♪ markets: emerging pain. stocks hit a 14 month low. wargames. russia and china demonstrate their unity with a joint military exercise. we are live in vladivostok. the pound jumps as the chief negotiator from the eu says a deal is achievable in the next week. can the two sides get past their areas of disagreement? welcome to "bloomberg surveillance." i'm francine lacqua here in london.

these are your markets. you can see the stoxx 600 pretty much unchanged. we are seeing quite a lot of on then euro and pound back of a possible hope that actually the u.k. divorce from the eu will be applicable. 10 years on from that collapse lookhman brothers, we will at the lessons learned with the former barclays chief executive bob diamond. let's get straight to the bloomberg business flash -- bloomberg first word news with taylor riggs. taylor: in the u.s., the white house has delivered a message to north korea and said it is ready to start planning the second meeting with kim jong-un. the announcement came just hours 's topdonald trump security advisor, john bolton, said nuclear talks with pyongyang have stalled. >> it was a warm and positive

letter. we will not release the full letter unless the north korean leader agrees that we should. the primary purpose of the letter was to request and look to schedule another meeting with the president, which we are open to. taylor: russian president vladimir putin toasting his counterparts from china and japan today. that is as the eastern economic forum gets underway in vladivostok. time, russia will hold joint military exercises with china in what is being called the biggest wargames for decades. and the u.k., the pound is holding gains after jumping yesterday. rged over $1.30. i think that if we are realistic we are able to reach first dayst on the

of the negotiation, which is the brexit treaty, 6-8 weeks. thanr: in the u.s., more one million people are fleeing as hurricane florence threatens to move close to the east coast. it is the strongest hurricane in almost 30 years to head the carolinas. the carolinas outer are under mandatory evacuation orders. the category four storm is approaching and estimates say florence could cause as much as $27 billion of damage. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine? francine: let's kick it off with italy. the country's finance minister speaks and at a met debt at -- at an event in rome today. officials say it intends to stick to european

union rules as it develops plans. will these gains be short-lived? joining us now is joseph oughourlian, chief executive and founder of amber capital. he says italy is a screaming buy. thanks so much for joining us. you have been bullish on europe and periphery europe for quite some time. has anything changed since the italian elections? -- ah: yes, i think a pop lot has happened. the beginning of the government was confusing, there were mixed messages being sent. that whole uncertainty that those few months during which the government was kind of trying to find its footing, i think have created what we have seen with the spreads opening up between italy and the rest of europe. francine: what does it mean for actually opportunities bind over there?- buying over

there were market jitters, right? we look at the spread between italian and spanish btp's or the 10 year yields. what does it mean for anxiousness in the markets? joseph: i think the government's finally understood that they need to send a very strong message to investors. it finally understood that unwinding of 100 basis points on the btp will basically annihilate all of the little financial room for maneuver there is to do any of the reforms that they wanted to implement or any of the plans that the promised to the electorate. francine: that means they actually break all the promises that they did in the campaign. joseph: i think they will have to water down those promises. what they have been suggesting is that they can't implement all of those promises at once and

that the minimum wage, or the minimum revenue will be spread out over a number of years. more restrained to fewer people. so there is actually quite a bit of room for maneuver on the fiscal deficit. ironically, italy has a bad reputation for public spending because of its high debt. on fiscal deficit it has been -- has had good numbers for decades now. to have a bit of a more expansionary fiscal policy. i think that they are long overdue, to be honest, after 10 years of austerity. not necessarily a bad thing for the economy. francine: do like any of the spanish bonds or spanish assets? but i am like spain,

puzzled by the opening of the spread between italy and europe. if you believe, like some people do, that italy is a problem for europe, it is the third-largest economy in the eurozone. it is really the core of europe. , toe have a serious problem think that spain, greece, portugal, even france won't be affected does not make sense. that spread should close, one way or the other. wrong, the bonus should open up against the bond. if i am right, the be to spread -- btp spread should come down with bonds. francine: what kind of assets are you looking for? joseph: at this particular moment i think italy is a great buy. the one exception, i think the one question is around some utilities concessions, given what has happened with atlantia.

francine: meaning that some of the promises on the campaign trail was maybe some of the government leaders to try and have more of an influence. we have seen it with atlantia because of the general bridge collapse? joseph: yes. i think there is unfortunately ideological bias against concessions against privatizations with part of the government, and certainly the bridge collapse has been a great vente to sort of thence -- all of these concerns about privatizations and expansion. some of these utilities, some of these concessions might have a little cloud over them until that is resolved. i don't think that issue will be resolved anytime soon, unfortunately. francine: thank you so much, joseph oughourlian from amber

capital. stays with us the eu's chief negotiator sends the pound higher as he says a deal is realistic. later on, 10 years on from the collapse of lehman brothers, we will look at the lessons learned with the former barclays chief executive bob diamond. this is bloomberg. ♪

♪ francine: economics, finance, politics, this is "bloomberg surveillance." we are just getting some breaking news. we have been following the market action closely. this in part is due to some of the selloff we saw in emerging markets. this was started in turkey but kind of spread. there is fear on the markets.

i think one of the stocks we watch out for the most, or one of the indices we watch out for the most is a hang seng indexed -- is the hang seng index. this has turned into a bear market. with our following china closely. i'm sure that is partly linked to trade but partly linked to the angst we see in the markets in general. this is the year to date chart for the hang seng. it has just fallen into a bear market. lifted straight to the bloomberg business flash with taylor riggs in new york city. taylor: amherst sports has received an indication of interest from a group, including china's biggest athletic close maker. -- amber sports has received an

indication of interest from a group, including china's biggest athletic gear maker. s last week's announcement of the settlement regarding shortcomings and the customer due diligence policy to prevent financial economic crime at the gate -- bank. timmerman has agreed to remain in his position. of kfc billion operator restaurants in the world's most populous nation, invest your group -- populous nation. the investor group has decided not to continue to pursue the deal after an initial proposal was rejected. chinachina -- yum declined to comment. francine: the eu's achieve brexit negotiator, michel

barnier, has struck an optimistic tone regarding negotiations. he says an agreement could be done within the next eight weeks. he wanted that several issues, including the irish border, remain unresolved. what is a potential deal mean for markets and investment. joseph oughourlian from amber capital is still with us. i know your fund focus is basically on periphery europe and europe. is a good brexit deal for the u.k. mean that you get rid of that mail -- layer of uncertainty? joseph: as far as u.k. assets are concerned, the fundamental problem i think of brexit, which i don't think it is a great idea for the economy and finance. difficult that a ,ad idea can be made less bad but it will have an impact on the economy when we are another.

certainly, a smooth brexit is less bad news, is marginally better, but i don't think that the experiment is going to be good news for the british economy overall. when i look at the fundamentals of the british economy, you know, frankly we are talking about italy. italy's financials in terms of net credit or debit position against the rest of the world, its current account surplus, it's fiscal balances, are not much better than britain, to be honest. frankly, the starting boy here with a bit of a bubble on real estate assets, zero interest rates, looks quite shaky ground to meet. francine: given what is priced in at the moment, if we have an amicable split, and we saw euro rising on the back of the michel barnier comments. does it help periphery europe as well as we -- if we have a friendly split?

joseph: it does. it is in the interest of both europeans and brand that there is no terrible deal, and harsh brexit, that's for sure. i think the europeans are also conscious of the fact that britain is the second largest economy in europe. if this was to go to a clash, for sure brain would be a big loser -- britain would be a big loser, but you marginally would also be a net loser as well. francine: overall, what's the mood in the markets? we broke the fact that the hang seng index is now in bear market territory. it seems that it is nothing to contagious, but people are uneasy. do you feel it on the markets that there is something not quite right? joseph: yes. as far as emerging markets go, there is a convergence of three factors that are negative. the first is the strength of the dollar and the fact that the fed is on a tightening course, and

that's never been good does. that kind of sucks out the global liquidity. global liquidity is the u.s. dollar, essentially. i think the strength of the oil prices also a negative factor -- price is also a negative factor, at least for emerging markets. issue is sortrade of the flame that instills the fire with emerging markets. i think withint, emerging markets, you mentioned latin america, or are a number of emerging markets which look interesting that sold off. their currencies have devalued, depreciated massively, and they are starting to look interesting from a value case. francine: give me one. joseph: i actually quite like argentina here after the peso devaluation.

i think that brazil is starting to look interesting as well. i look at where the fundamentals of those economies were 20 years ago, and frankly, they're much better now than then. francine: thank you so much. joseph oughourlian from amber capital stays with us. vladimir putin meets with jinping. next.live to vladivostok this is bloomberg. ♪

♪ ♪

francine: this is "bloomberg surveillance." i'm francine lacqua here in london. russian president vladimir putin is hosting his counterparts from china and japan as the eastern economic forum gets underway in vladivostok. time, russia will hold joint military exercises with china in what is being called the biggest wargames in decades. our reporter joins us live from vladivostok. we want to understand what these world powers will talk about. it's not only about expectations, as a little bit about how president trump will take this. let's get straight to vladivostok an to annmarie hordern. great to have you. i know it is probably one of the most exciting meetings in a while, but what will these two leaders focus on?

i think we are having a couple of technical difficulties. it is quite far. we center there and it has taken her weeks, if not more, to travel to vladivostok. let's get back to our guest, joseph oughourlian, from amber capital. we will get to her in a second to really layout this foreign policy, the anti-globalization -- layout this foreign policy. we will see what president trump, the anti-globalization figure, thanks. -- thinks. is this no as you just keep up with for history rather than knowing how to trade the markets? joseph: i can think -- i think initially it was treated in the markets as noise. there was a moment when the incremental trade barriers, or

tariffs will become a relative -- in the markets. it has certainly ignited the flames of an emerging markets , when this summer there were all these issues with china, but it remains a concern that is sort of out there for markets, but at any moment can go back if it degenerates seriously into something a lot rying.or francine: when you set down you were telling me about your experience with the collapse of lehman brothers. the day before the collapse there were obvious vulnerabilities in the markets that people did not see, interconnections. where do you see those vulnerability's now given the experience that you had? joseph: i think we have the same issues now that we had for

lehman brothers, which is an explosion of debt now. at the time of lehman brothers it was concentrated on subprime mortgages in florida, california, and other u.s. states. today we have issues with the u.s. dollar debt of emerging markets, but certainly the what theive easing, hasand the boj is doing meant that keeping rates so low for so long there has been an explosion of debt in many areas. it is difficult to predict how stable that will be when things turn. francine: thank you so much for joining us. joseph oughourlian there. we will get him back on to really understand more. he lived through the lehman collapse. the 10 years after the collapse

of the lehman brothers, we will look at the lessons learned with the former barclays chief executive bob diamond. that is coming up next. remember, just about 20 minutes ago we broke the story right here that the hang seng index in hong kong turning into bear market. european stocks pretty much study. we had a little bit of a mixed session in asia. relations have seemed to improved between the world's biggest economies. i don't know if that will be sustainable or not, but we are also seeing a dollar weakening. there may actually be an amoco split betweenble the eu and the u.k. this is bloomberg. ♪

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wherever you are. head to xfinity.com/stream to start watching. simple to rent, easy to buy, awesome to go. francine: economics, finance, politics, this is "bloomberg surveillance." i'm francine lacqua here in london. we are in day two of our coverage of the financial crisis 10 years on.

let's take a look back at a few key days in september of 2008. brothersber 15, lehman filed for chapter 11 bankruptcy as merrill lynch was taken over by bank of america. on september 17, 2008 the u.s. government to control of aig in a bailout to prevent the bankruptcy of the nation's biggest insurer. on september 20 3, 2008, ben bernanke and the treasury secretary testified before the senate banking committee about the bush administrations $700 billion plan to remove illiquid assets from the baking system. we will discuss -- banking system. we will discuss that next. because we are seeing some positive news about a possible amoco -- amicable split between the u.k. and eu, no better time inn to look at employment the u.k.

testd a better gdp vigor figure than expected yet -- figure than expected yesterday. if you look at the data so far, it seems to actually validate the decision to raise rates last month. let's get straight to the bloomberg first word news with taylor riggs in new york city. taylor: the white house has delivered a message to north korea and said it's ready to start planning the second meeting with kim jong-un. that the announcement -- the came just hours after donald trump's top national security advisor, john bolton, said nuclear talks with pyongyang had stalled. >> this is a very warm and positive letter. we won't release the full letter unless the north korean leader agrees that we should. the primary purpose of the letter was to request and look to schedule another meeting with the president, which we are open to.

taylor: russian president vladimir putin has held bilateral talks with china's gigi think. the lead -- xi jinping. the leaders met as the economic forum gets underway in vladivostok. u.k., serling surged above a dollar $.30 as michel deal -- brexit deal is possible within eight weeks. >> if we are realistic we are able to reach the agreement on the first stage of the negotiation, which is the brexit weeks. within 6-8 taylor: in the u.s., more than one million people are fleeing as hurricane continues to move towards the east coast.

is poised to become the strongest hurricane in almost 30 years to hit the carolinas. four states have declared emergencies as a category four storm approaches. initial estimates say florence could cause as much as $27 billion of damages. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine? francine: thank you so much, taylor. now let's get back to our coverage of the financial crisis. 10 years ago this week lehman brothers declared bankruptcy. its collapse,f its north american business was purchased by barclays. atvyn king was the governor the bank of england at the time and here's what he told us about the deal. >> barclays are a very lucky bank because they bought it essentially for have the price only a few days later.

the hangup on the barclays deal was that people in the u.s. wanted the british government to underwrite any potential losses from lehman brothers, and since we knew at the time that we were ,asically underwriting barclays we were issuing an insurance policy to barclays by protecting the british banking system. that was the right thing to do. francine: bob diamond was one of the main architects between the deal between lehman brothers and barclays. he went on to become parkways chief executive -- barclays chief executive and is currently the ceo and founding partner at atlas merchant capital. thank you for giving us some of your time. when did you realize lehman was going to be so big and it was going to take the rest of the financial crisis with it? bob: it's interesting, francine. from one perspective, there were a lot of warning signs. the year before when we had the

in thearket troubles french banks, we had the asset management problem at bear stearns. ofhink we had in the summer 2007, the large mortgage make -- in the u.s. bear stearns was acquired by jpmorgan. it was soon after that that we first began thinking about what could be the next fall. so many things happened. in some ways you would say we should have been prepared for it, but i don't think anyone in the world was prepared for the devastation that hit the morning after the bankruptcy of lehman brothers and the chaos in the markets. francine: this is why? people did not understand the interconnectedness of banks lending to each other. do we understand it now 10 years on? it is correct that we did not completely understand the

interconnectedness. i think there is a better understanding today, but to say we understand all of the complexity with the interconnectedness would probably be a bit optimistic. francine: at the time we should have seen the vulnerabilities. what do you think is vulnerable now that regulators are missing? we realizede moment there was a problem, i think the single biggest issue for elected officials was too big to fail. how can we be sure that we never again have to put public money into banks or other financial institutions? and is easy to do that if you just make the system completely safe and take no risk. always the challenge has been, i do we make the system and makes safer and founder, while also promoting jobs and economic growth, meaning getting risk, getting lending to the economy? risking a newwe financial crisis or will the next crisis come from the real economy? bob: i think it is probably the

latter. i think today banks, particularly the larger banks, are safer and founder. i don't think there is a crisis with banks around the corner. i do think there is an interesting addition to that thinking, though, which is that if we do have a crisis in the financial markets, it is unlikely in my mind to because by the large banks. it's also unlikely that the large banks will be part of the solution. if you think of the amount of risk being taken today, it's significantly less, and that's appropriate. and the ability to help in a situation like that from the big banks is significantly less than it would have been prior to the crisis. francine: who is part of the solution? is it any regulators or does it have to be government? bob: i think you hit the nail on the head of what the where he is -- worry is. one of my worries is that if you

look at the tremendous success of monetary policy and quantitative easing, and the things implemented by chairman bernanke post crisis, it has been very successful. today we still have 3.5 trillion of assets on the fed balance sheet. inflation is about target. we have just put $2 trillion into the u.s. economy through tax cuts in spending in the u.s. the thing i worry about is if there is a crisis or an accident, or something that needs to be done about the financial marketplace, do we have the tools? have we used all of the ammunition from monetary policy and fiscal policy? francine: would also spoke to michael spencer, bob, and he says he was worried that barclays would not survive lehman brothers. purity is. >> i remember sitting there watching the barclays share price tumbled down and actually

genuinely wondering at the time, is it possible that barclays don't survive this? francine: bob diamond, would you remember those days? bob: i think that was like the next year in 2009, and all bank stocks were week. time,look back at that the first quarter of 2009 was the deepest and artist recession we had seen since the great depression. i think as we look back at it today, it lasted 3-6 months, but the severity of it was real. francine: are we still paying the consequences of the financial crisis now? populismas saying that is because of the financial crisis, the stagnant growth is part of the financial crisis. what do you see? bob: my where he is, how do we move ourselves away from the appropriate measures that were

taken in monetary policy and fiscal policy, and how do we begin getting to a more normalized level of interest rates without scaring the markets. there is a trillion dollars in u.s. corporate debt -- $8 trillion in u.s. corporate debt that will mature between now and 2020. if you weigh all of those things with a significant amount of ammunition used from monetary policy and fiscal policy, a needed to get rates higher, back to a more normalized level in all of the debt that is ready to mature in the next couple of years, we have a recipe for issues. how do we manage through that i think is the single biggest impact of the financial crisis today. francine: when you say issues, bob, is it crunch time for the economy or actually a huge market correction? bob: i think that is the question. we have to continue raising

rates and get back to a more normalized level, and we also have to be conscious of the impact on that, on other factors such as the maturity of debt. francine: muscle memory is a great thing unless it is the only thing you have. is there a danger we are over regulating banks because of what happened with lehman and the financial crisis? and that regulators are missing the next big thing? bob: no, i don't believe that. i think there are differences, though. i think the u.s. banks today probably have recovered more than the banks across europe. i think when you look back on the quick actions around tarp. that was justarp mentioned in this program was about ring fencing assets. i watched as congress did not approve that. was veryd tarp, which affective, was about putting equity into all of the systemic banks.

in order to pay that back to the government they had to clean up their balance sheet, meaning past the fed stress test. until that money was given back to the government there were really no bonuses or dividends. 10 years on, the banks that were probably in the most difficulty at that time, the systemic banks, are today stronger and healthier. we have not seen that kind of recovery across europe. francine: bob diamond from atlas merchant capital stays with us. plenty coming up, including more of our exclusive interview with bob diamond. we will be asking him where he thinks emerging markets are heading and about the portfolios of atlas. life after lehman. we will speak with the former ecb president. you don't want to miss that interview. this is bloomberg. ♪

>> we are at a defining moment>> in our history. our nation is involved in two wars. we are going through the worst financial crisis since the great depression. we certainly have an unprecedented crisis in our financial system. >> we really in many respects lost three out of five of the top investment banking firms in this country. >> giants like bear stearns and lehman brothers brought others like merrill

lynch. >> we warned you just about six weeks ago that this was entirely possible and in many ways, predictable. brothers,me lehman which was allowed to fail, and just last week the treasury decided to bail out aig. >> the ensuing calamity was entirely foreseeable and preventable. this was no act of god. this was created by a combustible combination of private greed and regulatory neglect. >> i would hope that there would be some kind of decisive action. >> this is probably the most difficult environment in the financial markets it that i have experienced in my 30 years in the business, but it is a cycle, and we will get through it. it will get better. >> we must act now to protect our nation's economic health from serious risk.

there will be apple opportunity to debate the origins of this problem. now is the time to solve it. ♪ of thee: those were some u.s. government voices responding to the financial crisis a decade ago. will continue our coverage and bring you an exclusive interview with the former ecb president jean-claude trichet later. let's shift gears and talk about emerging markets. the msci index is down about 13%. the slump is -- the stems in part from the escalating trade tensions. followand russia will with their own meetings on thursday and friday. for more on what's going on in emerging markets, let's bring back bob diamond, the chief executive and a founding partner at atlas merchant capital, which focuses on investments in africa, among other things. thank you for sticking around.

when you look at when you started at atlas merchant capital for years ago, didn't exceed your expectations or was it a disappointment? hasn't been tougher than you thought it would be -- has it been tougher than you thought it would be? bob: we have seen three things come back. one is broken dealers, particularly within the u.s. and europe, operating outside of a bank with a company -- bank holder company. that was a trend for 30 years where more and more of the securities businesses were going into bank holding companies. what was a capital advantage for bank holding companies, particularly the large, interconnected banks, is today a capital disadvantage. whether it is time your gordon gordon u.k. -- panmure and the u.k., the broker-dealer model is something we are continuing -- continuing to be

interested in investing in. if we can find banking platforms in europe without legacy assets, it's a great opportunity to take deposits and get lending into the real economy. as you know, the for systemic banks in greece today still have 63% nonperforming loans even after the crisis. we are not distracted by that. is ahird thing that we see large insurance companies, to some extent, faces some of the same issues as a large banks, which is legacy risk, residency -- legacy assets that regulators would prefer to see got so that equity can be used on new business and shoring up the business. francine: is it fair to say that growth has been slower than expected? you are going to do this big, wide, african-based bank and it's taking longer to put together.

is that correct? bob: in africa it was quite quick to put together. we continue to invest in the business. in africa we are now in seven countries and the performance has been pretty good. francine: are you any closer to taking control of nigeria's union bank? bob: in the past year we have to to 22% from -- from 22% 49%. we really like the investment and management team. will continue to find ways to invest in nigeria and the union bank. ,t's a tough macro environmen for banking, particularly in -- environment for baking, particularly in -- banking it, particularly in nigeria. francine: you are trying to get more than 49%? bob: we can talk about that. francine: talk to me about what else you like in europe.

is there anything else you are trying to buy? bob: we have announced and are hoping to close very soon on a paris-based broker-dealer. front office in paris, a lot of the operations in switzerland, and it works with key banks across europe. will no credit oh in italy -- -credito and credit agricole are examples. to get excellent you need to scale and breadth. to be number one and number two in equity research, for example, if you can get scale an abrupt adth by working with a series of banks together. with are looking to expand that across europe. francine: to getting the brand in other countries?

bob: exactly. there are a number of countries in europe and we are interested in expanding outside of europe. francine: are you interested in italy? does the populace to government scare you off? bob: there are populist issues almost everywhere you look. do we pay attention to those? of course. does that hold us back from investing in italy? absolutely not. we are working with people who really have been real successful builders of baking businesses nejra: francine: he wants a challenger bank, right -- like businesses -- businesses. francine: he wants a challenger bank, right? bob: in many of the periphery

countries where the hit came earliest and the recovery is coming early, they still have a majority of the systemic banks and core banks have very high levels of nonperforming loans. withoutn find platforms legacy loans and legacy technology, we can accelerate deposit taking and accelerate lending to small and medium-sized businesses. francine: where do you think finance will be 10 years from now? do you see a facebook or google coming in trying to disrupt you? bob: we are watching technology, do i think google or apple or other technology firms are going to take over finance? no. do i think banks and financial services companies have be quicker to adept technology? i think it will be the regulated banks that are most adept at integrating technology that is going to be the winners in this.

i think the second thing i see as a real trend is after 30 years leading up into the crisis, where breath and scale was a single most important thing in banking, and it was global, global, global, universal, universal, universal. today the national model seems to be a much better opportunity to drive returns for investors and to get lending into these countries. francine: why? because you understand lending better? because people wants to talk to someone who understands their more local concerns? bob: i think it is that combined with the regulatory environment. the fear of too big to fail continue to apply. buffers at capital that are at higher levels --. francine: how much consolidation are you expecting in europe? bob: there is a lot of talk of it. i think over time it is likely we will see some consolidation

in europe, but i don't see any urgency to banking consolidation in europe until we get stronger banks across europe. i think consolidation will come as a second step to that. francine: bob diamond, the former chief executive of barclays, and the current chief executive of atlas merchant capital. overe u.s., millions -- one million people are fleeing as hurricane florence is set to hit the east coast. north carolina's outer banks are under mandatory evacuation orders and four states have declared emergencies as the storm approaches. initial estimates say florence could cause as much as $27 billion in damage. will continue to follow this closely. we will look at the impact it can have on some of the oil rigs. we will continue to look at the political response. we are close to the midterm elections. and eating the president says or does could impact voter turnout and his popularity come

november. we continue in the next hour. tom keene joins me. we will look at the effects of the financial collapse in 2008. we speak with jean-claude trichet. the pound and it euro are both climbing on the hopes that the u.k. and eu will achieve a more amicable deal than previously thought. there is an anticipated fed interest rate hike later this month. will have plenty more on emerging markets and all of your politics stories. this is bloomberg. ♪

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russia and china demonstrate their unity with the joint military exercise. our life after lehman brothers continues. we'll be joined by jean-claude trichet shortly. this is bloomberg surveillance. i'm francine lacqua in london. tom keene in new york. we take stock of the lessons learned from the financial crisis. hong kong trending into a bear market. there's is not a lot going on in emerging markets. tom: i'm focused on the philippines were we had a breakdown in the peso and a jump in the yield. across america a focus on 9/11 as well. there's the emerging markets currency. we do it out to four digits. turkish lira doing better.

a domestic story as well in russia. let's look at new york. it is raining and it is somber. ceremonies and remembrances in pennsylvania, washington, and new york. francine: 17 years since 9/11. let's get straight to the bloomberg first word news. forecasters say hurricane florence could turn into the strongest hurricane to hit north and south carolina in 30 years. more than a million people have been ordered to leave their homes before hurricane florence comes ashore. landfall is expected late thursday and early friday between charleston, south carolina and norfolk, virginia. his estimated damages could reach $27 billion. president trump is open to another summit with kim jong-un despite stalled nuclear talks. the white house says the president received a warm letter from kim seeking a follow-up meeting.

there is no evidence kim's regime has taken meaningful steps to limiting its nuclear arsenal. china's president xi jinping and vladimir putin are meeting in vladivostok. putin is hosting an economic forum there. he says trade with china will rise to $100 billion in 2018. meanwhile, russia and china begin seven days of joint military exercises today. says he's nuclear chief hopes the atomic deal survives but he says the program will be in a stronger position than ever if not. also tells the associated press that president trump's decision to withdraw the u.s. from the nuclear accord puts him on the loser side of history. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs.

this is bloomberg. tom: quiet markets finally. four, curveegative not doing much, oil beginning to be a story again. i'm looking at the philippine peso as one proxy in the weaker e.m. francine: pretty quiet. a little bit going on brexit. i am looking at the market moves. , butean stocks are steady the dollar has weekend and the pound and euro are climbing on the news that britain may achieve an amicable split from the eu. the brexit negotiator said a deal is realistic and possible within eight weeks. bloomberg will bring you special coverage on 10 years since the collapse of lehman brothers. how someour focus to

of the government leaders responded to the meltdown a decade ago. an extraordinary and perilous moment in our nation's history. >> this is a defining moment in our history. >> the landscape of our economy has been radically reshaped. >> we are at a defining moment in our history. our nation is involved in two wars and we are going through the worst financial crisis since the great depression. >> companies that have formed the file dacian of our financial markets are shrinking overnight. we lost three of the five top investment banking firms in this country. >> giants like bear stearns and lehman brothers brought others merrill knees like lynch and fannie mae and freddie mac. all of you six

weeks ago that this was entirely possible and predictable. first came the bailout of bear stearns, which were told was unavoidable, then came lehman brothers, which was allowed to fail. fannie and freddie organized a bailout of aig. >> what is tragic is the calamity was preventable. this was no act of god. it was created by private greed and public neglect. hope there would be some kind of decisive action. >> this is probably the most difficult environment in the financial markets i've experienced in my 30 years in the business. it is a cycle and we will get through it. it will get better. >> we must act now to protect our nation's economic health from serious risk. there will be ample opportunity to debate the origins of this problem. now is the time to solve it. some of the images of

another time and place. we saw the op-ed by paulson and geithner and company and some of the criticisms and debate 10 years back. that conversation this morning with jean-claude trichet, former president of the european central bank. we are honored he could join us. , the great euro optimist, erik nielsen of unicredit. when europe was flat on his back, nielsen was pounding the table saying it is not that rim. let's start with mr. nielsen. ik, i will start with you. trichet on the state of europe. erik: we have had years from

1.5% to 2% growth, not as much as you would wish but if you look at per capita we are doing as well as the u.s. if you look at 90% of the population -- in america the growth rate is at the top 10 and we do not have the same income distribution issues. trichet, on lehman one of the great observations interview to interview is that the europe banking system is behind the united states is system. what does european banking need to do to modernize, to catch up with what the giants of the united states are doing? you're absolutely right. there is a domination of the investment banking in new york and the u.s. in particular which is part of the cycle because the

crisis was born in wall street. crisis,enter of the which was as grave as the 1929 in the 20th century is born in the u.s.. mind is have to get in there is a big structural difference between the u.s. and europe. in the u.s., at the first of the u.s. economy was made through banks with only 25% of the financing and through markets with 75%. it was exactly the reverse in europe. 25% for the markets and 75% of the financing for banks. that is the first explanation. the recapitalization of banks in europe was much more costly in terms of percentage of gdp than was the case in the united states of america. there are many reasons for those differences.

one reason is the existence of freddie mac and fannie mae, which we mentioned previously. why a large part of the financing of the u.s. of publicmes out institution and not through the banks. of course, the europeans have a lot of hard work to do. structural reforms are of first importance have been decided, including the single supervision authority with the ultimate decision taken by the central bank. disadvantage in terms of structural differences with the u.s. -- they have a number of decisions and i'm very much on the side of the optimism expressed by the previous speaker. francine: the concern at the and, when lehman collapses

market participants and regulators did not realize the interconnectedness of the banking system. what we know about the banking system now? is there a danger we could go back to the 2008 financial crisis? jean-claude: jean-claude: we know we have decided to reinforce the decisions of the ands at the global level through appropriate institutions with the backing of the g20. a lot has been done to reinforce resilience. that if weot suggest had a new shock we would not have contagion. this is one of the emerging properties which comes out of what you just said, the generalized interconnectedness between institutions and markets and between economies at the

global level. be --s suggesting we much we must be prudent and cautious in all respects. i am not that -- myself when i look at the overall global indebtedness when we know the crisis came from many causes, in particular the indebtedness at the global level. importantthis is an point. indebtedness where? are you talking about shadow banking? jean-claude: go to the bottom line. 2007, we had overall indebtedness, public and private, coming 90% from the

advanced economy and 10% from the emerging economy. after the crisis, we continue to grow leverage at the global level, public and private. not exactly the same in various countries. the big difference is the global leverage augments 50% because of the advanced economy and 50% because of the emerging economy. that makes anymore -- an enormous difference. if there is something like the global economy, if the global ofebtedness as a percentage global gdp is a good indicator of vulnerability, then we are in a vulnerable situation. tom: i want to go to your engineering background and talk , let's go in the financial system. one of the great themes of our look back has been the cost of quantitative easing.

was the impact of these balance sheets that draghi and others have to face? what is the impact of those balance sheets on emerging markets? me theaude: it seems to central banks did what they had to do. .hey were in a crisis had not the central banks been bold and swift, we would've had a great depression and we would have been in a dramatic situation for all of our fellow citizens in all advanced economies. the central banks did what they had to do because the situation was dramatic. when the situation is less dramatic, they have to withdraw progressively, which is being done successively because the sequence of events or not the same in the u.s. and europe.

they are progressively withdrawing. there is nothing to say about that. it seems to me that the central bank did their job and in any case the counterfactual would have been much more dramatic. that is absolutely obvious. it is true there is not only central banks. they are not the only game in town. you have all the other partners. private sector. the other institutions, the governments and the parliament to -- and the parliament. they think we are not done. structural reforms are lacking. most of the advanced economy and also the emerging economy are not doing a good job in terms of in terms ofies, augmentation of leverage of the public debt. we have to mobilize all partners to be much more aware of the

fact that if we want to avoid the repetition of the drama which took place 10 years ago, we have to step in. all partners have to step in. , when youerik nielsen look at the vulnerabilities now, is it indebtedness? is it something else? erik: there is some vulnerability because of the indebtedness. it is different in different places. in europe you can argue it is the sovereign that has been expanded to public debt, in america it is the corporate sector. it tells you the interest rate tightening we are now coming into would have different effects in europe and in america. we do not quite know because at the same times -- it comes at the same time as the balance sheets being reduced. as economists, we cannot tell

policymakers with great certainty what the effect on the economy is. it makes it more dangerous than if we have been sitting here 20 years ago. there is more uncertainty in the system now because of the leverage system but also because all of the other things that happened with the balance sheet in terms of the affect on the real economy. francine: we will come back and picked up from there. erik nielsen from unicredit and jean-claude trichet will be staying with us. coming up we will talk about emerging markets and china. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." supplier oflargest semiconductors used in cars is now looking beyond the automotive sector. they plan to buy integrated device technology for $6.7 billion. a california company will help them expand into communication devices. the price represents a 60% premium. --hinese consortium bloomberg has learned yum china has learned the company's yum china operates k mc and pizza hut restaurants. the consortium includes china's public wealth fund. of chief financial officer ing is stepping down in the wake of a money laundering investigation. he will stay in his position

until a successor is found. millioned to pay 900 dollars to settle a dutch investigation into money laundering and other corrupt practices. that is your bloomberg business flash. ecb president mario draghi may disappoint investors who are looking for the euro to go higher. he may do another balancing act when presenting new growth and inflation projections that could show the impact of trade wars on the euro recovery. with us in jean-claude trichet, the former ecb president, and erik nielsen. a very quick question to each of you. what are the consequences we are still paying for because of the financial crisis and is it the loose monetary policy we cannot

get rid of? there are still people unemployed who do not need to be unemployed because we went through this crisis, and the policy was uneven. the central bank had to do too much compared to other agencies. , argue we pay another price which is the regulatory machine and the capital requirements, which had made the banks a lot safer, came haphazardly. there was no limit to what could be thrown at it. now there is a stability of a graveyard where it becomes difficult for banks going forward. thousands of new regulations is an enormous burden on the financial system that should transmit savings into investment. francine: do you agree with that? that the banks are overregulated so the money does not get into

the real economy? one of the main lessons of the crisis was precisely that we had an immense price to pay for the vulnerability of a number of financial institutions. i would not suggest we deregulate. i think we have to stick with to what we have decided and try to have the other partners, as my partner just said, step in. i will not follow deregulation. tom: with it all of this is the state of european banking. i understand you represent unicredit and have to be careful what you say. how close are we to what jean-claude trichet talked about ? how close are we to a unified banking within europe? erik: i think we are some way away.

have beens not european banks. orare one and there is one two depending on how you define it but we are still not within the eurozone. banks become safer when you have greater geographical diversification. there has been a tendency since the crisis -- banks by definition get less safe because ultimately the strength of the underlying economy is the most important thing to make a bank safe or less safe. completed, is not think we still have some way to go. tom: mr. trichet, i wanted to shift gears to the emerging markets. this is the emerging-market foreign spot chart from jpmorgan. it shows classic trichet brutal

moves. you invented the phrase. you have seen the second division and first derivative of change in currency valuations. what does it signal to you when you see three legs of brutal ?oves in weaker em currencies jean-claude: it suggests two comments. it is clear the overall leverage i was mentioning is now in a consider see of emerging economies. all him or to me, including china. then it is something -- all emerging economies, including china. second -- contagion. see the probability of contagion at the regional level

is still there and the correlation between the evolution of various currencies is telling us beware. you are in a new world of interconnectedness. in that new world, contagion goes rapidly as we discovered in the lehman brothers bankruptcy. let's be very cautious and prudent. contagion is always possible. that being said, i will not over dramatize what we are observing right now. francee: do you think should put a canada up for the ecb -- should put a candidate up for the ecb presidency? jean-claude: that is the decision of the heads, whether .hey propose candidates i have gone to that experience myself.

i could see you are very interested in that matter and you had polls on the possibilities. i look at the names. they are good names. it is a decision of the heads of state and government. tom: unfortunately we are front out of time. we have more questions on the ,uccession plan of mario draghi but we are out of time. thank you so much. former president of the ecb. we will continue with erik nielsen. maybe his name is on the short list. let's look at em currencies. this is bloomberg. ♪

tom: we welcome you worldwide on september 11. images from the world trade center. magnificent pools.

i was privileged to see them the first time with our michael mckee who was at ground zero on september 11. really extraordinary to see them in the early morning of this september 11. still moving. francine: it is still moving. i know they will read out names for the rest of the morning. we will keep a close eye on that as we remember that day that changed all of our lives forever. we are on day two of the financial coverage 10 years on. let's take a look back at a few key days. brothers 15, lehman filed for chapter 11 bankruptcy. barrel -- merrill lynch was taken over by bank of america. the u.s. government took control million -- in an $85 million bailout.

ben bernanke and hank paulson testified before the banking committee about the bush ministrations plan to put assets from the banking system. a look back at what it was like during those days at the height of the financial crisis. we spoke with michael spencer. guy johnson asked him what happened. >> all the financial stocks took a massive divide -- massive dive. lehman int exposed to the negative way. , i am down 100ng million quit today -- 100 million quid today. francine: we will keep watching throughout the week. let's get straight to the bloomberg first world news. taylor: more than a million people living in the path of

hurricane florence have been ordered to leave their home. it is poised to become the strongest storm to hit the region and more than 30 years. forecasters say it will make landfall late thursday or or early friday. says the damages could reach $27 million. which of administration is preparing to unwind obama era limits of methane leaking oil wealth. complained that the mandates meant to flight -- fight climate change are too expensive. a federal judge has denied bail for the accused russian spy. butina is the gun rights activist accused of working as a secret agent from moscow.

in the u.k., prime minister theresa may is set for another fight with brexit supporters. in a july, her government said hearts of european union law will stay in effect after the country leaves the block. global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you so much. it is always interesting when you hear the name vladivostok. place where people meet on the eastern edge of siberia. there is the meeting with russia and china. good morning, tom.

we are just 80 miles north of the north korean border they share with russia. all eyes are on the chinese president. it is the third time he is meeting with putin this year. -- sheas talking about noted that china is the biggest delegate -- xi jinping noticed that china is the biggest delegation here. the two are looking for stronger economic ties. they are talking about sending joint ventures worth more than 100 billion u.s. dollars. alibaba to here from to show evennd more night, the two are kicking off joint military exercises. we're talking through 2000 soldiers. the biggest we have seen since the cold war.

alexander say how this is a major milestone. for decades, the china has been seen as a threat. now, they are being seen as an ally to russia. many would say this is a show for one individual and that is for president trump in washington. francine: i was going to ask exactly that. what does it mean for president trump? does he feel alienated. that he needs to have stronger ties with china and how does he do that? >> it is interesting because trump has recently backed out of two massive asia forums. , which obama backed out of. that was seen at the time as a massive win for china and a massive blow to the u.s. it seems that vladimir putin is trying to take advantage of the

angst that trump is causing his asian partners like japan and south korea. all of the countries are here and are talking about stronger economic ties with putin. francine: thank you so much. now is the global economist and author and eric nielsen is still with us. will you look at china? how should we read china? >> i think that the most fundamental question to ask is where is china in terms of its global approach? we are talking a lot about the 10 year anniversary. i see very little of a discussion about what china is doing since they were a big piece of the global stimulus. they intervened in 2008, 2012, 2015. we look at the emerging markets.

we look at the role of the foreign investment. they are the leading nation for many countries and not just developed nations. also emerging markets from africa and across asia. we know they have a strategic plan. think, in terms of your question about whether president trump is looking at this, i think the chinese have an agenda. the question is where are they now? some people are taking the view that the economy is such weaker death -- is so much weaker. francine: if you look at the form, does it mean they are trying to take the center stage? are they becoming the new globalists? >> that is what they are trying to do. it is part of a game plan by the

chinese to shift the center of the universe from the states to beijing. --s is a tom: wonderful to speak to you again. o'neill talks about the growth of china as being important. in your new book, you talk about 21st century growth. these guys are meeting in vladivostok. what is their model for 20th-century -- 21st century growth? >> it is not different from previous approaches. economists tend to look at things from a basic model. we look at capital and labor and productivity. and that basic respect, we know the chinese have -- the story has always remained constructive. in terms of labor market, quality and quantity in terms of

the labor force, as much as it is ebbing and flowing, i think that there is a constructive story there. they have invested considerably in education. with respect to productivity, we know that the story for developed countries has been a big issue. with the impetus of technology, the question is how does that affect productivity and china? layladies structural -- you these structural factors with the idea that government as arbiter of capital and labor. we know that the state is very deeply involved. it seems that a lot of the backbone is something at the top of their agenda. tom: as we look at this dynamic , i go backlling away to your initial effort looking at money pouring in to any part

of the em. vacuum?a fill the if there is a vacuum for president trump, can they fill the vacuum with flows or does china have to take an easterly path? >> the easterly path is happening. markets orng certainly the ones i visited are not sitting around. countriesnize western are struggling right now. if you look at the length of the capital labor and productivity, you would be crazy to be sitting around in any of the emerging markets and waiting for a handout. there is a broader question to be asked about the detention -- the tension between united states and china. that absolutely the case

the united states is a self-contained entity. it has natural resources, it has a skilled labor force, it has a situation where the leading and most innovative companies continue to be born in the united states. they have a constructive story. they have enormous challenges from infrastructure and questions around immigration. i would not count them out as a key player and a purveyor of innovation that is desperately needed to address some of the most seemingly intractable problems the world will face in the next several decades from education and health care and geopolitical instability. tom: we will continue with this. timely to talk to a gentleman who spells his name differently than i do. he is the former governor of new jersey.

as we remember september 11. ♪

francine: this is bloomberg surveillance. k, -- u the chief brexit negotiator said a deal. if -- we areat able to reach an agreement on the first date of the negotiation.

it was an six or eight weeks. francine: with us as eric .ielsen when you look at the brexit went toions, we suddenly, we can find an agreement and eight weeks -- in eight weeks. what does that mean for what we are going to end up with? >> i do not think that is what you discussed in your book. this is the phase of chaos. i think what is happening is in a europe, we always come to some sort of agreement. out, you have to get it around that time. all we are talking about is avoiding a hard brexit. mencine: are you telling

that we talked down expectations to a level that will be taken by the markets to something positive or is it going to be where the rules are so aligned that is not going to be that bad? that because history tells you that is probably where you get to. it is a firm history. they chaos that this organization in london has been so pathetic that one would think they could not do it. maybe the whole thing falls apart. it is an immensely complicate a task. this fragmented and murderous political system here now. maybe it is positive when you are reminded that something could be done. francine: eric never hold back. amisa, congratulations.

where would you start? >> with respect to brexit? and essential problem i am highlighting is short-termism. contrasting the fact that we have these long-term challenges that we know about. debt. like long-term considerations around demographic shifts in technology and what does that mean for jobless underclass. we all know about these long-term structural factors. they will come to roost. we are in the bar at times given where the economy is. that it has been so buoyant. picking up on eric's point, which is spot on, we have a fundamental economic issue we have to get result.

-- we have to get resolved. with the state of the u.k. and itself, politics has interfered once again. short-term agendas and motivations. that is what the book is trying to bridge. these long-term challenges with these short-term focus is an incentives. tom: in vladivostok, the two leaders sit down. if i may, as we see this moment unspoken in russia, the room, is the new american projection to asia. as we pivot so a lot of us that, what does the secretary of state need to do to write the american ship -- to right the american ship. >> i tend to be very pragmatic about these things.

most of the world needs economic growth. that is where there are issues. you see south africa slipping into a recession. the issues around venezuela and turkey. all of these are clouded by an agenda of a reduction of trade and the anti-trade sentiment that the u.s. has embarked on. that is not going to win friends around the world when people are trying to say your outweighs to increase economic growth, reduce income inequality, in a world where the headwinds are against us. tom: thank you so much. we will continue with our monitoring. we have a press conference of mr. xi jinping and mr. putin. this is bloomberg. ♪

tom: putin and xi jinping meet in vladivostok. they begin a press conference

that will be duly noted by the white house and the state department among others. meeting 80 miles north of the border with north korea. nielsen has been the arch optimist and continues to be an optimistic voice on european economic growth. growthlook at economic in europe, it has to be made up of consumption. what is the state of the european consumer? it is always been the idea that germany does not consume. >> i think you are right. consumers are doing quite well. they are not leveraged. their income has gone up quite nicely. said, the germans have held back for a while. just like in america but running a little bit behind, wages have started to go up in the last six

or nine months. in places like germany, you should expect consumption to pick up a bit. trichet avoided our question about who would be on the short list to take over for mario draghi. give us an opinion on which nation will be represented next as president of the ecb. is it germany? >> i do not think germany will be sitting on the next presidency of the ecb. i do not like the question. it is not about nations. it is about finding the best person with some political considerations. my guess is that the french have a good chance. francine: it is the european union. whence you get the job, it does not have anything to do it nations, but it does on who gets paid. >> it of course has a lot to do

with it. -- yous a possibility say it is angela merkel's term. she would rather have a turn at the commission. francine: this is a loaded question, but is she afraid of trump singling her out if they have a german at the head of the ecb? >> no. francine: the trump tweet is not a deterrent? >> no. if you visit people at the chancery at the berlin, this is a german story. she is a german chancellor first of all. her standing and germany usually benefits from trumps rants. tom: thank you so much. thrilled to have you with us. we have much more to talk about. we are looking at the

remembrances for september 11 in america and also the historic moment in vladivostok as mr. putin and mr. xi jinping re-pivot to a new asia. idea of then's return of marco polo's road, here is partly where the road starts and anne's -- start and ends. we talk with william lee of mil ken institute. please stay with us worldwide. this is bloomberg. ♪ this isn't just any moving day.

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america's trading partners and out and adjust to new threats in vladivostok. pugin meets with xi jinping -- pugin -- putin meets with xi jinping. all is quiet on the em front. the pay show -- the peso shows record weakness. it is 17 years on from september 11 across america. this is bloomberg surveillance. we are live from our world headquarters in new york. francine, it is 17 years on. it does not get any easier for those across america touched by the tragic event. francine: it certainly does not. september 11, 2001 remains the darkest day in new york history. itry year, they commemorate with ceremonies all over the

five boroughs. tom: the two foundations are now pulls -- are now pools. the names are on the edges of the pool. it is really quite something. right now, here is taylor riggs. taylor: forecasters say florence could turn into the strong hurricane to hit north and south carolina in 30 years. more than one million people in the region have been ordered to leave their home before hurricane florence comes ashore. landfall is expected thursday and friday. it is estimated that damages could reach $27 billion. president trump is open to another summit with north korea's kim jong-un despite stalled nuclear talks. the white house says the president received what he called a positive letter from

kim. there is no evidence that the regime is taking meaningful steps towards eliminating the nuclear arsenal. china's president xi jinping and russia's vladimir putin are meeting in vladivostok. trading with china will raise about $87 billion to $100 billion in 2018. russia and china begin seven days of joint military exercises today. iran's nuclear chief says he hopes the atomic deal survives, but he warns they will be in a stronger position if it is not. president trump decision to withdraw the u.s. from the nuclear accord puts him on the loser side of history. global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.

this is bloomberg. the markets actually quiet. euro-dollar was a 116. a little that light off of where we were an hour ago. the philippines really having a struggle with peso new weakness. that is something we need to keep an eye on. european stocks are falling. u.s. futures also falling. we had a mixed session in asia. fears are growing over trade relations. the pound is climbing. the euro is up. tom: let me give -- let me do a morning read. we have not talked to kevin cirilli. leonardo of the new york

times with a terse essay on money laundering. most of the what's of secure bureaucrats who the president has tried to discredit also are experts in some combination. one dubiouso say deal was trust $95 million sale of a palm beach house to a only four years after the president but the house for what he one million. -- for 41 million. kevin, give us an overall on where we are with follow the money. what is washington following on the money right now? aren terms of what they representing, it is what got paul manafort. he did not disclose who he is representing in terms of foreign government. that is why washington is in such a period of influx right

now. if you want to represent a foreign government and lobby the u.s. government, that is legal. what is illegal is not disclosing it. that has dramatically shifted the lobbying world inside the beltway. tom: how are they advising the president on this concept of follow the money? >> they are ready for battle. that is why you have seen the president pushed back in terms withtting for an interview robert mueller. that is also why you are hearing the tents hearing -- the tense hearing with justice kavanagh. the supreme court of the united states could see a case meet before the supreme court based upon a lot of the conversations

and wranglings we are seeing, which is why the judge kavanaugh hearings were so heightened. francine: what impact does it have on the midterm election if anything? >> that is a great question. it is one that is hard to calculate particularly in terms of pulling -- of polling. if you look at the progressive left, one could make the case that the democratic base is fired up. you look at a state like ohio where the issue is playing well for the republicans. it has mobilized independent voters. union members. you see that it is playing well for the republicans. i would argue that if you look at the previous races, you would see the democratic base fired up. tom: kevin, thank you so much.

joining us from washington is william lee. we are thrilled to have him here. particularly with the international moment america is in right now. what is the symbolism of pugin and xi jinping meeting at vladivostok? >> right now, the trade battles are over where the coalitions are going to form. xi jinping and putin are trying to position themselves. tom: i do not know who will write the next book. maybe it is the vacuum of civilization. how urgent, important, or discrete is the vacuum of american foreign-policy as we see this moment in vladivostok? >> the vacuum is good work. to fill thetrying vacuum with a different kind of foreign-policy.

policy based on bilateral is him and not multilateralism. that is something the world is getting used to. francine: bill, good morning to you. do you think people are a little bit concerned about the trade and that this will die down that this will not mean that much? or on the other hand, do you think people are underestimating the changes that it will cause to the world economy? >> all this talk about trade and tariffs, i think that is missing the point. the point is where will the trade strategies be for the next century? that is going to be on market access and protecting intellectual property. that is where the big domestic markets are trying to get together and say, how can we provide our economy that gives everybody market access while preserving intellectual capital?

that is where the negotiating is going to take place. that is where the war is going to be fought. francine: what does u.s. foreign-policy mean for the world economy? >> foreign policy is going to be driven by the need to ensure that u.s. industries are able to go in to other countries around the world and do business there and still protect their profit opportunities. also --give their -- foreign policy and domestic policy is going to be interlinked. tom: we are thrilled to have a september briefing with william lee. too much the fed policies. days until20 or 19 the next fed meeting. coming up, we look at the equity markets that will not give up. jonathan krinsky will join us from bay crest partners as we charge the path forward on stocks. this is bloomberg. ♪

taylor: this is bloomberg surveillance. let's get the bloomberg business flash. the world's second-largest supplier of semi conductors used in cars is looking beyond the automotive sector. the california company will help renaissance expand into data centers and communications devices. the price represents a seeking percent premium. a chinese consortium plans to -- bloomberg has learned the group believes that the business conditions have worsened. yum china operates afc and pizza

hut. kkr.onsortium includes the chief financial officer of dutch bank ing is stepping down in the wake of a money laundering investigation. will stay in his position until a successor is found. a probe found that the bank underinvested in compliance. that is your bloomberg business flash. tom: thank you so much. william lee is with us in washington. right now joining us is jonathan krinsky. he is from bay crest partners. he is a technician. before we get to lehman and the part, you have a brilliant of one of your recent notes where you say when you break out to new highs, it matters. it has happened 31 times since

time began. goodis a good single -- a signal. >> if you think what has to happen for the s&p 500 to go at least six months without a 52 week high, that is the bear market. there is a lot of churning and pullback. we had that from january until august. 94% of the time when you have that occurrence, you are higher 12 month later. that does not mean you cannot have a little weakness in between. tom: let's go to the chart. we look back 10 years. the bid fell away with agony in early 2009. i went to focus forward on what you learned as you were within the market. how did you stay in the market and how do you stay in the bull

market right now? >> when you are talking about this bull market, it is very isolated to the u.s. the u.s. markets are the strongest and the world -- in the world. the trends are pretty positive for the major averages. you have to stick with stocks that are upturned. we talked last time around the autos. the homebuilders are breaking down. there are parts of the market that are not as strong as we would like to see. if you're talking about the major averages, the trends are pretty positive in the u.s. wencine: overall given that are 10 years from the financial crisis, are there spots that look as vulnerable as back then when you think the system as a whole has been fixed? >> everyone agrees that dodd-frank and banks have made everything a lot safer. , the economysis and the system has evolved.

what we do not see is that we do not have -- the amount of leverage that is being built up. everyone assures us that it is not touch the payment system. one thing regulators are behind on is understanding what is going on in the private equity world. in 1998, their 8000 was the companies. now, there are less than 4000. you see the massive shift in ownership. i think that is where the next vulnerabilities are going to be coming from. --ncine: what does that mean we worry more on how the world is indebted. >> the leverage being used in corporate america is method. of the gdpc debt ratio is the highest it has ever been. we know that companies are borrowing a lot. what are they doing with the money?

the reporting systems are making it clear what they are doing with it. a lot of it is investment. in the private equity world, especially in the light loans where the cash flow loans are massive, leverage loans are the flavor of the month. what we do not know is who is supplying the leverage. tom: this goes back to buybacks and use of cash. what decision-makers are doing in corporations. that speaks to the persistency of quarter to quarter performance. do you see a break in that or a continuance of use of cash as we have seen? -- what is the biggest question right now is the weakness globally a sign of -- a sign of things to come for the u.s.? we think the u.s. continues to be the best house in the bad neighborhood.

there could be a little bit of vulnerability and the u.s. in the near term. the primary trends remain strong. the data supports higher years later. names --s the big tex they detect names outperform, that is what is driving the. you treat those extended stocks that the market is in love with? >> it depends on your time for an. if you are -- on your time frame. institution,larger the way the market is structured, you have to continue to be with those or you are likely to underperform. francine: if you look at the massive market, the bull market we have seen, what will make it reprice? what is going to be a catalyst for a market selloff? >> this is something we have

talked about for a number of months. it is nothing new. it is the rest of the global markets telling a different picture. you can talk some of that up to -- you can chalk some of that up to a stronger dollar. we last saw it when we had a massive breakdown in the dollar and 2014. that resulted in a bit of a correction. perhaps we see something like that into the end of the year. it is difficult to say when weakness in global markets will spread to the u.s. in the u.s., it is bifurcated. we have seen some cyclical layers in the market starting to break down. that is a concern when you think about what that means for the economy. if you are talking about these market indices, the s&p 500, the nasdaq 100, until the tech names

start to break down, it is difficult for the index to break down. francine: thank you both. them.l be staying with coming up, the former federal reserve governor. we'll be asking him about the trade war and how the fed should view this. that is coming up at 8:30 a.m. in new york. this is bloomberg. ♪

tom: car talk. the only car my father ever owned was a ford fairlane. i was cool for a moment. elon musk moving to -- blackcturing of city and and metallic silver will still be available to be like a ford fairlane and 9057. william lee is with us. this shows the desperation of mr. musk in this debate between public and private. everybody was to go private. >> it is amazing that raising capital is no longer an ipo. it is going private and being owned by private equity.

that is the change in the financial system that the u.s. has gone through. that is what my colleague at the institute and i have been doing. we wrote a paper about why the firms are going private. it is to avoid a lot of the shareholder activist out there. to let managers implement the strategy. there is more to the story because private equity is promising as investors higher returns because the financial hocus-pocus. there is a lot of financial engineering getting stakeholders higher returns. private equity firms are getting stakeholders 60% higher returns than the s&p 500. they have diminished to barely even. that is showing that whatever secret sauce private equity had is starting to run out. companies do not want managers to be in bed with stockholders. id withe in a b stockholders.

the market has been very friendly to musk. he should not want to go private. his legend is giving the company a lot more life than a private equity owner would give him. for other companies that do not have the religious following that musk has, a lot of companies are going private. that is where a lot of vulnerabilities will be. we need to understand where the leverage is in private equity. francine: william lee of the milken institute and jonathan krinsky will be staying with us. this is bloomberg. ♪ xfinity mobile is a new wireless network

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included with your internet. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. tom: september 11 and each name matters behind the banner

remembering on september 11. hockey coach on staten island. each name matters. or than one million people path of hurricane florence had been ordered to leave their home. the storm is taking aim at north and south carolina employees to come -- path of hurricane florence become the biggest stom hit island in years. forecasts say florence will hit early friday somewhere between charleston, south carolina and norfolk, virginia. estimate is that damages could reach $27 billion. the trump administration is preparing to unwind obamacare a making wells. they want to ease requirements forcing energy companies to stop the leaks. industry has complained the mandates to fight climate change are unnecessary and too expensive. a federal judge has denied bail

for a russian spy. barrel -- in the u.k., prime minister theresa may is another fight with brexit supporters. they are gearing up to battle how european union law will apply in britain after the divorce. that parts was said would have to stay in effect. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. the shipping might of the ,outheastern united states joining us is stewart wallace. nots another hurricane, but

hurricane. the arrow points to the huge body of commodity shipping, doesn't it? stewart: also huge amount of agriculture on land. is the biggest turkey producing state in the u.s.. aparts unusual about this from the strength which is now a category five, moving towards a ategory five is that it is direct hit. normally with hurricanes, you get it as it goes up the coast but this is going straight at the coast. speedg out for the wind and total chaos after. learned. have we are we getting any better at watching hurricanes in the business community?

we are definitely getting better, not only in terms of predict to get and thinking about how it will hit and our response, but also in terms of local businesses. this does not have been very often. or three days before it hits the coast and many things could change. it is a very difficult question to answer. it is very unpredictable and will be very damaging. francine: for bloomberg users, you can follow the storm also. give me a sense whether this causes an increase in purchases and whether that leads to a dramatic spike for fuel prices in the lead up. stuart: after the event, trying to get supplies in will be a real event.

the compound each other. and also food. it will be difficult to get something into the region for at least a few days. francine: how difficult is it to understand the effect on retail demand? stuart: at the moment, you would expect people to stock up on water and food and basic medical care. the long-term impact to some extent will be judging what happens to local economy. you intend to think it would be negative, but maybe there are some bright spots. tom: thank you so much. something we will follow wednesday into thursday and friday. something in the vicinity of 2:00 a.m. friday with maybe landfall. bloomberg radio with our meteorologist, it is variable. let jonathan krinsky with us from baycrest partners and build the of the milken institute.

we have an ever rising deficit. i understand it is a blip on the map of fiscal policy, but it is a different policy when you're counting trillions and not millions. bill: people are talking about the deficit ended debt load restricting the u.s. from conducting normal policy. emergency financing and we could hit a recession. talk about temporary measures to boost the economy. i do not think we should look at debt and high levels of debt as a block to the ability to do policy. tom: there is caution on automobile manufacturers.

very cautious on autos, does that include what we see outside of detroit? jonathan: it is european autos as well. they don't look good and haven't for a while. i mentioni was here, it looks ugly. it goes to some of the down the line players as well. it is not great and autoland. francine: what else looks ugly out there? that youanything else wouldn't touch? jonathan: we mentioned homebuilders. they consolidated for the last four to five months and we are seeing a few fresh breakdowns in homebuilders. even in semiconductors which is bifurcated. semiconductors are doing well, but there are others that are in an ugly downturn you have to look into the weeds to find

bifurcated trends francine:. trends. francine: is that the first step that things aren't looking so well? think that is stretching it. there is demand for different types of housing. homebuilders are saying we can only afford to build mcmansions because lack of skilled labor is preventing us from starting a home at a good price. that is where the challenge is for the homebuilding industry, building the right type of home for the audience that is about to come out which is the millennials. and will be look at this forgetting about the hurricane and coming back to the american economy, the great mystery of is down from 4% gdp. how have you recalibrated gradients? jonathan: near-normal -- new

normal should be above 2%. going from 4% to 3% is where everything is projecting. going forward, that is where the fed projected things. the mystery is where will inflation come out? there is nominal gps that will drive policy. mix between rural growth and inflation is still in the air. a lot of the administration is convinced that the supply responses from investment will give us more growth and less inflation. tom: we do charge here at bloom -- charts here at bloomberg. we have one just out of london and we did this with jonathan krinsky. this is the accountable number of turkeys in america for you said the carolinas will be severely damaged with hurricane florence and the turkey population. novemberms to be a -october surge in production of turkeys.

can you please explain this? jonathan: that is ahead scratcher. tom: it is. it somehow plummets. the turkey count plummets into early december. i am shocked by this chart. it is amazing what you can get off the bloomberg terminal. you are not talking about the turkey diet we are on here is that going to stretch out? tom: it is. we are heading into the thanksgiving. they cooked the wrong bird. francine: another subject. daybreak onmberg radio, in the morning briefing, robert moon get you prepared for your business day.

please stay with us. i promise no more turkey charts. this is bloomberg. ♪

francine: this is "bloomberg surveillance." day two of coverage of financial crisis 10 years on. let's look back at a few key days in september 2008. 15, lehman brothers filed for chapter 11 bankruptcy as merrill lynch was taken over by bank of america. on september 17, 2008, the u.s. government took control of aig and $85 billion bailout to prevent the bankruptcy of the nations biggest insurer. on september 23, 2008, said

chairman and secretary testified before the senate banking committee about the bush administration $700 billion plan to remove liquid assets from the banking system. keep watching throughout the week for more coverage of the 10th anniversary of the collapse of lehman brothers. us: jonathan krinsky is with a baycrest partners. we only from the milliken institute is also with us. goodrant may save very point, which is everybody managing the message 10 years on. i get that. nobody is saying, we missed it. oo.t is fine, t what did we get wrong? the importance of liquidity, and it is hard to measure. what was missing was the ability

for traits to be conducted and everyone was suspecting if the partners were credit worthy or not. no longeranks are market makers. if you ask any trader the amount of inventory held for making markets is smaller than it ever was. that going forward will one -- be one of the achilles heel's that will bring on the next financial crisis. you need that trading liquidity. what is the difference between liquidity and solvency? bill: it is a matter of timing. if you want to be able to sell something, liquidity enables you to do that. if i am not worth the amount of money i actually have with my assets and my liabilities don't match, that is seldom seen -- solvency. if i need to get rid of something and sub there someone else wants to buy it because

there is no market and they can't, that is when growth slows down. francine: like 10 years ago, we were slow to understand how a lot of banks were lending to each other and were interconnected. if something were to happen in the real economy, would we be as slow to understand the repercussions within one or two days, or would it take the same amount of time? bill: the one thing we haven't learned is to not fight the last war here we are assessed with making sure banks are solvent. we are not concerned whether or not markets are solvent, especially as markets have shifted more towards private markets. private equity is doing a lot of transactions. pension funds are investing in private equity and the returns are being determined by secondary market trades where markets are not markets, they are negotiated prices. i've it is selling assets to other private equity firms, and those prices don't have the same

price discovery as the public marketplace. a lot of pension funds that are way underwater are looking for higher returns from private market transactions, and we have no clue whether they are valid or not. that is where the vulnerability is. francine: you are telling me we could actually have a repeat, not of the same financial crisis, but a repeat of something of the scale of the 2008 crisis? bill: that is what we do not know. there is not a lot of disclosure and transparency. in the private financial world, there is nothing systemic going on because the banks are not involved. tom: let me come in as we see the moment of sunrise across the east coast of the united states. the vice president will be hosted today at the pentagon. it is september 11. good morning. ♪

>> this is "bloomberg surveillance." i'm taylor riggs. the 2020 beijing olympics are going after one of the biggest makers of ski equipment. an offer has been made of $5.5 billion. solomon owns under sportswear in china. boeing is raising its forecast for aircraft demand. maybe there should be a big effort. boeing says china will need 7700 trillionalued at 1.2 dollars in the next 20 years. that is a 6% increase from last year's estimate. the forecast takes into account the outcome of a trade fight and its impact on boeing.

hedge funds and best performance in august, managers gained 1.1% last month. on average, three .5% throughout the year. that is just behind the top yearly performers. that is your "bloomberg business flash." here is a chart that we can do with jonathan krinsky a baycrest and we can do with this bill lee with us from milliken. in january, the world was coming to an end go to cash, go to cash. we rolled over and it is a bear market and here we are back up at the top. what do you do on those days where it says the world should go to cash. what do you do it yourself? jonathan: you have to look at s.me of the bigger trend

you want to look at some of the market internals to get a gauge for what is working. often times, and declines, stocks are still working to keep you on the bolo side. bullishut this up -- side. tom: i put this up for bill lee. this chart is the mother of all optimistic charts. small business loves this make america great again in economy, don't they? bill: they finally got some attention. tom: they got the president they love. bill: yes, they did. you have to watch the behavior. in the same gets direction, get are the way. watch out for getting caught up

in optimism. are they investing and our the spending businesses? they are for now, and that is a good trend. the optimism and enthusiasm is followed up by actions. francine: thank you bill lee from milliken. let's go back to jonathan krinsky of baycrest. emerging worry about market contagion spreading to other markets? jonathan: there have been prior instances where that has mattered. you go back to the late 1990's. there was an em crises and that spread to the u.s. markets. that did not cause the end of the bull market. as we keep highlighting, for the end of the u.s. bull market, you -- leadershipo stocks stopping going up your you're talking about amazon, apple, microsoft and tech.

they make up two big of a percentage of the market to not matter. i think you need to keep watching em. rest of the world keeps watching and even parts of europe continue to trade poorly. if you're talking about the u.s., you want to continue to focus on the u.s.. francine: if you look at the u.s. in the late cycle and tax cut benefits will come to an end at some point. what does that mean for the markets when that happens? jonathan: we will see parts of the market that are affected more than others. we are seeing that right now. financials are ,nterested -- interesting financials are the only one of the 11 s&p 500 sectors that is not taken out 2007 highs. that shows you how big of a decline it was. tom: be more discerning.

regional banks, small banks, which banks? look at someionals of the strongest but they are correlated. tom: what about jp morgan, apple, amazon? does it act like apple and amazon? jonathan: relative to the rest of the financials, it does. it has been a leadership stock and we like to see more rotation into the morgan stanley's and goldman's of the world which have been lacking. financials is an area to keep an eye and. tom: everyone is talking about in newty storefronts york city, is it a trap? jonathan: you go back a little over a year ago and there was invoiced retail etf's. that was the bottom in retail. tom: what do you see in the short, inverse retail etf?

jonathan: that etf launched almost to the day when retail etf bottomed. tom: i am shocked. checked my pulse. we launched a product on wall street at the absolute worst time? jonathan: shopping, right? jonathan krinsky, thank you. can we get him back to expand on the idea that wall street put absoluteduct at the worst time. that is extraordinary. jonathan krinsky with baycrest partners. much more that we are speaking of today third in america, we look at september 11. the president in pennsylvania, new york city, and washington in the pentagon. ♪

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hurricane florence speeds for the carolinas in what could be the most powerful storm in the area in decades. ahead for a big week of central banks. argentina, to do, russia, and warnst monetary policy as of em risk. the pound continues a rally after a deal could be reached in eight weeks. wages climb with a meeting on deck. to "bloomberg daybreak." anniversary of the attacks. we are looking at the 9/11 memorial. later on, they will gather and read the names and have a moment of silence and the national anthem. alix: 17 years. david: i cannot remember -- believe it. i remember it well. alix: