we can see strength. even without that cat. if we hear anything about a hike, people would not be happy about it. caroline: coming off record highs. we had a significant move during the press conference. at one point about a 30-point move on the s&p 500, but it feels like the risk off mood caught the market. joe: again, it's not nothing, but in the grand scheme of things and compared to the extraordinary rally we have seen across the indices this year, it is pretty mild. scarlet: along with the moves south in stocks, we have to point out treasury yields have moved to session highs as well. remember, at its low today, it , 7%. 2.203

the bloomberg dollar index now gaining .2%. : big sort of whiplash almost to some extent. abigail, what were you watching? abigail: technology. the intraday reversal's the tech sector earlier today. have doubt by apple in the apple complex. basically, one point 3% reversal. even 1.4% reversal. we put it into the context of the s&p 500 technology sector chart over the last year. it's not entirely surprising because we were looking at readings earlier this morning. we also have an all-time high earlier today and several times over the last couple of weeks, but this comes as we have the first maxi cell signal since the end of march and we are in overbought territory but looking at lower ties. that suggests there could be more of a pullback ahead.

scarlet: taking a look at apple trillionver elusive dollar market cap club. apple has only been able to hit it about 65 times relative to microsoft, which only hit it about once relative ds today. this comes as apple talks about share repurchases. you can see the stock buyback at 217. microsoft mentioned yesterday, also hit $1 trillion but failed to reach the level again today. with big tech leading gains, we're also seeing futures. romaine: i'm taking a look at hilton worldwide. shares up about 6.5% today on the back of an earnings report that was kind of mixed. revenue per available room actually only rose about 1.8%. they recorded a lot of soft demand from corporate clients as well as international travelers, so why did shares rally at a record high closing today? and a lot of it has to do with licensing these, managing fees

and credit card fees. we saw a lot of strength and remember, hilton has been trying to move to an asset light model -- i it is more reliant on am in models it owns and more mayan on models where it licenses out its name and collects on fees. scarlet: thank you so much and he wrapped up just in time because we have earnings from qualcomm. the encoder adjusted eps 77 since a share. oflysts were looking for eps $.71. adjusted revenue for the quarter, 4.88 billion dollars, beating the highest analyst estimate. on average, analysts were looking for $4.8 billion and we are looking at qualcomm shares, up by better than 2% at the moment. caroline: we are going to want some sort of lip service paid to the settlement with apple. we got hardly anything from apple in terms of the prepaid qualcomm. will qualcomm spill the beans? joe: this is a stock up 50% since the settlement.

scarlet: paring some of these gains a little bit as we continue look through the earnings release, still with us is stephen whiting of city .rivate bank you talked about how we knew 2018 earnings would not be great. what do i earnings look like right now given that we are about halfway through? stronger than consensus for the quarter. quarters of30 nine that happening in a row. the gains of large which tends to be what we see in the first quarter, so i think again, the final quarter will show about a 2% year-to-year gain, but that is with at least a 25% drop in the energy sector, which we think is history, given what happened with the oil price. going forward, we probably end up with a 4% to 5% eps here in the united states. you have to remember, last year, share prices in the u.s. market down 6.5 p globally, down 10.5. these are the kinds of reactions you get when you think you have reached a peak in earnings. we are not up a lot, but i don't

we even have to assume 2020 is a down year for earnings given what has happened. the fed has swerved on taking us off the cliff. again, you can quibble a little bit about should they do more or less, but we were on the wrong track that knocked markets down and we can have market expansion if earnings are going up, not down. that is what is going on. joe: come in on earnings and the fact that we do not need to have amazing earnings to be better than where a lot of people assumed at the beginning of the year. sarah: right, small growth is still growth. when you look at court is not coming in negative, people are pretty happy about it, but i was speaking with someone today who described growth as anemic and i've been hearing investors start to bring up currency headwinds because the dollar is still strengthening and now people are starting to consider if we do see the dollar breakout, what does that mean for the second half of the year? i have spoken with investors who are saying we have not seen many of the downgrades in the third quarter, the fourth quarter to earnings as we have in the first

and second quarter, but if we do see the dollar somehow continue to strengthen and break out of the range we have seen, there is the potential we will have to later outr downgrades in the year. joe: worth noting that the dollar, like every other market, flipped, talking about spiking to near its highs of the day, so that concern obviously is not about to go away. >> to assert a certain extent, that is what revenue concerns were based on. are you watching the dollar, watching the margins? >> exactly. i'm glad you reference that. when you see chairman powell's commons, when you see his optimistic view and i'm not going to worry about the downside sensitivity. you have seen press conference after press conference getting you this kind of reversal up in the u.s. dollar which provides a modicum of restraint, including on earnings going forward, so that is where i think you are

seeing reaction. caroline: we have more earnings coming in a moment because we are seeing first quarter payment volume jumping for payment company square. they see second-quarter adjusted revenue of 500 $45 million to 550 5 million dollars. just shy of analyst estimates. square is one of those companies that moves in a volatile fashion. we have seen it be the dollar -- the darling of the markets. joe: what is interesting about square is a got clobbered in q4 of last year like all of the other hot tech. it has not rebounded in the same way. it is well off these all-time highs, so a long way to go there. the market has not embraced this company the way it has many of the other companies that got hammered. scarlet: a lot to do through as we look at earnings from qualcomm, square, and also consider again the news conference from jay powell. what is this mean for the jobs report friday. does it take on extra importance? >> i think it does because the

data had been highly confusing. extra strong gdp in the first quarter, despite them a cyclical parts of the economy showing their worst readings of the entire expansion. we saw declines of consumer durable spending, another declining residential investment, and still, you manage this high headline. today's i is an report, you heard jay powell talk about reduced trading strains -- today's isn report. the report is riddled with concerns about the border dispute with china, -- the border dispute with mexico, china, etc. if markets move up and are optimistic, policymakers need to worry a little. scarlet: let's recap some of the numbers that did come out in the markets during the close. qualcomm had second-quarter earnings and revenue higher than analysts estimates. it also gave a third view that includes a revised or $.5 billion or $.5 billion a $4.7 billion on the apple settlement. it seems third quarter none gap -- qualcomm has reversed

its gains and is down 3% in after-hours trading. we want to say thank you and asdbye to stephen whiting well as bloomberg's sarah ponczek, our cross asset reporter. that does it for the closing bell and for me. romaine bostick is stepping in next four "what'd you miss?" -- for "what'd you miss?" this is bloomberg. ♪

caroline: live from bloomberg

world headquarters in new york, i'm caroline hyde and here's a snapshot of how u.s. markets closed down on the day. it seems as though potentially and insurance rate cut is on the table. chairman powell seeing no strong case for a rate move in either direction. meanwhile, steve moore's chances of a fed seat sink as republican lawmakers voiced doubts. most valuable u.s. marijuana company is making a billion-dollar bet on cannabis oil. let's get back to our top headline. the fed leaving the main interest rate unchanged, pledging patients as it grapples with conflicting currents in the u.s. economy. let's listen to the the fed chair speaking about the fed decision earlier. >> we do think our policy stance is appropriate right now.

we do not see a strong case for moving in either direction. the weak first-quarter -- second quarter was not expected, and i do not think it is related to anything we did in terms of raising rates. some of it does appear to be transient or idiosyncratic. the financial system is quite resilient to shocks of various kinds. if we need to and is needed, we will use our tools to keep the ineral funds rate somewhere the target range. we will do that. do not expect me to do it again, but we don't know. we think our monetary policy stance is in a good place and we will be patient. we do not feel like the data is pushing us in either direction. of course, we will not hesitate if we do feel the data justify moving in a different direction. : let's bring in the head of u.s. rate strategies at bank of america merrill lynch. great to have you with us. i'm looking at the two-year yield. give us your marks out of 10 for

.ow jay powell handled today >> i thought he sounded a lot more confident in his messaging, and i think what the market was really telling you is after the five-basis-point initial cut reaction that the chair sounded on net more hawkish than the market was anticipating. the chair really give the market no reason to believe in the idea of a preemptive rate cut, at least one that would occur imminently, and as a result of that, markets had to price out some of the risk that the fed would be lowering interest rates further than what they did through the small technical adjustment made today. joe: as you said, he is sounding a little bit more hawkish. i understand why the fed does not what investors to become too complacent or want to put policy totally on autopilot, but does even if it shift, was ultimately kind of subtle, undermine another point, which is that they want the 2% inflation target to be symmetrical, and they typically only miss in one direction?

>> yeah, that's right. it is a real challenge. he received a number of questions in that regard, so the fed is worried about the idea that they will persistently undershoot inflation, so i think this is the message the chair wanted to deliver today, that they still remain confident in their forecast. they think some of the downward pressure on inflation that we have seen over recent months will be transitory. it will aid over time, and as we get closer to the end of the year, we should expect inflation to gradually rise back to the fed's 2% objective. the fed saying they're going to stay on hold before they prejudge before they decide to make or give any type of signals available move in one direction or another, so still very patient, on hold, which contrasts to what the market is anticipating. -- the chair really gave no fodder to the market.

you mentioned the interest on excess reserve rates : you mentioned the interest on excess reserve rates. we had a column basically making them are -- the argument the fed should embrace the i/o we are in the way the market has. do you think the fed funds rate is right now still effective as a communication tool? no, i don't. i think the fed funds rate is highly idiosyncratic and does not really reflect what the fed thought that it did in the precrisis days. fed funds are supposed to be in interbank borrowing and lending rate and volumes in the fed funds market are very low. it's really dominated by one the lender, the federal home loan bank system, and it does not really accurately reflect, at least in my opinion, when banks have a true demand for funding, target and still the i think they are getting frustrated with some of the idiosyncrasies it contains. it's one of the reasons why the minutes has reflected the fact

that the fed might consider targeting a different rate. they have talked about targeting the overnight bank funding rate, which is a close cousin to fed funds, but has a much deeper volume days, or they mentioned potentially targeting a repo rate such as secured overnight financing rate which we know is the preferred alternative to libor, so the fed is going to have a rethink about what the rate is they are targeting, by they are targeting that, and these of the decisions the fed has coming down the pike for them. the only other thing i would add is that i find it personally is it notable that each time chair powell has made an i/o we are adjustment or the fed has made that adjustment, they say they do not expect it again, and he reiterated that today. if you go back and look at what he said in june when they made the first i/o we are adjustment, he said we do not think we will have to do this again. in my mind, it raises questions about how well the fed does truly understand liquidity

conditions and demand for reserves and the banking system, and it raises the risk that they need to make a broader adjustment such as rolling out a standing repo facility as he mentioned in today's press conference, or potentially stop the balance sheet unwind early or potentially seek to grow the balance sheet earlier than the fed has been anticipating. i think the aisle we are adjustment just revealed the fact that the fed still has a lot of important thinking to do around the overall amount of liquidity in the financial system. : we always appreciate your insight. we want to get to some quick breaking news on metlife, the largest u.s. life insurer. reporting adjusted eps of one dollar 40 a sense, above the $1.27 analysts were expecting, and they also had equity of about 10.3%. joe: coming up, we will speak to about theife ceo company's massive that on we

oil. that's next. ♪

joe: the most valuable marijuana company is making a big bet on marijuana oil. the largest acquisition so far between the u.s. cannabis companies. joining us now, the ceo of the company. thank you for joining us. tell us about markets in the u.s. where cannabis is legal or even in canada, about the demand for oil products and why you are making a big bet on that form of consumption. >> and put me, the u.s. is the fastest-growing cannabis market in the world. support a don't

use today, so there is increasing demand and it really is in the form of vaporized oil products. that is the choice for the new consumer because you are not smoking anything. >> are you talking recreational or medical use or both? >> really both. patients prefer a en -- pen 10 --p versus a plant solution. caroline: how can you ensure the brand beats others? cannabis will be commoditized over time, but i think there will be tremendous value in how the brand interacts . we believe in the brand. it's the biggest on the west

coast and a portly because we fragment is goes, we're excited about the opportunity. joe: how frustrated are you about stalled legalization efforts in new jersey and new york and how long will it be before we can walk into shops and see your products in recreational stores? york,new jersey and new our priority is to serve medical patients. we think there is a terminus a lot of growth ahead of us. there's more and more medical patients adopting every single month. we will let the government figure out and what place and time of don't use will be implemented in those states, but to be honest, it's not a big priority for us at the moment. : there's so many players and different facets in you look at the industry. the stateing, given of legalization in this country right now and regulation, is it wise to move toward consolidating now or should some

of these companies wait a little bit? >> it is a highly fragmented market, but i think consolidation is important because we can get operational efficiencies. we are running a business across 15 states. if we can put together, and teams, share space, have, purchasing power, we can create returns for investors, so i think consolidation will continue and only accelerate in the next couple of years. caroline: you said it is not really a priority right now in terms of recreational relation coming through. you will leave it to the states and federal government, but from a medical point of view, is it not also frustrating that we are not seeing changes as quickly as anticipated, and does not -- does that not vindicate the sort of prices you are paying out? >> i think it's clear there are medical benefits to cannabis. there are 20 million veterans in the country that cannot use cannabis legally because of the federal prohibition. we are frustrated and we need change because this product has its place in the medical

community. caroline: do you think you will get that any time soon? house willistic the show leadership this year. i think you will see a couple of bills come out of the house this year that are pro-banking, pro-state approach to cannabis. mitchhave to see what mcconnell does. i'm optimistic the house will show leadership. joe: we saw canopy make a fairly extraordinary deal. have any canadian companies approached you about something similar reactor is that something you would explore, some sort of link up theingent on eventually federal government de facto legalizing it? >> we are focused on legalizing our strategy.

our goal is to create the most accessible brands in the industry and we will be doing that securely, our goal is to execute our strategy. romaine: do you think the political environment will be ripe enough to do what you want to do? >> we are headed into election season so it is difficult to predict, but i know there are 33 states with medical programs, the vast majority of those laws are in place because the people voted for them at the ballot box. congress has to get in step with the american people that wants cannabis. caroline: what is the biggest challenge to your business? >> honestly, it is boring, but it's operational excellence, executing across 13, 15 states at the same time. you really can be index. company if you can drive margin and do things across markets. that is what we focus on. -- you really can be in excellent company. where it ismarkets legal, what is the primary way

you establish a brand as being better than another brand? >> as an example, select and their chief marketing officer will be joining us. he comes from apple. the same way any other consumer product is marketing, they are doing that with select. romaine: coming up, we are headed to us and to do. we will hear from a republican senator coming up next. this is bloomberg. ♪

♪ mark: i'm mark crumpton with bloomberg's first word news. during his performance today before the senate judiciary committee, attorney general william barr testified he didn't feel there was enough evidence to prove president trump's instructions for white house counsel to remove robert mueller had "corrupt intent." , when he march for came over the apartment, and we were frankly surprised that they were not going to reach a decision on obstruction. we asked the basis for this.

is also asked to appear thursday before the house panel, but said he wouldn't testify before the committee insisted on having its lawyers question him before the panel. emergency border funds. according to a document obtained by bloomberg news, the document doesn't seek more funding for a wall. most of the money would go to house migrants and process their arrivals. homeland house as security is in danger of running out of funds they need to deal with the search in migration. hundreds of thousands of cubans have taken part in the country's annual may day march, following past president fidel castro and his successor in an event dedicated to announcing new restrictions and sanctions by the u.s. government.

the u.s. said they would place a new cap on the amount of money families can send relatives in cuba. he also wants to move to restrict so-called nonfamily travel. yesterday, president trump threatened to do a full in fargo embargotions if -- full and sanctions. they said cuban troops were keeping venezuelan president nicolas maduro in power. they sent -- they said in response, "we reject president trump's call for a blockade. there are no cuban military troops in venezuela. british prime minister theresa may says she remains hopeful that the uncertainty surrounding brexit will come to an end in the near future. may spoke before a committee of lawmakers in westminster. >> the challenge i received earlier.

the approach the house had taken so far on an actual date. may's conservative government struck a divorce deal with the eu last year but britain's parliament has rejected it three times. the government has held several weeks of talks with the opposition labour party about reaching a compromise, but the meetings haven't produced a breakthrough. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. caroline: some breaking news and big moves after hours. sinking below its $19 ipo price, at one point. the ceo is moving to become the chief strategy officer. the numbers for the first quarter, it seems as though they are spending a lot on product

development, headcount, acquisitions. romaine: i remember they had the issues with the data breach and they were trying to migrate users over from ticket fly. you are really seeing shares get killed as a result. we are going to turn to politics. trump'smoore, president preferred pick for the fed, is facing increased opposition from republicans. bloomberg correspondent kevin so really spoke with lawmakers on capitol hill. kevin: republicans increasingly skeptical of stephen moore's nomination to the fed board. i was able to speak with senator tim scott of south carolina. ifator scott: i don't know the president has actually nominated him. i will wait until we have an entire portfolio of what he has said, what he has done, then evaluate his nomination once it has been confirmed.

until then, a lot information is leaking out, so to speak, which is hard to figure out. >> do you have any concerns? scott: there are comments he has made in the past that he has apologized for. at the same time, he would make a -- he would bring a fresh perspective to the fed. some full would be critical that perspective but i think some scrutiny is not a bad idea. but i have not committed to support him or vote against him. i'm looking forward to having a chance to talk with him about the actual job itself. >> one thing he focuses on our economic opportunities in particular. senator scott: we have about 8700 opportunity zones around the country. is to step up the basis by about 10%.

once you make the initial investment, you would go 10 years and then you would not owe any capital gains tax on the profit. there's a lot of incentive. the goal is to help progress toward distressed communities. i grew up in a single-parent household mired in poverty. one of my goals is to help folks that come from challenging backgrounds. >> one of the things in particular is that it essentially has become a nonpartisan issue. who are some of the democrats you are working with? senator scott: cory booker has played a significant role. senator peters. many folks from my side if not all folks from my side from rob portman, senator caputo, senator ernst. so senator scott directly making mention of senator joni ernst, republican from iowa.

on policy issues ranging from stephen moore's nomination to the fed board as well as the issue of tariffs and the ratification of usmca, republicans like senator ernst, senator scott, are starting to voice concerns. take a listen to what senator ernst said when i asked her not only about stephen moore's nomination, but about trade policy. i would vote no should it come up for a vote. >> switching gears in terms of trade policy, chuck grassley, your fellow senator from iowa, said that he does not want to have the tariffs on the usmca. do you agree with that and do you have any concerns? sen. ernst: i absolutely agree with senator grassley. those tariffs need to go away. we want to move ahead with

usmca. i'm excited about the opportunity to get it through the senate. >> there has been a lot of criticism on those particular tariffs, not only on republican colleagues like yourself and grassley. what are you hearing from constituents? sen. ernst: i just met with beverage contributors today. as they are bottling, all those go into aluminum cans. these have a huge effect on those, distributing soft drinks and so forth. that is one industry in iowa. we hear from ag manufacturers all the time. the end-use of those products, our farmers, ranchers, they feel the impact of those tariffs. it has been very harmful for the iowa economy. >> if you are outside of washington and trying to figure

out the timeline that usmca could get ratified, does that tariff particularly derail the timeline? sen. ernst: i am hoping we get it done this summer, and the sooner the better. that is the joni ernst timeframe. i want to see it done soon. we need to see those tariffs removed. and i have spoken directly to the president about this. >> on china, u.s. trade representative lighthizer along with treasury secretary steven mnuchin, negotiating this week. what do you want to see done? sen. ernst: i want to see a complete agreement done. i want to see that we can enforce the trade deal with china. iowans want to see a lot of agricultural products moving into china. we also want to see fair trade. we don't want forced technology transfers, intellectual property theft. we want to be good trade partners with china.

we want to see them do the same for us. senatort was republican from iowa, joni ernst. coming up, how to get a better interest rate if your company plans on setting up shop in china. this is bloomberg. ♪

undoing -- newt twist on doing business in china. the communist party is handing out low-interest loans to companies that prove their loyalty to the party of president g zhongpin. the editor of bloomberg businessweek joins us now. andlearn about xi jinping pledge loyalty, and you get money? >> you can also pledge some of

your income. this is part of this new system that has been reported, a couple of companies in a particular province in china are getting low interest rates after scoring high on an index that proves they are loyal to the party, they can wear a flag pin to show their loyalty, and they can donate part of their income. romaine: what goes into this index? metrics for the index is basically what i have seen before, studying up. we had an article -- you can calledly use an app studying the powerful country or studying the great nation. you wreck up points, sort of like a clout score or an index that prove loyalty to the country or the party. those companies are getting much rather thanst rates about 20% to 30% higher.

caroline: i think what is interesting about the story is that it sort of shows the contradictory nature of what is going on in china -- in china at the moment. this is a country that is supposed to be opening itself up to the markets but on the flipside, it is becoming more authoritarian. >> on one hand, trying to regulate. fromfocus has shifted state owned companies to now private companies, at the same time trying to push down political control. governments all around the world are always giving money to favorite people, cronies, stuff like that. what makes it unusual is how much the politics are intertwined with a sensibly private banking. romaine: the general idea here is that basically you can't really operate as a business in china unless you are sort of tethered in some way to the

government. >> the government and business is the government. it is all sort of intertwined. caroline: what i think is interesting are some of the interviews that were done in this piece as well. how are they measuring how they turn their own employees to be supporters as well? its employees sign up. >> it is all sort of relevant. particular person had his employees sign up, they all wear pins, and he is sort of proving his loyalty. caroline: check it out in the latest bloomberg businessweek, and hear from the magazine's reporters and editors. now let's get out to smart charts with abigail doolittle where we walk through the latest market analysis. abigail, looking at the dollar. we are looking at bank

of america, merrill lynch. before we take a look at oil, or the dollar, let's take a look at oil. oil was lower ahead of that turndown. here is your chart of the oil. >> we had a very nice downturn in oil prices. the bottom ofrked the head and shoulders base pattern. this was completed here in january, which allowed us to project for rallying oil prices. midbreakout .2 about the 60's. the oil prices have reached about $65 a barrel or so. we think that is the potential area where that begins to develop. last week's price action is very interesting. pressure on suppliers to ramp up, et cetera. this forced price action to eight new 10 day low.

it is about a 13 day low. the top begins to form in the oil market and if this trendline breaks, oil markets -- oil prices could be at risk for a greater decline. thinkl: a lot of people the trendline is to show a trend. if we do see a reversal, where do you think we could see oil go in the near to medium term? >> price action comes down below this level, we would do a retracement from that low about 45 to the peak of about $65, and target the middle. if we were coming back down to $50 to $52 per barrel -- abigail: let's bring the dollar into it. if there is a strong dollar, that could bring about weaker oil. >> i do like this chart very much because we were dissed -- we were just discussing the daily chart. this is a weekly chart of the dollar.

larger time frames seem to trump smaller time frames. we have another head and shoulders bottom in the bloomberg index as high as $12.60. a very strong dollar. what we have here is the breakout here, a rally into $12.15, kind of trading sideways for a while. that suggests there might be a tailwind for the dollar. signal, the buy first really of the year. it looks like you could have a nice call on the dollar going higher, and that could push oil lower. back to you. joe: here's a chart that caught my eye. bitcoin is trading at a premium of about $300 on the exchange. check out this chart. we have in blue is the price that bitcoin is trading at, one of the bigger exchanges. white is sort of the average price of other exchanges.

huge premium ever since last week. what happened last week as we had the new york attorney general come out and make allegations about the thisionship between currency called tether, and whether they have the funds. you may think it is we are that on an exchange of crosshairs like that, there's a premium. investors are eager to get out of that exchange and they are willing to pay out more for their bitcoins to get them out. caroline: to get out of tether, which we now learned is only backed by about three quarters of the money. the actual price of tether has held remarkably steady, which is pretty weird given all the concerns. but you can see their concerns really reflected in the spread. we saw this happen with mt. gox years ago, that in the concerns rose there, the premiums rose. romaine: coming up, how they are helping one firm minimize taxes.

this is bloomberg. ♪

romaine: vanguard is finding a way to defer and maybe even disappear some of its taxes in its mutual funds using etf's. here to talk more about that is bloomberg's rachel evans. i was fascinated by this. essentially, vanguard is taking their mutual fund, attaching an etf in a certain way, and through variety of mechanisms, they are able to escape some of the taxes. >> this is a great piece that was done for us. when they looked into exactly , part ofard uses etf's the overall fund structure, what they outlined in the story is basically this unique fund structure that vanguard is able to deploy thanks to a patent that they were granted in the they have all their

mutual funds and they are able to eat make them a share class in their mutual funds. securities have gone up in price. there able to use that as a whole fund complex rather than an etf. >> it doesn't eliminate the taxes, it just pushes them out. i still can't get over that this is patented. it seems very weird to me. is this something that other asset managers would do were it not for this patent? unknown, comparable i guess. we do know in the past, usaa has licensed this strategy. they haven't pushed out any funds on the back of that. this isn't unique in the financial markets in terms of interesting structures. theircquired a patent for next shares funds. essentially, these are an

alternative model of mutual funds. we recently saw obsidian get approval to get active transference. of putting your ip, protecting your ip, is something we are seeing a lot of. seeill be interesting to when the patent expires on this version, if people come out to try to do these structures? medical terminology is tied up in all this. some call today dialysis machine. so-called heartbeat, right? what is a heartbeat. how is this showing that this is going on? >> when you look at flows in and out of an etf, this is kind of like a creative redemption process where it puts money in, takes money out. semiannually, a couple of times a year, you will see in many funds a big inflow, big outflow. what this is, a friendly bank

pumping money into an etf and taking stocks out of the etf. those stocks are usually anything leaving the index or anything that has gone up particularly in price or subject to capital gains. what vanguard has done by attaching an etf to its mutual funds, it is basically able to use these to act as a dialysis machine for its fund complex. joe: who are the winners and losers in this? it is good for the shareholders in the funds, right? >> etf shareholders, also be mutual fund shareholders. that is different to other wherey's mutual funds, they get hit with a capital gains tax every time someone exits the fund. it is one of the unfairness is people .2 in the system. the big losers are probably twofold.

on the one hand, the u.s. treasury, which is getting tax at the moment. they might get it eventually. i guess the other people would be managers generally. they are not able to take advantage of this patented structure. it makes their mutual funds more efficient. caroline: it is a fascinating story that is complex, and you made it simple for us. don't miss this, the bank of england announcing its rate decision followed by a press conference from governor mark carney. much -- i will be watching more economic data. romaine: the maker of vegan chicken and beef substitutes plans to start trading on the nasdaq. caroline: we will be all over that story. romaine: bloomberg technology is next. ♪

♪ emily: i'm emily chang in san francisco. this is "bloomberg technology." shares of apple climbing back up to the $1 trillion market cap after iphone sales have stabilized and massive buyback. qualcomm also out with earnings results with one key new piece of information. apple will pay as much as $4.7 billion to the chipmaker as