new tariffscks to on chinese imports. cities cut back on risk. citigroup warning arise in wages could trigger a selloff. we are working on it. congress they're working on fake news, investors punish the stock. david: welcome to "bloomberg daybreak." there is a lot of turmoil down there. alix: the question is who is in charge of the white house. who is making the decisions? the op-ed leaves that in question. david: the woodward book one day , and this anonymous op-ed the next day. president trump is not pleased. alix: this is not going anywhere good. markets nearing a bear market. from europe and the

u.s. with futures flat. euro-dollar flat as well. the treasury market goes nowhere. crude goes nowhere. nowhere might be the theme today. time now for the bloomberg first take. we are joined by our guests. you can see, emerging market equities falling into a bear market. this is not the first emerging markets selloff you have lived through. >> really? alix: is this a legit change, or are we getting to a bottom? for 10 years, and now the fed is changing policy. taking away liquidity is a major change for markets. that is weighing on foreign bonds and currencies. these foreign governments have debt in u.s. dollars. it is straining their budgets. david: it doesn't look like it

will end any time soon. it has been the longest since 2011. >> absolutely. it is always a different country and currency. now you are seeing pressure in philippine stocks. earlier this week was the rand. spread seeing this through different countries, in some cases regardless of the fundamentals. one thing i did want to point out, my colleague had a column noting it depends on your definition of contagion. is stocks down across markets regardless of fundamentals, that is one thing come up the we are not seeing the thing which will trigger a global financial crisis. david: does the fed back off? >> no, they can't, unless the domestic data changes the picture, or the international data becomes systemic. the fed can't back off. david: let's turn to domestic

data. lis not happening and i isolation. the yellow line is now. the last time this much this long was the tech bubble. how much is this driving the em problem? >> that is part of it. feeling that what will happen in emerging markets will not affect the u.s. equity markets. people are too optimistic about this, and that leaves you open to being caught flat-footed. alix: part of that is sentiment, but also overall inflation in the u.s.. the potential for faster wage 5% pullback, geopolitics, trade sanctions, international weakness is always interesting to pinpoint the

aka wage data.te wag we will have comment overt tariffs for china today. or 25%, we know he will do something. he is waiting for the news to hit his desk and will pull the trigger. that is the inflation we need to worry about. wages may follow if there is peopleof a ramp for wanting to make up for the effects of inflation, but i don't think we see inflation until we get it from a supply side. david: if i am invested in em and job numbers come out tomorrow, what do i want to see? what is a good answer for me? >> you want see something that backcause the fed to pull

and slow its pace of raising interest rates. whether you will see that is an open question. manufacturingism out this week, that was a big surprise given concerns about the trade tensions. seeing that rise makes you question whether there might the more gains for certain companies in the s&p 500. twitter.e company is we had jack dorsey with sheryl as they from facebook testified on capitol hill. this is part of what jack dorsey had to say. it was not very encouraging to the senators. >> recently we failed our impartiality. i agree. it was unacceptable. we found ourselves unequipped for the immensity of the problems. inhave not done a good job

the past. our verification program is not where we would like it to be. david: the market did not like what mr. dorsey had to say. twitter really got hit a lot worse. >> what is fascinating is jack dorsey got praise by his candor. they were impressed how he did not see like a ceo. he was more franken forthcoming. that is not what investors want to see. to see twitter continue revenue gains. alix: when we are dealing with a fragile now global growth is hurt, but tech is doing well. if that deteriorates, we are in for a different world. >> i am not sure how far tech will deteriorate. it is so embedded in everything we do, despite the pullbacks.

investors will look at what he said as a progressive action to get things done down the line. there aren't that many alternatives. alix: also true. you saw what happened to facebook when they said we are taking action. stock got stressed as well. it is a no-win, no wind right now. >> i think they were not clear about the extent of the changes that would have to be made to their business model. having these capitol hill hearings where you have to answer these questions and come out with hard strategies to address these issues could be beneficial as investors get a handle on what these companies will look like. david: they want a clear, simple answer, and there was none yesterday, neither sheryl sandberg and jack dorsey come in the market did not like it. >> those of the questions they

have the hardest time with, how do these work, who is a bot or not. they don't have a great way of explaining that. that is what everybody is looking for. alix: we have the midterms as well, so a prevalent issue at the end of the day. will beidterm elections a statement on the trump presidency. a staunch republican and one trump as your next president or to continue, you will give him the congress to support him. if you are not crazy about what he has been doing, you will take the congressional vote away from him. david: that is assuming we trust the midterms. we have u.s. intelligence officials saying the red lights are flashing on russian interference in this election. those hearings yesterday, you did not come away with a sense that they have this thing. alix: if you're going to be a russian intelligence officer

election inay an the u.s., you will not be a dumb bot. >> i'm going to use that. david: in those hearings, you did not have any sense they can currently the american people the russians will not tamper with these elections. how do we make sure that they are honest? >> you have an awkward relationship between the tech companies working with the senators and house of representatives trying to crack down on twitter and facebook in other respects. we had this idea of shadow banning, is twitter trying to silence conservative voices? you have the side elements making this an awkward relationship as they will try to work together and protect the integrity of our elections. alix: so diplomatic. thank you so much. check out all the charts we use in more on gtv .

you can browse features, save charts. gtv throughout the program. more on emerging market ane. the risks of contagion and whether might be buying opportunities. this is bloomberg. ♪ ♪

>> this is bloomberg. ♪ currencies other falling for the second time in less than 24 hours. bitcoin down as much as 10% in hong kong.

broader concern adoption of digital assets will take longer than expected. facebook and twitter under pressure to make the rules of content clear. jack dorsey and sheryl sandberg testified before a house committee. continue to get better at explaining how their systems work. is talking about life after alibaba. he spoke to bloomberg in an exclusive interview at his philanthropy conference. >> i don't call myself successful businesspeople, but i am successful on life. i have gone through tough decisions, tough days. these can be very good for many young people. i am not going to teach math, english, business in the schools , but i'm going to teach young

people how to face challenges. >> that was jack ma. that was the bloomberg business flash. alix: i want to be good at life. right? emerging-market stocks on the cusp of a bear market for the second day. you can see few signs of relief for that selloff. it is the longest route since the 2008 financial crisis. many are using a single word, contagion. the globalnow is equity and technical strategists for wells fargo institute. route going to stem or is there more to come? there is value there, china, taiwan, south korea. they are reorienting themselves from technology towards fueling got consumption china has been talking about for some time. the weakest links are working

their way up. we do think it stops here. those countries have issues that are idiosyncratic. because theuch was fed policy taking liquidity out of the system? also president trump to date with another $200 billion worth of imports with tariffs imposed. >> sentiment is a big deal. in january, markets are trading at 17 times. it was a new dawn for emerging markets. and were technology-heavy would not be commodity producers anymore. they are much more reasonable on a valuations standpoint. emerging markets are still emerging, but the by a wish and's are more compelling. alix: you can see what we are talking about. the white line is emerging-market bond etf's. around 6%.

the blue line is shares outstanding. in 6% seems to be a level that will be drawing in investors. thedo you distinguish from value versus the value trap? >> that is the $64,000 question. we have enjoyed passive investing for the last nine years. this is a time when active will outperform passive. shy away from broad emerging market exposure within etf's and figure out which managers are trying to figure out where the values are and the value traps are. david: to what extent is the knighted states causing problems in emerging markets? the united states is doing terribly well. the biggest, longest, highest since the late 1990's in the tech bubble. is that driving the e.m. down in a sense? >> it is.

when the u.s. is outperforming, the dollar tracks inflows. they have to come from somewhere . right now they are coming out of emerging markets. that is putting pressure on the currencies. dollars comeed in you have to pay higher yields, higher spreads come and pay back in a currency that has appreciated. alix: if we see inflation move in the u.s., that could be a negative. , you'ret wage gains back to an environment where you will see a selloff because of worries about tighter fed policy. what is the feedback loop for you there? would agree. there is a lot of complacency. you have midterms. we are close to 2900. we would say we are at the upper end of the year-end target and it is a great time to rebalance. alix: where? >> towards emerging markets and

developed markets. if you look at the relative next 12s, over the months, it will surprise more on the international side than the u.s. side. , .8, thet about europe highest in seven months? without benefit also? >> the reason for the high correlation is the currency. there was a similar issue where the dollar was running and you had e.m. underperforming. that is why the correlation is so high. everyone is left in the dust by the u.s. as we expect the positives on the international side. that's where a lot of the diversification comes from. you want to play those different economic cycles. with the u.s. ahead of the curve, you want to play that currency risk. alix: in terms of you don't want to miss out on the late cycle rally for u.s. stocks either.

do you need to keep in small caps? you have toosure keep or hedge in other ways? >> we are recommending a diversified portfolio. again, we come in knows how this .ne ends we've talked about exceptional balance sheets around the world. there is a lot of uncertainty. do to hedge that uncertainty is making sure you are diversified while playing value. alix: biggest risk? >> central banks, the fed, ecb. alix: do you think we are in a global synchronized growth recovery still? >> we do think that. the u.s. is leading. if it was the opposite, we would be more worried. the u.s. is still the global consumer. if the u.s. is doing well, the u.s. will drag everybody out.

-- out. .- up david: a headline crossing the bloomberg, elliott management is saying in the letter to hyundai and spin offombine assets and bring it together in a $60 billion company. paul singer has been upset with hyundai because they think they are trading below where their peers are trading. hyundai saying they are not that interested. alix: coming up, slowing activity in the busiest oil patch. down with the cfo of pioneer natural resources and asked how the slowdown in the permian basin is affecting the company. that is next. this is bloomberg. ♪ . ♪

warning,ermian halliburton said activity was

slowing in the fastest-growing basin in the u.s., while aboutberger is concerned productivity gains in the basin flattening out. i sat down with the cfo of pioneer natural resources, the pure play in the permian, the company you go to when you want to know what is going on in the region. >> entail new pipes come on in the second half of 2019, you will see some slow down because people were not bring those wells on. they can wait to do that later when they can get the revenue from it. >> do have any sense of how aggressive money is being moved out of the permian basin? >> it is more of a pause. some companies are moving it from the permian to the eagle, but i don't hear a lot of that. >> the takeaway capacity issue is well known. what are the other capacity constraints in the permian? >> the biggest one is labor.

the things we are thinking about is how do you do things more we can dond how things out of our dallas headquarters in the future, or use technology to have less hands on the rigs. the takeaway capacity will solve itself in the short-term. >> does it get worse before it gets better? next 12 months, it will get worse before it gets better. on the oil pipelines, there is enough expansion to mitigate it. we are at the worst place right now, the steepest discount. as it relates to exports, we will continue moving barrels to the gulf coast. it will continue to go on the world market. exported 25 million barrels of oil since we started

exporting. customers around the world and repeat buying, so the export market is continuing to absorb these barrels. i don't see that is a big issue. alix: that was my interview with richard daley. there is a gap between what producers are saying versus what the oil services company's are saying. i don't know where that disconnect is, unless it's an inventory issue. david: does that mean they will start making some money? until now they were putting more cash into it. alix: they will be making less because of the price dislocation between the permian and that btr , especially ifw they are moving got oilt or money to other placesi. david: where are you on oil? alix: we think there -- >> we think there is a bear

super cycle playing out within commodities. from one is where we went $100 to $27. phase two b is choppy trading f multiple years. our best to guess is supplied seems to come back on once you take it above $60, and below $40,hen you go so we think sideways movement and oil from here. alix: bear super cycle, cool. coming up, tech execs make a commitment to clear policy. this is bloomberg. ♪ ♪

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much everywhere else. s&p futures are pretty much flat. .1%, most like exposed by emerging markets because of exports. dollar is a little bit mixed. safe haven getting a tiny touch bid. european stocks and emerging markets have been some uncorrelated, so some relief and emerging markets will be spreading to europe. people rate up -- cable rate up .2%. a path to a deal may be clearing. said let's make it vague, and then we are in better shape. alix: pushing a boulder down the road. on what isan update making headlines outside the business world. president trump is calling it a matter of national security. he is dementing that "the new york times" review -- revealed

the identity of a senior official who wrote an anonymous op-ed article. the writer indicates he or she is a political appointee who gave information. president trump's is the world will find out in days of canada will be part of a new north agreement.ade he is threatening to proceed with mexico only. foreign minister says talks in washington remain constructive. in the u.k., former prime minister tony blair does not believe a no deal brexit will happen. i think the chance of a no deal brexit is pretty low. i do not think the u.k. parliament would permit that you happen. i do not think europe would want that to happen. thatnk it is possible there is a no deal brexit but unlikely. what is more likely is the gridlock in parliament -- i do

not think the prime minister's proposition for brexit is likely to command a majority. emma: u.k. prime minister tony blair. 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 emma chandra. sheryl sandberg and jack dorsey facetime congress with lawmakers asking about their social network content. a conciliatory tone. ourecently we failed intended impartiality. it is unacceptable. i'm prepared for the immensity of the problems that we have acknowledged. been arank, we have not good job of this in the past. our verification program is not where we would like it to be. alix: joining us is selina wang, bloomberg tech reporter. what did we learn? >> i lost track at a certain

point of how many times object dorsey said i'm sorry and we did not do enough. something that became clear is that lawmakers were better prepared and were asking harder questions, really focused on learning more about how these algorithms work. the techtely, from companies, we did not get any huge bombshells about what they are doing to move the ball forward. we did learn there is no surefire way to deal with election meddling and they are sure to come against more problems in upcoming elections. alix: what is next? >> some potential windows for regulation. it seems that it is looming, finally coming. lawmakers said the wild west of social media days are over. that is something that was brought up several times, median 230, giving social companies legal immunity from content posted by users.

several lawmakers said they need to take more toluse olorunnipa and -- more responsibility in , forin incidences example, when drugs that are illegal are sold on the sites. david: thanks for reporting from washington. selina wang from bloomberg. joining us now from naples, florida, is roslyn layton, american enterprise institute visiting scholar. she served on president trump's fcc transition team. good to have you here. i think many americans, particularly if we vote, watched if we haves asking assurances that russians will not interfere with elections come this november. what did we hear from these companies? >> you could see what the market responded afterwards.

with the stock drop, not total confidence. but what i think we should applaud democrats on is that they are having these hearings. years, those of us in the policy community have tried to point out concerns for the platforms, competition, transparency. democrats did not want to listen. the tech companies were not fallible, and all they were interested in doing was regulating competitors to the tech companies. what is positive is at least we have moved forward to have hearings. it was not possible to get all of the people they wanted. google did not show up. but the fact that they have come to the table and are discussing and recognize the shortcomings, that is an enormous first step. and the recognition that the on the books, some of them

are quite out of date. they need to be updated. so it is a positive first step in i think the american people can be on the books, some of thm are quite out of date. encouraged. david: it has gotten our attention as a country. now what will solve this problem? what we heard yesterday from sheryl sandberg and from jack dorsey was that ai will help lead us out of this. technology got us into this, can it help lead us out? >> no doubt about that. i think the ai is very promising. the sheer numbers of people who use the platform, it is a herculean feat to root out everything. we have to start somewhere. i am encouraged by what we have seen on ai. it is not perfect. it has to have human review. but when you look at things like terrorism, the ai is effective to read up patterns. ofthey can see patterns certain kinds of abuse, and that can be detected and taken off. the other part of that is there was also the union concerns. would ai be used nervously or

non-purposely -- purposely or non-purposely against humans? those are the things around transparency they need to be disclosed. another important thing is consumer education. there is also a role that users need to understand, how platforms are working. that is another part of the picture. it will not be fixed overnight, but we are in the right place to move forward. sides ofnews is both the aisle want to work together, and i think it is one of the positive news stories. opportunityin-win here to make legislation that works for consumers of all the places they want to go online. david: we heard from the private sector and from the legislative branch. we did not hear much from the executive branch. i wonder whether it is possible to get to a solution without there being a single point of accountability and coordination within the executive branch, bringing the information together and quarterback the

solution. >> what i would say is, first of all, we do have separation of powers. there is a limited role with the executive branch in terms of what they can do. they have respected that to a large extent it what you also need to know is that the president does appoint and make the nominees to the very subtle agencies, and he has -- to the various federal agencies, and he has appointed outstanding people. the federal trade commission are in the midst of a major inquiry into all the digital platforms. that is ongoing. they have roundtables starting this month. that has not been done for 20 years. going, there are things on in the background that are supporting this process, and that will inform what goes on in lake congress. -- in congress. david: all important and good people working hard, but you know that when everybody is in charge, nobody is in charge.

right now, i do not have a sense of there is a person that the president can turn to and say, you get this fixed, it is on your shoulders. >> i would say we have separation of powers for a good reason. we have three branches of government, and they all play a role. when you see the department of justice with a role, the federal trade commission, the judiciary, ia, national telecommunications information agency, they are working with the department of commerce and looking at what we can learn from cybersecurity to bring to this issue. senator ron wyden of oregon pointed out the privacy issue is something on the level of national security. so the way the white house is working is trying to get the different departments to work together. that is how it should work. i think the american people should be encouraged by that. david: that was really helpful. that is roslyn layton from the

american enterprise institute. alix: that does not seem difficult, working together for a common good. still with us is similar some on a of wells fargo investment institute -- still with us is similar some on the -- sameer samana. this was the performance of facebook after the cambridge analytics a scandal. how de facto this in when looking at value tech? weightins ofp the -- weightings of facebook and twitter within the tech sector. google, and you get up to 16%. these companies maybe make up 1% to 2% if you have international stocks. we have been worried about regulation for some time. peaks socialeen

media. there will probably be additional regulations are but that does not take away from what is happening in technology. we would view this as a buying opportunity if there is further weakness. alix: in terms of overall market leadership, do you expect that to come from tech or will it be health care? >> we have been neutral on technology for some time now. concerned about regulation. a lot of crowding in the sector. we like cyclical areas. if the economy improves, consumer discretionary, health care, industrials, and we still like financials. we think those areas will step up if tech falls back. david: i did not hear a lot of specific regulations. do you think there will be real regulations in the u.s. are within europe? >> it depends. it is a political solution, as roslyn mentioned. there is a lot of coordination in the u.s. and outside the u.s..

we view it as a headwind. probably affects valuations. david: sameer samana of wells fargo investment institute, thanks so much. revamp,p, citi's restructuring the investment banking operation. that is next in wall street week. this is bloomberg. ♪

emma: this is "bloomberg daybreak." , arne duncan, former

u.s. education secretary. this is bloomberg. businessur bloomberg flash. citigroup is to unveil a restructuring of its investment bank operations later today. it will combine its corporate and investment bank with its cap older markets origination business. has been chatting its power structure over the last week, including appointing a new cfo. the biggest oil service committee and nothing a slowdown in the biggest scop patch. in therton sees weakness pretty and new mexico. the company says it will knock as much as 10 cents a share off of her quarter earnings. schlumberger- expected to be lower than expected. bloomberg has learned a middle eastern buyout firm received a

bid from a private equity firm for just one dollar. liquidators are getting offers from regional operations within the unit. the restructuring team is string to sell assets to settle more than $1 billion in debt. that is your bloomberg business flash at alix: we turn to wall street beat, threes things -- three things wall street is buzzing about. leadership, and bitcoin falls off. two sharp declines in the same day, a nine-month low. harvard's farming fiasco, the $1 billion farm that gets wrapped up in an international legal dispute. david: jason kelly, bloomberg's new york bureau chief, joins us. on citi, we have an update. it is happening. we're always interested in the individuals at what is the

strategic move? jason: even the rumors was straight to the top of most read on bloomberg. new jobs in banking on wall street? this includes people that are being elevated. movement,a moment of succession planning. september is often a time where banks tend to move people around a little bit. and they are putting their stamp on the bank. mark mason thing is was promoted to cfo. -- mason is a guy couple days ago. jason: exactly, is a tricky things. alix: is vice chair a real thing? david: it can be.

disclosure, ray maguire is a friend. he is wonderful. great relationships, a great banker. jason: pfister is one of these is one ofvice chair these things like, good for you, put up your feet, have lunch is. we will see what happens. it is largely up to the person a lot of times. most prominente wall street person in that role for many years. is important to have capital markets with the corporate bank, and that is making a big move in how you put those people together. you talk about cross-selling. alix: exactly. that is something goldman sachs wants to do. come back to this moment, almost exactly 10 years on from the start of the financial crisis. how do banks look now? how are they running business? where is the risk?

how is it the managed? alix: talk about bitcoin risk. david's was loved story because he talks about that coin all the time. david: i was an early adopter. people were making fun of it. bad: cryptocurrencies had a drop for the second time in 24 hours. todman sachs has reported have pulled back on near-term plans to set up their crypto trading desk. shape shift is asking for personal information. there is some struggling growing pains. jason: this is something the probably any skeptic assumed was was likeny crypto bull it will be fine. everybody's coming in. it is not happening so much. which you --nts, and those endorsements, which you got a few big endorsements,

but when you have the big banks backing off a little bit, not great. david: and the sec said not so much. sensitivityhe price of goldman. really into it, then bitcoin falls, and just kidding. jason: one important thing is if it drops below $5,000, which it is not quite there yet, but that a really important level in terms of people starting to get out. tides andple in bathing suits. alix: what? 10 mid-to-upper when the -- a david: when the tide goes out, you see people in bathing suits. to this at back harvard, $1 billion in brazilian farming land. good idea or jason: yeah, that

did not go so well. people love this story. i do, in part because it is harvard, the biggest endowment. for a long time, it has struggled, certainly for the past few years. it has had a number of managers. they managed everything internally. to new manager is starting disperse those bets a little bit. of these natural resources investments are very hard to unwind. alix: the deal here is they are buying directly into brazil, but through that, they wound up potentially buying something that was stolen, farmland that was stolen by armed thugs, and the farmer is really angry about it. a direct investment in that way makes the transparency question a difficult answer. david: other than that, it is fine. [laughs] jason: this is a nightmare scenario. oh, great, now i will have

students protesting because i'm taking away tribal land? seriously, come on. find another way to invest. david: hindsight is 20/20. meantime, invest in real estate in a reinforced forest in brazil? alix: manage your risk, and then we will talk about reputation risk. david: many thanks to jason kelly. listen to him on bloomberg radio daily from 2:00 to 5:00 p.m. eastern time everyday. coming up, resistance inside the white house. thesident trump is telling " new york times" to unmask the author of that anonymous op-ed. this is bloomberg. ♪

david: what i am watching, that "the new op-ed from

york times" yesterday where supposedly a senior white house official road, and this is part of it in -- president trump is facing a test to his presidency unlike any faced by a modern leader. many officials in his own administration are working diligently from within to frustrate parts of his agenda and his worst inclinations. i would know it i am one of them. alix: jaw dropping. david: we do not know who it is. the "the new york times" says they do know and says they vetted it. president, among others, has reacted. this is part of what he had to say. president trump: if the filling "the new york times" -- the failing "the new york times" has an anonymous editorial. they're doing a great job. poll numbers are through the roof. guess what, nobody is going to come close to beating me in 2020 because of what they have done. david: he is mad. do you blame him? alix: of course not.

david: i would be mad, too. alix: there is a distinction if you disagree with a ceo of a company versus you do not agree with the president who was elected. democracybverting our and the order of our democracy. david: absolutely. he is elected by the people. he has a right to govern the country, and people should not undermine. alix: there are so many things on this, truly jaw-dropping, especially as we head into midterms in about eight weeks. -- is up, mark mobius is the contagion flu continuing? ♪

alix: bear comes out of

hibernation. emerging-market equities near a their market. citi cut, back on risk. heading to jobs friday, warning a rise in wages could cause a selloff. and trade battles good for oil. global oil demand could be heard by the escalating trade war were china. good news, no big oil price spike. david: welcome to "bloomberg daybreak." i am david westin with alix steel as we look at the white house. a lot going on, including turmoil. today's the day it might impose tariffs, another $200 billion of imports on china. alix: are they meeting about that or about an anonymous all that? we said it earlier -- about an anonymous op-ed? we said it earlier, and he sounded really mad. our president really mad, that means bad things could happen. in purdy c -- pretty calm

the markets. s&p futures are up. euro-dollar flat on the day. a mixed dollar story. european equities and em equities had been moving in tandem. em mightof recovery in be good for europe, as well. treasuries go nowhere. crude goes nowhere. feels like a summer friday, not a thursday with a ton of news. david: people cannot figure out what to do. time for the morning brief, looking ahead to jobs day. we will get adp employment changes for august. and we will get weekly jobless claims. market services and composite pmi readings for august. 10:00, factory orders and durable goods orders numbers. now let's turn to emma chandra for first word news. emma: president is calling it a matter of national security. the "theanding that

new york times" revealed the identity of a senior official who wrote the anonymous op-ed claiming members of the ministration are secretly working against him. set tote house has thwart impulses. vice president pence has denied he is the author. meanwhile, president trump says we will find out in days of canada will be part of the nafta. canada's foreign minister says talks in washington remain constructive. in northern japan, a powerful earthquake has killed at least two people and cut electricity to almost 3 million buildings. it was 6.7 and strict the western part of an island. restoring power to take more than a week. 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 emma chandra. alix: thank you.

in emerging-market stocks on the cusp of a bear market for a second day. the longest rally since the 2008 financial crisis from peak to trough contagion is the worry. here is what some experts said. >> everything going on and everything driving the index down and worrying investors are idiosyncratic, country specific investors -- issues. so you cannot paint them with a broad brush. >> it will not go anywhere a time soon. it is very compelling valuations. i think they are becoming more compelling in the next month or two. >> we like to see will capitulation, and we do not have it yet. >> i think we have not yet seen capitulation and emerging markets. there are a lot of idiosyncratic issues. i do not see them reaching that buying entry point yet. theren things get hard, will be a massive recession it

argentina, obviously, and -- >> argentina has the ability to turn the corner. the support from the imf is a very big deal. that dynamic will take time. there is a fiscal challenge and an election coming up the challenges are real. alix: joining us now is brian belski, bmo capital markets chief investment strategist. and mark mobius is joining us in singapore. mark, what do you do with this selloff? so into it or look for value? >> look for value definitely. there are tremendous opportunities. i am not saying you jump in with two feet but at least you began to stock pick. there will always be winners and losers. even if the china situation gets worse with the trade war and tariffs,oses the 20% there will be winners in china. we have got to look at those.

alix: where would you be looking to buy? this is the worst selloff peak to trough since 2008. you have to wonder if it is going to be in fx, bonds, or equities, and what countries? >> definitely the equities. those are hit hard with few exceptions. fews in argentina and a other places like turkey have bombed out, as well. but we think equities of the place to be. were putting, we together a model portfolio, and brazil is high. india is very big. korea is in there. those are the big ones at this stage. russia,see things that opportunities in argentina, in south africa. so there are lots of interesting things happening in these countries. remember that individual

companies is where you have got to focus. a lot of individual companies will benefit from this kind of volatility. david: we are looking at a chart showing currencies and stocks. helpingere a tightening drive this? isn't there a problem with the trade that continues even today? what is going to turn it around? >> first of all, you can see the valuation of the renminbi. if you're in beijing and you have a 20% tariffs being put into your goods going into america, the best offense would be the value of your currency by that amount. so we could see as much as eight renminbi to a dollar. it is not beyond the possibility it something to watch for. alix: with the eight renminbi to a dollar, i cannot do much in global markets will just take that to the woodshed. >> the will be a lot of running

in the street, but there are some countries that have very strong alan's sheets. but -- strong balance sheets. look at thailand. it is true that if china devalues that amount, there will be a lot of losers. but also winners. there is the possibility. david: brian belski, what is your view? is there going to be a lot of blood on the street? >> my question for mark would be, market, exploding currency, we all know about currency. so if you take the currency discount and then you actually really look at financial's, howdy -- look at fundamentals, how do you know that you can, will, and should be avoiding a value trap? where can we believe in the denominator in terms of book value, cash flow, and earnings? when does that switch take place so you can actually believe in

those values? >> we can believe in these values if, number one, the balance sheet of the company is strong. that is the key factor at this stage of the game. two, look at those companies that have an earnings potential n industry that is growing, and they are in a consumer-oriented scenario where the consumers are still buying. despite the fact you have the diwali reading currency, you still have the mystic market doing well. i would say those are the two things to look at. and if you look at our portfolio, you will see that consumer goods are at the top of the list regularly. discretionary consumer goods are really up there, and that is what we're looking at now. what you are saying is avoid kind of the noise here near-term on kind of

the overall emerging-market focusfor the world and more on the domestic side as emerging markets transition from this industrial base machine from growth to last 15 years into more consumption. is that the right way to think about this? >> that is precisely it. consumer is kind now -- king now. they will get richer and richer. david: what about increasing divergence between the u.s. and the rest of the world? it is not just emerging markets. can that continue? >> there's no question that what is happening in the u.s. is having a tremendous impact. future strength is key. look at raising interest rates, and that will go on. in the american economy booms. , theemployment goes down

limitations agrees. all of these emerging-market currencies will have to be devalued. they already have, but you will see more of that. more importantly, you will see these countries being forced to raise interest rates, which will put a brake on the evaluation of their currencies. of course, those people that are heavily in debt are going to being greater trouble in these countries. bond debtout not only but domestic debt. seen that bignot slide in the peso. is the selloff over, mark? if not, what is going to be the next emerging market currency to fall? we have gone from turkey, argentina, brazil, and now with the philippine peso. >> at this stage, i think if you look at south africa, there is more weakness there. the economy has slowed down quite a lot.

a number of these african countries. they will see currencies drop because people will want to buy u.s. dollars or euros. in some of the east european countries, you may see some evaluation. valuation. see some d incremental -- now it will be incremental. david: i am going to put a chart that shows as the valley of emerging-market debt has gone down, etf investment has stayed up and even gone up -- as the value of emerging-market debt has gone down, etf investment has stayed up. is this 10 time to be buying emerging-market debt? >> i think so. i am bullish now on emerging-market debt for that reason. you see what is reflected in some of the etf's.

nobody knows the bible. is to putg to happen money in and it goes on further. that we are pretty close to a very pessimistic scenario, which i think is good for emerging markets at this stage. alix: brian, do you agree? >> i keep thinking about 1997, 1998. mark is right, you can never pick a bottom. we will have some sort of a bounce. that scares everybody. at the end of the day, the fundamentals of the world in terms of global growth and earnings still look pretty good. not like we are in a dire position. by the way, the size of this word contagion -- just because it happened in the last recession does not mean it will happen in this recession or pullback, but please stop that. you're talking about countries that are miniscule parts of gdp

that have already had tremendous fun a mental problems. by the way, investors went to the emerging markets and chased them for the wrong reasons at the beginning of the year. david: at the risk of alienating my friend here, let me use a word contagion in this regard. people have to sell high-quality assets because they are losing on riskier assets and are forced to sell. does that create an opportunity because few are? selling because they have no choice? >> that is right, absolutely. that is why i agree with this idea that you have to pick and choose. broad-baseddo a stroke about what is happening. the other factor here is that we have got to be aware of the opportunities in some areas where people may not be looking. some of these so-called frontier markets, there are tremendous opportunities. for example, vietnam.

there may be some concern about what is happening in vietnam because of the global situation, but the reality is they are going to be benefiting to a great extent because a lot of the exports coming out of china will be coming out of vietnam. this is something to look appear david: mark, thank you for joining us from singapore. mark mobius, mobius capital partners. brian belski will be staying with us. coming up, we will want his reaction with my interview with john kasich yesterday. live from new york, this is bloomberg. debt matters. we know that. debt is going to crush us at some point. it is stimulative for now, but that is the short term. long-term, it will be a huge drag on our economy. ♪

alix: adp employment out. private companies only edit 162,000 jobs in august. the estimate was for 200,000 jobs. is it a precursor to jobs friday, and does that mean where we are in terms of full employment? david: so a little noisy. emerging markets are not declining in a vacuum. part of the equation is just how well the u.s. is doing. when i talked to republican governor john kasich of ohio yesterday, he warned that the good times in the u.s. markets may be short-lived because we will have to pay the price for all that debt. >> of course debt matters, we know that. debt is going to crush us at some point. right now, u.s. debt is stimulative, but that is short trump over the long-term, we know it will be a huge drag on our economy. david: brian belski of the bmo, you aref

basically positive on the market. talk about that run-up in the fiscal stimulus. >> to be clear, we have been very concise the politics really have nothing to do with the absolute performance of the stock market. it can either help or deter the overall trend. the overall trend of fun of the market have been improving for a while. no doubt that tax cuts and stimulus work, but during the obama administration, we quadrupled that. we forget that. we forget that in the 1960's gdp was at the highs levels in our country during president kennedy, and then we had a deficit. late 1970's and early 1980's, a double-dip recession. it is great to wave the flag that debt is a problem, but what are we going to do about it? solution?e a

i think the u.s. is growing at a pace that people are surprised about, and i think we will continue to do that. can we grow our way out of that? i think part of that, we can. david: he talked about balanced budget, and he has to do that in the state of ohio, required to. >> i think the thing no one is talking about is that we can grow fast, but what about going into the government and start cutting some of the facets of the government? david: let me show you something from goldman sachs. bank of america has a similar thing. this indicates that we are reaching a peak here, and the fact that the bull-bear indicator has gotten that high, the market has gone down. other people are warning of real danger of retrenchment. >> anytime that you have had this type of a run in the stock market, we going to have a pause. and i also work at the place a

put this thing together here. sometimes it works, sometimes it does not. i think animal spirits with respect to the fall and people underperforming at the end of the year will be a bigger trend. but this incessant need to call the correction, nobody knows. we're going to pause from this. here is why stocks will go up or down, financials. has anything financially changed in the u.s. stock market in the last couple quarters, last year? earnings are going up, valuations are going down. too heavily weighed on all this stuff gearing us. and we have had outflows in equities this year. people are buying emerging market etf's, and that is because of this incessant hatred for president trump. let's buy emerging markets because that is what we did in the early part of the 2000's and made money. no, their financial issues.

i think people are still leading with their heart and not with their brim, so there is more risk to the upside. when you have had this kind of a move, especially july and august, we will have some sort of a pullback. david: that is brian belski of bmo capital. coming up, one of the media industry's most bitter disputes, this cbs-viacom battle. this is bloomberg. ♪

time for three cover spirit on our radio cbs-viacom, a news story crossed yesterday saying they may come to terms on the dispute. she gets to appoint directors of they agree not to merge with viacom in spite of what happens with les moonves. blackstonewatching

per they will be marketing some high-yield debt to finance its acquisition of thomson reuters. 3.72% is the high-yield trading market. what will they have to pay to do it? isid: meantime, joining us bloomberg opinion columnist, and that is dale. >> -- that is dell. >> what does this mean for holders of the stock? dell had the merger with emc, and dell wants to go public again. holders have not been happy with the price. i do not think these numbers today will change anything. guidance for fiscal 2022, 2023, a few years out. the fact that these numbers are good today i do not think what change the underlying valuation assessment here by holders.

alix: what will change shareholder perspective? >> i think they are holding a for a higher offer. dell and silver lake have indicated they are not going to go down that path. then you talk about the third option, dell going public and forcing the conversion of those dvnt shares. there is a debate on whether that would be better for the holders, and a number of people i talked to think it is. it would not be that great for dell because it has a lot of debt and a collocated story that is difficult to market on an ipo roadshow. david: is a stock, cash, or both? >> it can be a friday ways. i think you have more of the cash element. that seems less likely, maybe changing the exchange. i think the pushback from shareholders is that they feel like they are not getting enough in the go forward into the based on the share exchange and the vision of a bigger stake in the combined company.

they think ultimate valuations should be closer to the m where vmware's stock prices per alix: where does vmware fit in? >> i think it is trading a little below 150. headline price for dvmt was about 109. alix: brooke sutherland of bloomberg opinion, thank you very much. i am still trying to figure it up david: a field day for lawyers and investment bankers. alix: coming up, emerging markets under pressure. my interview with michael cohen. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. seconds away from initial jobless claims report. the atp number -- the adp number was a little lower.

emerging markets getting arrested, helping european stocks. a mixed dollar story. euro-dollar trying to eke out some cut of gain. sterling moving higher after --ential brexit racers breakthroughs, maybe a deal will not be as hard. numbers,the adp initial jobless claims coming in at estimates. 203,000. number i look at his nonfarm productivity. they were hoping for 3.0. it was 2.9, same as last month. theory, wetration's should get productivity up and that will support long-term growth. alix: and the final read for the second quarter, so it little softer than the estimate. emerging-market turbulence could take a toll on the story of global synchronized

growth. what does that mean for commodity prices? this is global oil demand versus growth. right around 100 million barrels of oil a day. yearull's thesis for the is that demand will continue to grow and next year, as well. does that story change as emerging markets keep selling off and we see contagion spread? i said done with michael cohen, and he gave me his outlook. >> the macro environment has been taking to a more concerned state over the last six months. oil demand dynamic in a fitted from very strong diesel demand. all industrialized countries firing on all cylinders. em demand growth is a key part, 20%, 30% of the global oil. for atn a robust state least a year and a half.

i think there are a lot of concerns now when you look at the currency effect, in addition to the oil demand effect of higher prices. with the price and the income effect, it is starting to raise questions about the 1.8,inability of the 1.5, 2 billion barrels a day of demand growth we have seen. we saw almost 2 million barrels a day of demand growth, and we expected that profile to start to take lower over the course of this year. trade tensions give consent to the oil demand growth profile because it is affecting that em component of demand. alix: we have seen a lot of countries take off the subsidies they had, which makes them more sensitive to fluctuations in the oil price. are you having to factor that and you to your oil demand thesis? >> absolutely. when you look at the end price to a retail consumer in some of

these countries back at levels that is annd 2008, incredible full circle we have come and that is a result of tax changes. you are saying that in both the middle east and in key asian consuming countries. i think the other key is flexibility onhe the demand side is china, so off ofies that backed purchasing of the last tip of her three months while waiting for government approval. that purchasing is now picking up again and helping to tighten or further flattened the oil curve. that extra physical demand for refineries is having an effect in the short-term. alix: some say it is a good thing we have a trade war and emerging markets are falling

off. would you agree? have you upgraded your oil price forecast? walk me through it. >> on the first issue, when you look into the future, the question of the trade war and broader economic backdrop here, it becomes a question for u.s. energy policy. it is only as a result of this trade war that the administration has gotten kind of lucky. otherwise, the sanction effective cutting of supply to -- from iran and the effect we are seeing in the geopolitical impact in venezuela is also resulting in lower supply. it is coming in the same time as these demand questions. i think if we do not have the straight tensions, it would be even higher than we are right now. two years second question, what changed in the last year? we did this report on an annual

basis. this is the fourth time we have tried to give our view of where we see prices over a three to five-year timeframe. alix: 2020, 70 five dollar oil. 2025, but $15 above where the curve is. >> right. it is important to look at what has happened in the last year. venezuela is clearly taking lower. production is about 1.4 billion barrels a day. we have iranian sanctions, sanctions on iran, likely to take off. discussingnk we're -- and the other thing we're discussing at the barclays conference is what the u.s. producer will do. we just finished a presentation from one of the u.s. emp's saying we are not going to chase a higher oil price. that is a big seachange people need to recognize, that the u.s.

is not such a swing supplier as it once was. these producers are seeking returns. many of my colleagues on the equities research side are highlighting this. will notsing cash flow necessarily translate into incremental drilling and incremental capex. core with the permian, the acreage has already been used or drilled, so they are going to tear two. is that a real narrative in the market? >> i think certain companies are saying that, not necessarily all companies. certain companies are saying, look, we have delineated in this new area, so we're calling it now tier one. we have had great results in this area. for example, in the pocket and bakkan.akan --

over the quest of the next two years, there will be constraints to the growth story, whether it is take away constraints, labor constraints, completion cruz, that will be an issue for the next two years. i think when we look longer-term, from two years to five years, it becomes an issue of what is the quality of the remaining locations, and it will become an issue, generally what we expect prices to continue to rise to the medium term despite questions about demand growth over that time. alix: that was my interview with michael cohen, barclays head of energy research. joining us is rob thummel, tortoise capital advisors portfolio manager. brian belski is still with us. at the beginning of the year, it was all about lying energy stocks. rob, -- about buying energy stocks. rob, you are an energy investor. >> we do think oil prices are going higher.

we agree that demand is going up. the get supply. that is where we think there is a problem. inventories are declining. not a lot of spare capacity out of opec. and you have iranian sanctions that will kick in sometime in the fourth quarter and extend into next year. we think that poses a potential upside for oil prices going forward. and secret as global growth story, do you think that is seeping into it a little bit? >> a good global oil demand. 33 out of the last 34 years, energy demand has gone up. energy stocks have trailed oil prices. there has been a big disconnect for how much oil prices have gone up and how much energy stocks of got up. that curve might move up, and that would beget for energy stocks. it would help connect some of the disconnect that has happened.

brian, doan investor, you need to have a few where oil is going for a portfolio? follow research and run portfolios in canada, so we are neutral u.s. energy stocks. here is why. looking out over the next three to five years, supply is roughly managed and that is with demand. we are in the process of the last few years to transition to more supply driven versus demand driven oil analysis. we think canadian companies are positioned to expect a cash flow balance sheet. discern ability of earnings, earnings in the u.s. energy sector already went up, went up with oil prices. energy in canada in terms of earnings have not gone up yet, catching up a bit. regardless, in this trading range environment, pick a mo that we believe at b

we're in a longer trading range, thoseu want to buy companies second-best manage within that range. we believe it is a canadian oil company. i look do you believe, rob? >> honestly, we think u.s. is the place to be. we focus not just a producers but also infrastructure and downstream. we look across the energy value chain. the u.s. will need to grow longer-term. there are some short-term challenges because of the permian structure challenges. those will go away in the next 12 to 18 months or so. when we look at just the growth of the underlying companies relative to other sectors, we think there is a tremendous opportunity in the investment in energy sector. alix: what kind of name? >> infrastructure is one place we think is unique. look at u.s. energy infrastructure, running at almost 97% utilization. we need to expand

infrastructure. here is a unique factor to think about. --re going to expert oil export as much oil as we can produce. 5 billion barrels a day of exports in 2009. that is huge. to do that, you have to have these essential assets, the infrastructure a place. a lot of infrastructure opportunities. building oil export terminals. that is a great place to be in this environment. david: is infrastructure a play? >> that is part of it, and you can do industrials, as well. we are overweight industrials, an area we think is very overvalued. infrastructure and energy in the u.s., we still like a premier name like schlumberger. it is one of the best managed companies in the world in terms of energy. we still like exxon, too, because they have the cash flow

and balance sheet. you will see acquisitions in this space. to havewe are going huge m&a activity in north america with respect to energy companies. alix: rob thummel and brian belski, great to see you guys. you not forget to watch my show later today at 1:00 p.m. eastern time. i will be speaking with the ceo of devon. forward to that. let's get an update on headlines outside the business world. emma: president trump is demanding the "the new york times" revealed the name of a senior official who wrote an anonymous lock buster op-ed. the official says key members of the administration are working against the president. it says a number of people and government promised to thwart the president's more misguided impulses. vice president pence has denied he wrote the op-ed. brett kavanaugh will not promise to disqualify himself if a case trump.y fx president

he said he will make a commitment as to how he would handle a specific case. hearings resume later this morning. north korea's kim jong-un says he's open to getting rid of nuclear weapons if the u.s. acknowledges what he has already done. korea's will hold another summit and discuss ways to establish peace and eas militarye tensions. 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. this is "bloomberg daybreak." up, arne duncan is here to talk about how important primary education is. live from new york, this is bloomberg. ♪

emma: this is "bloomberg daybreak." i am emma chandra. later on bloomberg markets, an exclusive interview with the achilles management founder. this is bloomberg. time of year, students prepare to head back to the classrooms. they're hitting the books, and we are doing our homework on different aspects of education and what can be done to improve it. we discussed the rise of student debt yesterday, and tomorrow we talk about education technology. at thetoday, we look importance of preschool education as a foundation for the entire education system. from chicago, arne duncan, former u.s. secretary of education. how schoolsuthor of "

were, and inside account of failure and success from one of the nation's longest serving secretaries of education." things for being with us. when we read your book, a terrific book, the first thing you tell is that when you went back to work with your mother in a supplemental education program, you worked with a teenager who had everything going for him and you were going to get him into a good chart -- college but it did not work. >> it is a moment that changed my life at he was a remarkable young man. my mother ran an inner-city program in the south side of chicago for 50 years. he got good grades and was on the b-honor roll and is high school, never got caught in the gangs or drugs or violence. he played by all the rules. quickly after we started working together, i realized he was fundamentally illiterate, could

barely read or write. he had no real chance of having that dream of going to a big-time college. a young man who went to school, got good grades, was on the b-on ll, he hadb-honor ro no idea how far behind he was. he thought he was on track. david: the system told him he was doing fine. >> more than fine. david: i have a chart showing the u.s. compared to other countries, the number of three and four-year-olds enrolled. united kingdom is 103% because they enroll people who are not even citizens. 54%.is why don't we have more preschool education? question.stic short answer, we do not understand how important this is i would argue we do not value our children enough. professorize-winning

from the university of chicago has said this for decades. for every one dollar we invest in pre-k, it is found that we get back seven dollars as a society. pregnancy, less dropouts, more high school graduates, more young people going to college, more people entering the workforce. this is a life-changing opportunity. i say if i had one additional tax dollar, one more dollar to spend, i would put it into high-quality early childhood education. obamat of the administration, we were lucky to be able to put more than $1 billion behind this to increase the number of young people with access. we have so many kids around the country that are denied the opportunity. that does not make sense or that does not happen in other countries. alix: how much would we need to spend per state? we have rankings with gdp.ditures compared with vermont spends the most. north dakota one of the least.

how much do we need to spend to make a difference? >> short answer, it varies by state. if you look at the number of three and four-year-olds who do 8000, 10,000,s, that is your answer. this is not an expense, it is an investment, the best investment we can make and young people, their families, and ultimately our nation. david: we rank like number 24 in reading, 24 in science, 40 in mathematics. we have an election in 60 days. i do not remember hearing much talk about education. why is it not on the political agenda? >> because we do not vote on this issue. education should be the ultimate bipartisan or nonpartisan issue. republican, democrat, liberal, conservative. you never hear politicians talk about education, and that breaks my heart.

local elections, mayors, governors, congressmen, senators, or the president, if we were demanding that more children had access to high-quality pre-k, demanding concrete plans to raise graduation rates, demanded politicians make college more sensible and affordable, everything would change. i cannot emphasize enough how important it is, regardless of your ideology, to vote and create educational opportunities for young people in your community, state, and across the country. david: whether it is in chicago at schools are in washington, you have tried to be as bipartisan as possible. it seems to have become partisan. you wrote a piece yesterday saying the trump administration has no position on increasing access to pre-k or re-think high school graduation rates or leading the world in college graduation rates. the more i listen to the president, the more i am convinced that the lack of educational goals is by design.

why is that? >> i absolutely do think education is a bipartisan issue. trump, unfortunately, is an authoritarian leader. leader who says the press is the enemy and i am the only source of the truth, when that is your philosophy, you do not want a well education citizenry. you do not want people who can think critically and independently, who can challenge sources of information. and you never, from this administration, hear them talking about increasing access to pre-k. we could probably get high school graduate and a desk graduation rates to 84%, historic highs, but it is not enough. you never get conversation about making college more accessible and more affordable. as a nation, early childhood higheron, k-12, education, we're top 10 in nothing. we have to get better faster. the lack of conversation, lack

of goals, lack of urgency from the current administration is heartbreaking. david: important message. thank you so much. arne duncan, former u.s. secretary of education. alix: coming, nobody knows the selloff, but e.m. mark mobius is still bullish. more on what i am watching. this is bloomberg. ♪

i am watching as emerging markets where is the bottom? what do you do? we spoke with mark mobius earlier, and he is bullish. >> i am bullish now on emerging markets. things have gone down so much and the news is so negative. that is probably what is being reflected in some of this etf work. the bottom is going to happen. we put money in and it goes on

further. but we're pretty close to a scenario that i think is good for emerging markets. alix: he also said we could hit eight renminbi per dollar. david: blood on the streets. alix: there is that. that does it for "bloomberg daybreak." coming up, the open with jonathan ferro. oksana aronov will be joining us. this is bloomberg. ♪

find among all three nations that you can make a case that we will all prosper because of it. ♪ city, i amew york jonathan ferro. this is the countdown to the open. ♪

jon: coming up, emerging markets affects catching the break. the dollar weakening after a disappointing jobs read. with a joining citi warning for u.s. stocks. facebook's co-founder suggesting more regulation might be inevitable. futures firming up. dollar story in the fx markets with the euro-dollar and that is giving emerging market currency lift as well. >> this is starting to look like a textbook em crisis. for the are no respite fx market. >> brutal, painful. >> let's go out of turkey