joe: what does this mean, leave of absence? others have taken a leave of absence. they are never seen back at the company. what does that mean in terms of a departure? >> some executives have gone back. back, tesla always says they need to recharge. in the face of doug field. this person is going to leave the company for good. we have high turnover at tesla. it is basically a 10-year-old company, still like being

assertive. caroline: we will move on and check out the market close up next. here are the major averages. this is bloomberg.

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record close. overboard territory? joe: welcome to the closing bell coverage everyday 4 p.m. to 5 p.m. eastern. >> let's begin with the market minutes. check out the green across your screen. the s&p 500 climbed up 6/10 of 1%. the highest target on the street when it comes to alphabet and amazon. text leads the charge again. lisa: amazon, it is doing really well. it hit a new record of nearly 3%. morgan stanley so growth remains strong -- sales growth remains a strong. pour out compared to amazon.

exporting goods is not doing so hot after missing expectations for sales. they blamed under armour and guns. we will see. american eagle down a significant amount 7% -- amount, 7%. joe: let's take a look at the government bond market. not much going on today. we got some good economic data, but rotations tend not to be big market movers so we did not get too much action. 2.68 -- twoup to year yield is up to 2.68 and 10-year gilts unchanged. -- 10 year yield is unchanged. caroline: the pound missed getmism that maybe we might -- meanwhile, the canadian dollar we sought holding off its games in the last couple of days.

i hope they get a decent deal with the u.s. and mexico continuing this trade talk. the lira is being punished, down 3%. this is dollar strength versus the turkish lira. this has been woeful for the emerging markets. tightening liquidity. check out what has been happening to the argentinian peso. with sunk more than 45% on the year. we down another a percentage in the want to ask hillary payments to the credit line and we talk more about it later. joe: finally, oil caning inventory by 1.7%. gold is not doing much, but palladium, which is industrials -- precious and industrial, is up 2%. caroline: for more on today's

market action, let's bring in winston, north carolina. what do you think of these highs? we are starting to exceed the technical indicators saying we are technically overboard. are we going to crunch or drift -- drift higher? george: whenever you see a breakout in the all-time highs, which we have, that will be bullish. where we said, we have given how much valuations contract versus where they were a few years ago things to strong eps growth. , there'sand of itself no reason to be ericsson u.s. stocks here. but does not mean we cannot see a small pullback. long-term, we just a new

all-time highs after a big drought which tends to be relatively positive for the market or neutral. the valuations do not look crazy. with that backdrop, it's hard to look at stocks and say this is bad. joe: george, you mentioned the tax cut, giving a boost to corporate earnings which makes valuations look more compelling, but what about the fundamental drivers of the economy? the tax cuts are permanent, so you don't get the boost every year. other fundamental growth drivers in tech to keep us at the high level or are we going to flip back to where we were? george: as far as growth goes, we had a really good quarter. q2 was the strongest growth since 2006. things are starting to look like what we would consider a leading indicator of recession. as far as the hard economic data, there is nothing to be

concerned about. indeed, accelerating wages from a very low wage growth level to something more moderate, a similar story with inflation, leverage across the economy outside of the corporate sector housing marketh, activity has paused substantially and could pick up and will pick up in our view. there is just a lot of different crosscurrents in the post crisis economy that tend to look bad at one time or another or will be used as a likely recession driver getting canceled out by all of the other good stuff. it's really hard to be bearish about the economy now. that's may change a year down the road. for more recent now -- from , there is nonow reason to think we are near-term going to see the economy collapse or be challenging for anyone. lisa: george, it is hard to see any bearishness coming for u.s.

equities, what about bonds? it has been a boring quarter for tenure treasury in particular. the smallest trading range since 1965. where'd you see this breaking out or do you in the next coming months? george: the chart of the quarterly trading is great and a good chart. the bond market right now is looking at where the fed will set the terminal rate for the cycle. do they think they can get above neutral and where is neutral itself? until we see a bond market that believes the fed will push above neutral and can push above neutral, things will be locked in a bit of a trading range. the place where this is most true is the front and end of the curve which is going to be more responsive to what the fed is likely to do than the 10 year notes would be.

if the fed says we are going to get to about 1% real rates and have a long pause or the end of a hikingif the fed says we cycly to interpret some of the things they have said recently, of course you will not push bond year yields into the three and a half percent range we have seen relatively recently. until we get clarity from the fed around how they will move and whereeutral rate exactly that rate is, and we may never get the clarity, there may be another catalyst coming along, it is hard to see bond yields moving dramatically in either direction. where we think there is more room for movement is a little bit out from the front of the fixed income curve where there are no cuts or hikes priced in the year starting when you're from today to the year ending five years from today. there's a for your chunk with the fed is not priced to move at all. in fact, about five this -- five basis points is got. giveneems unreasonable the fundamental backdrop of the economy and that is probably

where you will see more movement than long-term with the tenure or treasury curve. caroline: what does that mean for the good old yield curve? do you care about the yield curve? does the fed? george: i think the fed cares. factorsseen a number of of the tenure curve and the atlanta fed president, a note onm the san francisco fed their macro blog about the difference between the three year and the ten-month curves and what the best way to think about it in terms of recession is, so common to have been around everywhere. it's reasonable that they should. two tends is 20 basis points. that is one hike away from inversion. if you look at the three-month tenure, that is another three hikes away from inversion. how you decide which one will be your one indicator is going to depend on what timeframe you but how your model works,

the fed clearly does not want to invert the yield curve unless they feel like they have to. they don't feel like they have tonow and they are likely only inverted after two or three more hikes. the could happen as 10 year yields fall, but if there is no catalyst for that, it's likely the curve will stay close to inversion and we will read incoming data as it develops in q1 and q2 of next year. that will inform how they move around the neutral rate in 2019. joe: grow quickly back to stocks, tech is leading the way once again. amazon's can -- amazon is continuing to store -- soar. what is your take and the independence that the markets have on overall tech stocks? george: we took a look for a client today with what is driven the s&p higher year to date. the sector that includes amazon which is consumer discretionary and something like three

quarters of gains year to date, that sounds top-heavy and unusually so. uncommony, it is not to see very large stocks dropping a huge percentage of the s&p returns or market cap. there are numerous and gambles -- numerous examples rough history. it as extremely bullish or bearish in any case. we look at the rest of the market which, while they have not performed as mega stock -- mega tech stocks, things are ok. have seenike we everything get crushed and only a few stocks are rallying massively. it's a little more even than that. so it's not something to be particularly worried about. lisa: thank you so much. that was george pearkes with bespoke investment. caroline: second quarter adjusting earnings for share is higher than any of the analyst themates and we're seeing

ramp up the estimates for $.47. we're closing double on that. the revenue is coming up at more than a quarter percent growth for salesforce.com as well. subscription revenue is coming in just over $3 million. this company does not have a single cell rating on it. shares popped higher and art now trading lower -- are now trading lower. coming up, we break down how one can this company sold less than $10 million worth of goods, but it is nearing a market value of $5 billion. more on that ahead. this is bloomberg. ♪

mark: i'm mark crumpton with first word news. president trump is sounding optimistic that the u.s. and canada could reach an agreement soon to overhaul the north american free trade agreement. the president spoke to reporters a short time ago. >> he very much wants to make the deal and i think it will be very good for canada if they do. it's probably not going to be good at all if they don't. mark: the canadian prime minister said today his government try to reach an agreement this week with the u.s., but it will not sacrifice its goal of setting what he calls the right to deal. -- canadian for minister foreign minister also expressed optimism but she said there is a huge amount of work to do. one billionaire investor made his first big midterm donation to the republican national committee giving more than $100,000 to the gop last month. he has been quiet for the past year on issues relating to president trump.

he was once one of mr. trump's most vocal supporters and he was a big donor in 2016 giving $2 million to a super pac that supported the primary campaign. senator john mccain's casket now lies in state at the arizona state capitol building in phoenix. mccain represented arizona in congress and then in the u.s. senate since the early 1980's. a private ceremony and public evening viewing are being held on what would have been the senators 82nd birthday. mccain's former presidential campaign manager said the public viewing will go on as long as people are in line. thursday morning will feature perceptions from phoenix on the way to memorial service at north phoenix cap this turkish -- baptist church. senator mccain is buried sunday following a private memorial service at the u.s. naval academy in annapolis, maryland.

global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton, this is bloomberg. joe: "what'd you miss?" a summer of love for marijuana stocks. cannabis valuations are surging despite the fact many firms in question do not have much of a business yet. for more on the hot stocks, let's talk to christine oram from toronto. the latest is tell ray. names learning these new of companies. what is the deal with them and how do they have a $5 billion market cap on $10 billion worth of sales? tilray -- >>tilray was the first cannabis company to go public on an ipo on the u.s. stock exchange without first listing in canada. they are unique in that sense.

pointed out, their market cap exceeded $5 billion today on it hit $5.7 billion revenue in the second quarter that was $9.7 million. it reported loss. it shows the growing discrepancy because -- between earnings and market caps. lisa: what does this company do and what is the barrier to entry? a lot of people are wanting some way to bet on the emerging there one industry. what are they getting with tilray? kristine: they are based in british columbia and are not that different from a lot of other producers in the canadian market. the grow marijuana, will be producing for the canadian recreational market when legalization takes effect in october. they have already been for theng -- producing medical market in canada and sell into other markets like germany. very similar in a lot of

respects to a lot of other canadian producers. they are listed in the united states, and not many canadian producers are. that has opened them up to a broader investor base of americans just now starting to get interested in the space. we saw mj, the biggest u.s. listed marijuana -- sorry, etf that follows marijuana stocks. it is approaching his highest inflows since february. there is a growing interest from american investors until ray -- and tilray has tapped into that. joe: you see the etf surging and everyone is trying to get in. here's my question. there is canopy and all of these other ones, what is the competitive position? -- what makeses one better than the other and how are they seen each other in terms of who will win out? kristine: there are not huge barriers to entry but there are capital cost to developing a grow operation and a kind of asng, but canopy is emerging

the clear leader in terms of its cash pile because of the investment. they will have more than $5 billion of cash flow gives them a huge advantage compared to many other advantages -- many other competitors. up because ak was lot of annulus -- analysts were speculating that they will be the next company to attract a major investment. perhaps whoever is the next alcoholic producer or pharmaceutical company. they think tilray will attract investors from a big u.s. company and could then be and not big similar situation. lisa: it is the summer of love indeed for cannabis shares. thank you. in this weeks there's an etf for that, scarlet fu highlights this cannabis etf drawing millions in assets. ♪ >> smoke him if you got them.

the etf alternative harvest etf better known by the sticker mj to traderst etf in pot in the you -- u.s.. holdings, roughly 40 there are many people inside like the kronos group. most of the weighting comes from north america with a lot of the companies coming from canada and the u.s.. investors have a huge appetite for these assets which launched in december. havecomes at a cost, they a high expenditure ratio of 75 basis points. light ingets a green the bloomberg intelligence traffic light system because what you see is what you get. lisa: you can watch bloomberg

etf iq with scarlet each wednesday at 4 p.m. new york time and 6 p.m. in london. the next big secular boost in u.s. equities could be coming. the reason, babies. -- smarts our next charts our next. -- are next. this is bloomberg. ♪

caroline: "what'd you miss?" it is time for smart charts with abigail doolittle where he take a look at timely topics with the top technicians. abigail: thanks so much. joining me is a brokerage consultant and technician. john, what a great time for you to join. for updates in a row out of

jelly -- out of jackson last week. the secular bull market continues. talk to us about the bull market in these terms you have broken out on the charge. a lot of clients come into fidelity and say what does a new secular -- the term secular mean. the market we are talking about is generational. if we went back to the greatest generation after world war ii, they came from where they began, nesting. the next bull market that came out was from their children, the baby boomers. we get theegin that, next bull market. 1982 through 2000. today we look at the current generation, the millennials. the rise and millennials has making -- has been making this market from 2013 to present. abigail: this is such an interesting way to look at the

bull market. we have had pullback so let's look at your next chart. another amazing long-term chart here showing pullback within a bull market and how they are healthy. >> they sure are. can at the last bull market, we can see there are pullbacks along the way. i purposefully did this, not as a log chart because i do not --t this to get yeah abigail: and it sure looks like that. if they caneople pick out the crash of 87 without looking at dates. people have a hard time. we were at other pullbacks in 1991, and 98. looking back at these for pullbacks, they were opportunities. abigail: what do you think about this year's pullback? i have to say, one thing that makes me nervous when i look at a chart is the of trend thinking

about filler -- the uptrend thinking about filler. is that right there the pullback of this year? was that a buying opportunity for the long-term? john: yes. we current -- we have current fullbacks in the new bull market . i like to think of it as starting around april 6 of 2013. when we look at the whole uptrend, there is a 20% pullback in 2011. looking back, it was an opportunity no different than the opportunity of the 1980's. then there was a time correction of 2014, 15, and most of 16. thatpeople think -- forget chart study price and time and they are equal. when you see these pullbacks, you have to be aware. if you are in a secular bull market, that could spell opportunity. abigail: is that an opportunity

this year? john: anytime you are in an uptrend, pullbacks become opportunity. abigail: let's take a look at your last charge. whenever i'm in any media interviews, people like to talk about faang stocks. what i like to do here is, let's talk about what if we are not looking at anything except equal weight tech? the white line is the are whitey. ryt.s representing -- the hundredsnting of white with a small and mid-caps. abigail: john, thank you so much for joining us for smart charts. back to you. lisa: argentina's peso is tumbling for a record low. we will be talking all about that. and what is next for the nation. this is bloomberg. ♪

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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. mark: i am mark crumpton with first word news. nato said the russian navy is building up its presence in the mediterranean amid growing tensions over the war in syria. russia has provided military support for syrian government forces which are expected to mount offense it's in the northern ravens -- province. praised the work of the federal government and puerto rico following hurricane maria. his comments came after puerto rico's governor revised the death toll from the category four storm. it had been 64, it is nearly 3000 now. the outgoing u.n. human rights

chancellor, he is concerned about president's attacks on the media and journalists. he also alluded to election campaigning during the upcoming midterms here in the u.s.. horrified,s would be if werhaps not as shocked hear about the journalist beaten i an iranian. for that, the president would bear responsibility. he also expressed concerns about rising for right nationalism in europe. he said he would urge his successor, the former chilean to be outspoken when she sees rights abuses around the world. the west virginia state supreme a formeried a bid by energy boss to run for the u.s. senate based on the states "sore loser law."

he spent a year in prison for safety violations related to a 2010 explosion and a massing mind -- massing mine. workers were killed. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. caroline: breaking news now on paul manafort and the retrial. they were 10 counts he is being retried for. the u.s. attorneys have asked for more time to decide on the paul manafort retrial on 10 counts. it was last week that he was convicted of eight counts on tax and bank fraud. they discussed by the jury in alexandria, virginia, and failed to return berdych suntan of the counts -- failed to reach verdicts on 10 of the accounts.

lisa: "what'd you miss?" argentina's president is trying to calm markets. caroline: today he's asking the imf for early release of funds for the $50 billion in my financing deal. the argentine ian pazo continues it slide, falling for the eighth day in a row. formerjoined by the senior economist at the imf. you said this request is a positive element. why do we see a continued selloff in the peso? >> it is a positive development. this is the best they could hope for. to maintainted monetary stance and are asking the imf to frontload the disbursements. they have to hope for the best. confidence.t with the win the hearts and they of argentinians so

have the ongoing continuation of portfolio stocks. lisa: i'm struggling with the idea that argentina is doing everything right from a playbook engaging and reforms, raising interest rates rapidly, asking the imf or money, so what can we draw from this? that is not the case, this is the typical dynamics from policies created by the experiment that preceded the market administration of brazil. i went about -- they went about --ng a similar inflation and he took a three-year low to a compass that. argentina is trying to do that and keep growing. we have to eventually you did the recession. it will create enough slack to bring inflation up and it will be the inflation that will help

to bring the current accounts to more moderate levels. it will also be able to sort this out over the next few weeks trying to have significant hardship. joe: going back to today, it is down 8% on the currency. there was something in the announcement or was there -- what caused the market to go off here? they're trying to do everything right. alberto: it's hard to tell. it was a stark reminder of the challenges they are facing, and this was pretty significant of a bailout. after the first review, they're asking the imf to accelerate the disbursement. there are can to thicken concerns given the sizable funding needs where the imf money would not be enough amid all of those commitments. lisa: i'm struck by what you're saying, which is what they almost need another recession to work out the high inflation rate. what does that mean for the debt

they have been selling over the past year, in particular the hundred year bonds that have been plunging? alberto: it is the adjustment dynamics after an experiment. the justman means you have to get back everything that was created. the fiscal deficit was high and now we have to go through a recessionary. to rebalance the currency to bring inflation down and to adjust the current account. the have to continue to deliver on the fiscal, because if they do not, they cannot solve this. joe: does the government have the capacity to deliver on the fiscal, and is the adjustment we have seen in the currency going to bring things back? alberto: it is going to help. the currency was overvalued before and inflation is running

about 30% and will probably accelerate by the end of the year. we've seen a very large normal move. in terms of effective real terms, it has not been as significant as looking at the bilateral peso, dollar rate. sure all theake nominal gains translating into real competitive gains. they are trying their best to accelerate the peso. perhaps they wasted a little bit of time india barking of more aggressive strategies. they still remain dependent. a used to be the willingness of the markets to fund large fiscal needs. now it is on the willingness of the imf to frontload the disbursements. caroline: kindness of strangers in the market as well. how much before we look at other countries? do you think the selloff was the contagion effect as we see the

turkish lira being batted today? alberto: it's a high beta to global market sentiment. every time we are in a risk. or external backdrop facing terry -- lisa: forgive me if you answer this, is it going to default again? alberto: not necessarily. -- argentina is very liquid. it might involve into a situation like that. there is no need for argentina to fall to regain solvency. given the dynamic, if they are not able to roll over -- caroline: they've got a huge credit line. lisa: but it has not been enough. all of the money has been cut off for so long. it is an interesting dynamic.

alberto: if you don't believe it will work, it won't work. joe: you mentioned trying to change the behavior of the domestic market so that people are not inclined to hold their money in dollars to do dollar rise the economy. when you talk about confidence, how much is it about external investors and how much about the domestic players and is there a different playbook in terms of getting confidence of one person over the other? alberto: it's a combination of both. when the foreign investors look at the anxiety of the local investors, that makes them more anxious as well. it's important that the locals trust the outcome of the policies, and that the ongoing dollarization of stocks, if that does not stop, there is not supply into the economy to change the currency. alberto, of goldman sachs, we are not letting you go. we will get more on your thoughts on the challenges and

potentially opportunities in latin america. joe: and get involved in the conversation. send me a tweet. here.dle is what you want to talk about? let me know. this is bloomberg. ♪

joe: we're back with alberto romolo's, the head of economic research at goldman sachs and a former senior economist at the imf. let's talk about brazil. another country seeing their currency get slammed. lots of anxiety in the election in about six weeks. what is it that has investors so spooked? is it fear of policy backsliding? argentina, brazil

needs to ask serious questions on whether the next president can deliver the measures needed. they have a small -- a full spectrum of candidates, but some may be politically incapable or limited to do so and so might have the wrong diagnostic about what is needed. that is the anxiety of the markets. will the next president be able to accelerate the fiscal adjustment. degree,: to a certain the law has 90% of the payouts mandated. you have to unwind the law. alberto: that's right. whoever gets elected will face a number of questions. it is not for the lack of policymakers. we had a previous one very fiscal area and little has been done. one that president and

is committed to do it in politically cable -- capable. joe: this gets to a question i always have when i cure about the need for fiscal reforms. how much is it about the pure math, closing some gap between expenditure and revenue, and how much is fiscal reform about a demonstration of political capacity? if you could demonstrate the political capacity, that make -- might be more than the math on what the investors want to see. alberto: absolutely. if people question your capacity to do it, interest rates will be distressed and aggravate dynamics. in some extent, brazil is worse than argentina but they have the unique advantage of having a good market where they can fund their large fiscal needs. that leaves them a little more leeway or time to solve the problem.

they're not as dependent on the kindness of strangers as the argentines are. when you look at the debt dynamics and debt to gdp, the primary deficit of about -2% of gdp, knowing you need to get to a surplus of about 3%, we talking about the fiscal adjustment of at least five percentage points of gdp. even if brazil were to be switzerland, it would be difficult. lisa: you talk about the kindness of strangers, and over the past two years, it has been a lot of kindness into emerging-market debt funds. that has slowed argentina's of the world. what has happened if the turkish situation and argentinian situation hits a return and people return -- withdrawing mass? what does that due to these latin america economies despite the progress? alberto: it makes things a lot more difficult. we're not passive passengers in that situation.

the classic lever to deal with that is that if you have a shock to a capital account, you are at risk of seeing capital outflows. you have to tighten monetary policy. tightening monetary policy is not good for job creation or growth. caroline: the outperform or is the mexican peso. is the only emerging-market in the green. what are you seeing in terms of the bilateral deal and the structure of the u.s.? alberto: starting with the fundamentals of mexico, they are a lot stronger than the fundamentals of argentina and brazil. their fiscal stance is strong and gdp is much lower. the overall macro is relatively strong and balanced. there are a number of domestic and other uncertainties. side, the policy

administration, and on the outside, nafta. initial -- we're not seen the fine print. canada is still joining the talk as we talk -- as we speak. there's a lot of things that need to be thought out. joe: it sounds like president trump is into the incoming president and has praised him on multiple times. could this be an upside surprise or risk to the mexican economy as they find it on the ground? alberto: if you are on good terms with your dominant partner or neighbor, it is all good. it's definitely more of a fluid relationship and to mexico's advantage. lisa: where do you think investors should be looking for the next positive surprise apart from mexico? alberto: mexico is a big one. investors have shown a lot of

love towards mexico for the years. there a lot of money parked in the local monarchs -- markets. with nothing ups and downs like brazil and argentina. it is to be seen where policies if there is discipline under the new administration. the outlook for nafta, our resolve in a from the way, yes. caroline: all right, thank you alberto ramos head of latin america research in goldman sachs.

coming up, a read on the regional microclimate and we hear from the regional a citizens climate as he talks about the shift to digital banking. that is next. this is bloomberg. ♪

caroline: "what'd you miss?" u.s. bank lending is climbing to a record high even as the spread between the two in 10 year treasury notes have narrowed. maybe adicator, recession is imminent? meanscussed what this for the state of lending and regional banks. >> the back end of the curve is probably suppressed of it from where it should be naturally. there is a number of factors, there are temporal issues around tensions in emerging markets, trade tariffs tensions, u.s. political uncertainty that i think has the 10 year over bids. you have to look at where the long demand is in the economy,

and if it is strong, you have to be there to support your customers. we are seeing the demand on the commercial and industrial side, the demand in commercial real estate, and pockets and consumer where we see nice activity. >> does it limit your ability to make money because you cannot charge as much interest? >> the good news is that most banks are acid sensitive and more exposed to the short end of the curve. if short rates go up, our loans are repricing faster than deposits still. the rises benefits oh -- beneficial. >> but for how long? jpmorgan says the competition is going to start pushing up positive data. >> that is something to watch. >> are you noticing that? >> certainly. the side of the market around commercial depositors or more affluent depositors, they want to participate as rates are going up. if the loan costs are going up,

they want to get more on their deposits. the mass customer, the folks with lower balances than the branches, are not as rate sensitive and banks are holding the line there. we can still see that interest market expand. >> when it comes to the nontraditional lenders, like goldman sachs, they have such low rates because they can. how does that not hurt you? >> they're playing in particular niches the market place. if you look at where they are raising the positives, they do not have brick-and-mortar's and are going through the digital channels. that is a more expensive channel to raise funds. there's a limit as to how competitive they can be. the broader places where we have relationships, we focus on niches like refinance loans so students are carrying high level of debt. once someone is out of school for five or six years, we can

refinance at loan and say the money, and bring a millennial customer to the bank. someone -- sofi is someone we provide liquidity to and we have built up that market. you have to choose your spots. if you go into areas like personal unsecured like markets is playing, it is more competitive. if you are very focused, you can find attractive places to lend money with good returns. >> you have a brick-and-mortar operation, 1200 branches, and at the same time you are moving into the online, mobile banking. they gives you an advantage to compete world and nationwide overnight. it also brings a lot of competitors against you. when it comes to picking spots, what is your spot? how do you avoid just competing on price? arehe business models moving toward digital, so you have have great on my capabilities and mobile capabilities.

that has to be seamlessly integrated with your physical branches. i think we are doing a good job at that. customers have great experiences with other industries. it is simple, easy-to-use, intuitive. those other companies use data really well. we have to be as good at that as other industries, and i think banks have been playing catch-up. when we look at the digital channels, we've introduced great new products. we have a robo advisory project called specify, we have a small business origination platform that we do over this in tech called foundation -- fundation. we are embracing the new digital approaches. saun that was bruce van speaking with david westin earlier today. coming up, what you need to know for tomorrow's trading day. -- joe: coming up, what you need to know for tomorrow's trading day.

caroline: "what'd you miss?" markets reckon i once again --

record high want again. the numbers for consumer confidence in the eurozone come out tomorrow. joe: i will be watching for more economic data at 8:30 eastern. lisa: don't miss the numbers for u.s. personal income and outlays coming out at 8:30 a.m. eastern as well. very interesting to see how much people are making. that's all for "what'd you miss?" caroline: "bloomberg technology" is up next. joe: have a great evening. this is bloomberg. ♪

emily: i'm emily chang in san francisco. and this is "bloomberg technology." antisocial -- president trump's campaign on what he calls unfair searches on social media. plus, elon musk returns to twitter, yet again fanning the flames. why the tesla ceo can't quit social media, despite warnings from investors. and stewart butterfieldal