ea rcting to this very sudden move in rates. more than the multiyear high. caroline: -- joe: green across the board, even coming off of the high levels of the day. all indices green. i wanted to ask mike because i was wondering, are we seeing some sectoral rotation here -- sector rotation? arencials and energy having a good day. between the rates and energy prices that continue to market higher, does this feel like an internal regime change in the market even with the headline indices going higher? >> i think, especially for today, the bond proxies got hammered today. financials are leading and they are happy about the steepening in the curve. i think it is important to go

back to the notion of why treasury yields rose today. we spent a lot of time on the blog making the case that it is more of the road story than an inflation story. is a tough distinction to make. we have had this rapid rise in oil prices, amazon raising wages, so it would be easy to mistake this for an inflation scare. several factors, including the icection to the serv industry data today, and the fact that it is a bearish toepener, all of that seems indicate this is the market readjusting to the notion that thanh will be better expected. not necessarily an inflation scare. i think that plays into the sector rotation of the market as well. caroline: i want to get a take on small caps versus the bigger caps. how has that played out?

mike: small caps came back today. they have been underperforming for some time now. there is a few things going on there. the easing of the trade tensions has sort of a, especially with the new mexico-canada-u.s. trade deal, has removed the trade deal of small caps as the domestic edge against turbulence. one is not enough to call a change in regime, but today -- caroline: it is climbing higher. mike: doing better than the large caps, yeah. joe: i want to look at the difference between the growth -- i don't think you would call it a scared. thinking back to the services, it is striking. the employment number really drawing the best ever from the reading, but not making new highs on the prices. if you are the fed, looking for

goldilocks, that is sweet. mike: absolutely. there are other signals you can take, especially in the breakeven market. there is not the sign of accelerating expectations for inflation. fact -- thatd the coupled with the fact, the highest level for the headed next in years, suggests the selloff and treasuries, at least in large part, i'm sure there are some people worried about inflation does well, but all of these peripheral indicators suggest it is more about growth. the adp jobs number is very strong and it is reinforcing that idea. there's a little to the difference in the way adp and the government computes the especiallys reports,

when it comes to jobs lost temporarily due to the hurricane. it will be an interesting friday to see. it could be a noisy month due to the hurricanes reflected in the government report more than the adp report. scarlet: we are looking at the different industry groups rising , leading the way is energy. if you look at the bloomberg to track commodity prices, crude is down $76 a barrel. brent is a must 86 dollars a barrel. aluminum had a huge rally up by 2%. as we look at rising rates, we .tart thinking about inflation this will be something that companies will be talking about during the earnings conference calls. mike: absolutely. it has been a straight shot up for oil. president trump was making threatening remarks about saudi arabia. the thinking there was that will help the oil price down and

intimidate them into wrapping up production -- ramping up production a little more. it failed to come. even the eia data was not only bearish for crude prices. to see it rise in the face of both of votes -- those things is something to keep an eye on. . caroline: what about the dollar? mike: the euro has been having a hard time because of the italy situation. caroline: did that suck the whole risk on mood because of that italy was a less of a concern in europe? mike: i think so. that is what everyone attributed the risk on sentiment two. italy is a hard situation. especially for a new yorker like me. see today, we are likely to day, weoday -- day to are likely to see more volatility as the italy situation unfolds.

we have to see how hard of a line regulators take on italy with the budget deficit. scarlet: i'm looking at the etf tracking italian stocks ending a five-day losing streak up by two thirds of 1%. mike, thank you. arewhile, stocks and bonds reacting to strong economic data today. private payrolls increased by the most in seven months. rose manufacturing index to a near record level in september. whereomes on a busy week one philadelphia fed president voiced his concern. >> i worry about some emerging market and inflation accelerating faster than i forecast. the broad level of uncertainty down here from people who are trying to make decisions, if we

can create a more stable, certain environment, that's would be good for business and good for the american people. for more let's go to gina. he's not the only one speaking. others speak on the fed. full is your interpretation of the data? >> a really solid adp print. it is so important to interpret the number in context to what we have seen over the last couple of years to what the fed were actually expecting. a lot of them have been expecting a convergence down to roll placement rate. it is something around the --dred thousand level hundred thousand level. we are now seeing a north of 200,000 level. extremely robust gains relative to what they are expecting. that is making them scratch their heads and say what is going on here.

joe: could it be that economists have no idea where full employment this? jeanna: i think that is absolutely the case. we are basically hearing them say that. jerome powell has said they are assessment of full employment -- their assessment of full is highly uncertai n and you shouldn't use it as a guide. the fed president said who knows where full employment is and where this number is. it would be great if we could sustain a 3.5% unemployment without higher inflation. they still think the base case is that there is a risk of inflation heating up at different levels of on implement. i think that will be the debate over the next six months to a year. scarlet: caroline, you mentioned fed officials speaking and jay powell speaking now in washington.

there is a q and a with moderators, so if there are headlines, we will a you know. looking ahead to the jobs report, one number people will pay attention to his wage gains -- is wage gains. when you look at wages, they are a fundamentally important stat to the economy because they inform how much the 70%,mer, something like can power this recovery an extension going forward. they are important because they link into inflation. jerome powell actually questioned it yesterday. ally that thosec two things feed into each other and the fed looks to these wage numbers as early indications of inflation taking off. joe: joe: i know it will not show up in the friday report joe: but are economists saying anything about the ruble effect

from the amazon wage announcement on broader u.s. measures of labor compensation? jeanna: we were just talking about this. caseuld absolutely be the that those wage increases would ripple through the economy. it is like the walmart effect. generally, when you see walmart do something with their in a moment, you can see that in aggregate data because it is a must-have -- massive employer. competitorsl of its to follow suit. you would not expect it immediately, but you would expected within a couple of months after amazon does those wage increases. you would expect competitors to step up alongside them. scarlet: jeanna smialek, thank you so much for joining us. caroline: breaking news. tilray is sinking after announcing a $400 million likeing of equity

instruments will convert -- which will eventually convert in 2023. or hundred are being issued. tilray is a very volatile stock. scarlet: they say they will use the proceeds for working capital, future acquisitions, and general purposes. caroline: and m&a. scarlet: yes. we wanted to note jay powell is speaking in washington now and any headlines, we will bring them to you as they come. that does it for the closing bell and for me. romaine bostick will be stepping in and looking into whether president trump is a self-made billionaire. this is bloomberg. ♪

caroline: live from the world headquarters in new york, i am caroline hyde. romaine: i am romaine bostick. joe: and i am joe weisenthal in washington. caroline: stocks closing not off of the highs. a new record high for the dow jones industrial average. joe: "what'd you miss?" caroline: taxing times. -- talks trump plans about his finances calling the report a hit piece. raised treasury stakes. investors bet on the world's biggest economy. sticking on the yield the scene, plenty on powell. a have him speaking at

particular event today. he is happy with the economy is. inflation is right at the 2% goal so says the fed chair. these are remarkable economic circumstances and he said we are not worried about wage increases driving inflation anytime soon. also talking about the -- talking about a curve. joe: meanwhile, the tax man published the results of a long-term investigation into the source of president trump's wealth. the times claims tax evasion. for more on the story, laura and the report to that covers president trump's real estate information. if investigators were to conclude something even eagle happened here, this many years later, is there anything to do? time,is probably not jail

but we are talking hundreds of billions of dollars fine for the trump family. they need to make their case improve they not only did something wrong but they knew they were doing something wrong. is new question the irs said having to investigate the boss. jeff sessions was in a tough position like this. we will see what they are able to do. when we look at this report here, the trump's statement said the irs investigated this years ago include them. was that the case? time, asious points in the spans three decades of behavior, it may have triggered some small irs attention or did not. been, this has been

audited and put to rest. fred is dead. donald trump's mom is dead, can you let well enough alone. caroline: everyone is dead, clearly. interestingly, we have a quote coming from the piece saying much of the money came from mr. trump because he helped parents dodge taxes and he and his ways around it. can you assess how this is being digested? we have had trump it back significantly about the piece. trump has been critical of this. a littleepublicans be more cautious and not know how

to handle this. they have the power. they can ask for trump's current tax returns. there have been multiple votes on the floor to release the returns and they voted no. if weats are saying retake the majority, we can see trump has been dishonest about taxes previously and possibly doing that now. throw in the concerns they raised about connections to russia whether it be loans or other business dealings. this is becoming a political firestorm on the hill as we head into the midterm elections. joe: you know new york city real estate well. in the the claims made new york times article about various ways money was transferred from fred to donald trump, is this stuff likely endemic in the industry shell companies with price markups and things like that? caleb: the short answer is yes.

there is some examples of the times sites that seem that they are perhaps a little more calculated or brazen than as typical across the industry. one particular example is that they set up an entirely different company designed to inflate the cost of improvements in various rental properties. this is the stuff we see quite often. it is reminiscent of problems kushner had in the last couple of months with the new york department of buildings went after them after filing false people work. tenets there said this thing happens all the time. the trumps are saying that they -- that the fact that they are being specifically targeted, that this is politically motivated. haveine: trump's lawyers been saying be's allegations are 100% false. you talked about how there could be an investigation made and there is only one underway.

laura: trump has already been investigated and the new york and city state and taxing authority are looking at this. you could see a big investigation come out of this. the irs has not said what they will do and they keep their cards close to the best so we will likely not know. these things could take months or years to move forward on this. they are also assessing what they can do. they don't have all the documents the new york times has. caroline: laura davidson, thank you from washington. and, caleb, you will be there with us. romaine: breaking news with us. tilray out with earnings reports and seeing revenue for the third quarter forecast. 10 millionn at about to $10.5 billion. the shares dropped before this and the company said it will place about $400 million of

convertible senior notes onto the market this year. they are saying they have cash on hand as of september 30 of about $118 million. joe: this number is underscoring how tiny these companies still are. quarterly revenue of 10 million home0.5 million driving the full point that the current market cap for the companies is entirely based on expectations. we will see how that debt is used. we will keep a close eye on it. this is bloomberg. ♪

caroline: we had plenty of fed speak today and the viewpoint has been added to. on exactly this because the u.s. dollar has reigned as the incumbent global currency making up two thirds of international debt. we see similar amounts of global reserve holding. our next guest is here with our next story. remind us why the dollar remains so important when he was economy has become less significant when you look at china and the rest of the world. >> in world war i and world war ii, the dollar gained as the british pound faded. continued, even as the gdp that the u.s. represents declined. this is kind of a path dependency. once you establish yourself, it

is convenient for the world to have a single currency to act as the highest. part of it is that the u.s. remains important and the u.s. is strong militarily and diplomatically. there are reasons you would want to be linked to the same currency as your ally. findeven russia and china it convenient to be connected to the dollar. joe: peter, are there any other currencies coming anywhere close to encroaching on the dollar's role? peter: two obvious candidates would be the euro in the chinese yuan. neither case are they a threat. the case of the euro, the problem is that there is no country backing it. there's a monetary unit but no fiscal unit as we point out. no taxing or spending authority. in the case of china, the

economy is not open and that is a function of the government not being open. i think as berkeley pointed out, the reserve currency of the world has always been that of a democracy. theine: when we talk about potential for the u.s. to lose the reserve currency status, in addition to the fact that there seems to be no viable alternative, but there any governments that want to take on that role? --er: what they don't want it is hard to see they would want to take on that role. he went to gain a little more independence with the united states. that is the theme of the story. what we have is jean-claude absurd thatng it is a european company would buy a european airplane in dollars. , is the reserve currency status that's great? -- that's great -- that great?

peter: there are pluses and minuses. the minuses are that when you have a reserve currency, it means you are having to supply a lot of your currency to the world. you do that by running chronic train deficits. that is how countries are able to acutely dollars to put into their foreign exchange reserves. having chronic dollar deficits is not a good thing. it's good undermine confidence in your currency. caroline: peter, thank you. it has been a great story and timely where we have the fed talking to the reserve currency issues. peter coy, thank you. coming up, italy case to europe. the prime minister says the government has discussed ways to lower the budget deficit targets

for 2020 and 2021. we will have the details. this is bloomberg. ♪ is bloomberg. ♪

mark: i have your first word news. president trump remarks about christine blasey ford are drawing fire from both sides of the aisle. house push back against criticism that the president was mocking dr. ford when he addressed a rally in mississippi. she has accused brett kavanaugh of sexually assaulting her when they were teenagers. is by thean event atlantic magazine, lindsey asked what he thought of the president's comments. >> sometimes people are accused of something they did not do. president trump went through a factual rendition that i did not

like and i would tell him knock it off. you are not helping. mark: the house also insisted the president was reciting what dr. ford said her and her testimony last week. controversy over judge kavanaugh's nomination has led tighten security at the capital. some senators use police escorts to shield them from protesters. dozens of protesters have been arrested and they step up their presence -- and security steps up their presence. mitch mcconnell said senators will not be intimidated from doing the jobs. dozens of people gathered in moscow to mark the 25th anniversary of an attempted coup. the service was held in remembrance of those killed in the violence. in 1993, the soviet parliament was locked in a power struggle with their president. that president issued a decree disbanding parliament, but many to leave theused

parliament building. electronic devices sounded off across the united states this afternoon as the federal emergency management agency conducted an emergency test. pm and theat 2:18 subject read presidential alert in the text read this is a test of the national wireless emergency alert system. no action is needed. in the meantime, a federal judge from doing the test. >> people don't have the ability to opt out of these alerts. if we have the emergency system in place, why a presidential alert? as we heard from fema, clear definition of protocol and the committee to approve the president's messages is our concern.

the cupe judge called to additional questions raised by lawsuits significant and urged begins to hire attorneys to pursue the claims. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am wrong crumpton -- i am mark crumpton, this is bloomberg. romaine: tilray is probably want stockshottest stacks -- and they came out with preliminary results. number is common at about $10 million in revenue as the projection for the third quarter. what it reported in the second quarter. here is greg from the cannabis industry and joins us now. >> this is a company that's worth almost $15 billion in the sales were better than estimates, but the valuations of these companies are trading on

future potential of the markets opening up. not a marketing canada is enough to justify these evaluations at this point. joe: arguably, the big story is the fundraiser. these. see a lot more of when your equity is valued so much, you should issue more of it. craig: there is no question this has been one of the hotter stocks. legalization in canada is only two weeks away. these guys will have working capital and paydown mortgage debt. i think you are right as far as striking while the iron is hot. caroline: they are paying 9 million of mortgage debt down yet they have to convert more than $400 billion -- million dollars. acquisitions they say they will make. do we know where? craig: there are a lot of

companies to buy in canada. bigger you will see the guys get bigger. at some point, they will figure out ways into the u.s.. that is very tricky because the border is a problem with the federal prohibition. there is a lot of companies that have a presence and that is the affective market. the california market is already bigger than canada. the border is very tricky place. romaine: we look forward to consolation earnings tomorrow morning. craig: canopy's neck in the with valuations of tilray. we will see -- canopy is the and neck with neck and valuations of tilray. we will see. caroline: tilray was trading up today. what a ride we have had over the last -- romaine: still up 822%. caroline: always good to put it in perspective. greg, thank you.

aig,s shift gears -- cr let's shift gears. guest on the analysis of of the eurozone, he joins us on the phone. they went in hard with italy. they said they wanted a budget deficit well above where the eu would want to allow. >> they are sticking to their original plan of having a deficit of 2.4% next year. they are saying their budget and economic plans are so good that tilray will grow so much in the economy will perform so well that the deficit by itself will decrease as a percentage of the italian economy in 2020 and 2021. ofy are making a promise now

something that will happen a year and a half or two years from now. to me, this is mostly a signal they want to look at the financial markets, and this is not written in stone. i think you hit the nail on the head. when they talk about deficit promises two years out, there is only so much they can reassure. to the degree they want to play ball into the agree they are not being antagonistic with europe, is that something that will reassure investors that the government is not trying to start trouble? adriano: it seems to me that investors are clinging to what good news they can get. beforeeven the reaction -- reaction to the rumors, those rumors were enough for the euro to go up. investors are trying to look for any good news they can get.

i would say that the fundamental problem connected to the italian economy is that they have a massive level of public debt. the economy is not growing enough. it is an antiestablishment government challenging eu rule. the concerns about the future of italy are still there. side of the world is not trading on the deficit or fiscal issues. they are trading on the political issues. cannder how soon italy resolve some of those political issues not only within their own borders or within the eu more broadly. adriano: italy has a correlation government with two different political parties in two different agendas. that conformsarty -- to italy's

wealthy. the other member of the coalition is particularly where the the south economy is not doing as well in the north. each party is promising to increase spending and unemployment benefits. you can see there is a problem there because there is a party that wants to cut taxes and then increase wealth. the compromise will invoke a change of direction in the italian fiscal policy. that is why the european commission is concerned. joe: you mentioned the economic --ubles in the high-level and the high level of public debt. could there be upside surprises in italy? earlier this week, we got the italian unemployment rate coming in much better than expected at

9.7%. versustill elevated precrisis levels in 2011. italiansre be a lot of who reenter the workforce and stimulate the economy in the next year or two? adriano: that question has different answers. on one hand, a significant part of italy's economy growth in a few years is the result of policies like the european ortral bank's qe program because of an environment in the eurozone. not necessarily due to reforms the government does to make it more competitive. there are several external factors that have an effect on what the italian economy -- if the government starts funding money into the economy, there is

room for growth. that is for sure. the big question is, what do you do with the next economic ?ownturn you find yourself with a very high deficit and little room for maneuver, and you may have to go back to the policies that in the the anger electoral right and brought the concerns up in the first place. you for bringing it all to us in terms of italy. the oaktree ceo says he is fine more buying opportunities in selling. where he is putting his cash next. this is bloomberg. ♪

caroline: howard marks has a message for investors. he recommends taking a cautious approach to the market right now. we spoke to him about his warning. >> i am calling for caution. to be an alarmist, and i do not think it is appropriate, but the economy has gone upward for almost 10 years. the markets as well. the too much money phenomenon is underway. it would be a mistake to have as much risk in your portfolio today as you did two years ago, five years ago, or 10 years ago. you have to a gallatin that. today is not the time for max , -- full risk, or

for evenly balancing offense of and defense. your portfolio should be skewed toward less risk, but not extremely. >> you wrote a memo back in february of 2007 and you cited in this memo, and the many conditions you described back then are the same you see today, so what i'm getting at here is oft even before february 2007, oaktree was selling assets. you are getting liquid and raising money, a lot of money as it turns out. what is oaktree doing today? are you selling? wewe are selling assets but are also buying. we are selling more than buying. we are buying bargains when we can find them, but it is not easy. we have raised another distressed debt standby fund. this time only 8.5 billion.

i can't claim presence -- presidents to the time -- pre cidents to the time. we are waiting and i think our clients are happy to wait with us because they want the edge, money convicted that's committed to a fund -- money committed to tough.when things get caroline: it seems he is on the fence. romaine: there seems to be a tone of fear missing out here. he has obligations with clients and with the market at record highs, you have to be in the game. caroline: joe? joe: you didn't get that you do get the sense that investors feel this pressure to take risks higher. there is a narrowness of the market, but it seems like if you can afford to buck the trend as

howard market sees it, -- caroline: he has eight and have million to put to work -- eight and a half million to put the work. abigail? abigail: joining me today is the head of tech at oppenheimer. thank you so much for joining us. one of the big themes this week is that you were telling us your clients have been asking you a lot of the selloff in small caps while the dow has carved out a record high after record high. >> nonstop emails this week worried about the underperformance in small caps. not a worry. here is why. is a long-term chart going back 40 years. the blue line is the relative ratio of the s&p 500 divided by the russell 2000. this uptick is the large outperformance versus small cap. this is what people are worried

about. it is barely noticeable. it is a drop in the bucket. that is .1. .2, i would make the case that outperformance is good for the market. throughout the secular rise through the 1980's, into the late 1990's, that was coincided with a rising blue line. large cap outperformance. even in talking in absolute terms, the russell 2000 pages small-cap stocks. i would say the uptrend is still intact here as well. abigail: that is a great analysis. thatif it's to some degree the selloff in small caps is not necessarily risk off because it has been an even trade around trade tensions. here we have an interesting chart as well about the 210

spread and yield is a big story on the day. ari: another big controversy. people want to know about growth versus value. outlook,oking into the it's important to understand what it is traded off of. the white line is the russell 1000 growth index divided by value. i overlaid with doug to 10 yield curve -- with the 210 yield curve. as the fed tightened interest rates, the yield curve has flattened and growth has outperformed. to make the case you will get this reversal into value, you have to be making the case that global growth will accelerate in the curve will steepen. -- and the curve will steepen. i'm rooting for that scenario. the market is signaling growth outperformance. i think the curve continues to flatten. abigail: you have made an

interesting point off air that we are at this point in the cycle and you have been so bullish and right. are we at the end of the cycle? even if we are, you have a way for our viewers to play it. ari: that is right. with this blessing yield curve, we see late cycle conditions. -- flattening yield curve, we see late cycle conditions. here is the ishares momentum etf. this is what we recommend to clients all of the time. even for the coming quarters as well, what is to note? momentum is hitting a new high. this is an adequate of market leaders. we are below the january peak. this is telling that the etf is out to new highs. they are stepping higher in a very steady manner. i think momentum continues to dwell on this market.

abigail: so if you buy this, you are buying facebook, cosco, netflix, amazon. a really nice aggregated by skit -- basket. ari: it gets rebalanced twice a year and there are adjusted returns over the prior year. lead, andntinue to there is a lot of value stuff in there as well. there are financials and you are buying the leadership in financials. abigail: thank you for your three charts and this momentum idea. back to you. up, a missingng blockbuster actress and millions and fines. how china is making an example of one of its famous tax evaders. we will have a preview, next. this is bloomberg. ♪

caroline: the chinese government is making it clear there is no

superstar exceptions under the law. after months of silence, a celebrity was welcome back -- welcomed back with a $70 million fine. she is a huge actress and suddenly disappeared. >> we have been following this story and i think romaine was also. we are wondering where was she. in the x-mentress series and she starred as blink. i think that is the only time i have watched her. she is huge and -- in china. she has 60 million followers and people are asking if the chinese authorities detained her. has vowed tot and overcome the difficulties to pay the taxes and fines. the chinese authorities are saying she dodged taxes with the yen and yang contracts.

joe: with the fine, was there anything else she had to do alongside that and issued free to tweet again and be in movies and all of that stuff? >> she is good to go. the tax authority is saying there are no criminal charges as long as she pays the fine. also, when it comes to other companies related to her, that would be $130 million, or agent was not so fortunate. he is being detained right now on suspicion of criminal activity. romaine: didn't all of this start on weibo? yes.: there was a retired news anchor who posted snapshots of the contract where she was expected to be paid more than $7 million for an upcoming film compared to

the contract she would show to authorities which was only about $1.5 million. that started the whole controversy and she disappeared on social media. this says a lot about the chinese film industry overall. caroline: this is a global issue, the film industry innovating taxes. using her asey are an example of other celebrities that could do that. the china industry could movie market..s. -- u.s. film industry. caroline: thank you. you do not want to miss "bloomberg daybreak: australia" and daybreak: asia. meanwhile, do not miss this. constellation reports its

fourth-quarter earnings after the bell. for "what'd you miss?" romaine: "bloomberg technology" is next. joe: and goodbye from washington. this is bloomberg. ♪ ♪

emily: i am emily chang in seattle for the geek wire summit. technology."mberg seattle is home to tech behemoths like amazon and microsoft, but with a small venture capital community, can they set the stage for the next amazon or microsoft? we will discuss. ons, boeing's ambitions their plans for hypersonic planes,