president trump: we are in a very good position and i think it's only going to get better. >> trump columns the market. -- calms the market. market's take a break from a brutal selloff. and warning of the tariff affects on inflation. the market ramps up the chance of a fed cut this year. and does china have pocket aces? both countries are betting on the river. or will they full fast? >> welcome to bloomberg daybreak. i'm david westin here with alix steel. the president saying it is good that we didn't do a deal. any deal would not be as good as we would have now because we are getting billions in tariffs. he says he is happy where he is. alix: he is going all in on the river. david: i love the whole thing. and john williams was talking about higher tariffs

having an effect on inflation. it is sort of a different conversation from six month ago. david: we will see a lot more as we hit consumer goods. alix: and retail earnings as well. markets will take a breath and a sigh of relief. 90% of the s&p is down. a little bit of a relief rally, or something more sustainable. i don't think we have the answer yet. the dollar participating in the relief rally after breaking through some key levels. yields are holding around the 240 level. that will be a different kind of without aramco pumping stations were targeted in a limiting attack -- saudi aramco pumping stations were targeted in a limited attack. lastlast week --david: week we were told we were moving the aircraft carriers to the

region. now it is time for the first take. we are joined by peggy collins kawa.ke last night, this is what president trump said. pres. trump: steve just got back from china. we'll let you know in about three to four weeks whether it was successful. right?er really know, but i have a feeling it is going to be very successful. david: what is successful? [laughter] peggy: i'm not sure from his perspective. a deal is what everyone is looking for because it is certainty. investors want certainty, and so do businesses in terms of trying to figure out what to spend in the year ahead for investors in terms of how to price risk. you trade thato

headline that basically says nothing? i believe we had a story about a year ago saying that everything in trump's administration is two weeks away. the fact that this is getting traded probably tells you market sentiment is not sufficiently pessimistic yet, and there are still folks holding out hope we will have some kind of quick resolution, the same folks who never saw this flaring up. alix: does that mean that today is sort of a bounce? how are you measuring the action this morning? socgen had thet best take. a lot of times you will see a carryover of that sentiment, and you can attribute today's rebound to trump's comments overnight, or just that things tend to change on tuesday. we had a bad day yesterday on relatively little change, and maybe this will suggest a giveback. alix: honeywell is reaffirming

its second-quarter full-year outlook, saying it only matters if companies have to lower their forecasts or change their supply lines. that could be reassuring. let's go now to the other side of this. wasnew york fed president speaking to bloomberg television and said we are already seeing a little bit of inflation and may see more because of these tariffs. >> the studies have been very detailed looking at this. we can probably get a couple of tenths on the inflation rate based on what's already been announced. if there's further escalation in tariffs, the effects would get even larger. you are making exactly the right point. this is affecting consumer prices as these are applied more broadly, and he consumer starts seeing it in terms of the prices they are paying at stores. it is definitely a significant effect. david: in the space of about a week we've gone from not enough

inflation to now saying maybe there will be inflation coming around the corner. the questiony: will be how much this ripples through in terms of prices. some of the tariffs they are talking about wouldn't take effect until late june. it is a question of how much this ripples down in terms of farmers and their output, as well as consumers and whether they feel the pinch in any way. alix: just to draw this home because a lot of headlines had to do with overpricing a cut, this is a great chart of the probability of a cut on the orange line. luke: i think this is the market pricing it a little rationally. they are not worried about the first-order effects of tariffs on inflation. they look and saw underlying pressures on the economy not

doing well, and this is a negative supply shock. the boe didn't hike right after brexit. this is a similar type of scenario on a much smaller scale that the u.s. fed is dealing with. david: if this plays out the way it is now, that is we are not making any progress anytime soon, when will we see it show up in the real economy? peggy: that's what i think is still to be determined because there's two points people are looking at. does it affect consumer prices, and does it push up inflation? do businesses holdback in terms of what they are spending on? we've seen a lot of good job growth. employment figures -- unemployment figures still at record lows. does that change how businesses invest in their own companies? david: it is sort of a game of poker. alix: you play hold 'em, right? you can totally tell.

[laughter] david: the question is who has more high cards at the moment. there's an interesting piece out overnight about whether china depends on us for its imports compared to canada, saying only comes from the united states, so i much clout do we really have? the blue is the portion of chinese exports. luke: i think that kind of drives home that the reason we've got this scenario is that both sides are not playing the same game. once height is playing chess, the other checkers. one mah-jongg, the other "texas hold 'em". that's why they've been able to misread the other's desire for a deal. what i find interesting is this applies to markets and the underpriced scenario. i thought the start of the year rebound was about the fed and chinese reflation, not necessarily trade war talks going well. i am wondering the extent to which this bolsters china's

desire to ease monetary first, and then even further loosen the physical spigots. what does the world -- the fiscal spigots. what does the world look like with chinese stimulus even more wrapped up? alix: are investors thinking a little differently about that? becauset is interesting there is a story on the bloomberg today talking about how goldman sachs asset management is continuing to go along on chinese stocks, saying this is a bump in the road, we will get a deal. it will be interesting to see whether investors decide that china is definitely a different market even the uncertainty around trade deal. it is a complete outlier, and this is one thing i am looking at and will continue to look at, the extent to which this is being priced as a u.s./china thing.

the chinese yuan is higher. it is normally not on a three-month basis. vol hason and aussie remained steady. i'm wondering how much the market prices this as a global event versus the two biggest nations clashing heads. alix: thanks very much. you can find all the charts we just used and more. go to gtv on your terminal. coming up, more on the u.s./china trade war. what it means for both economies with catherine man, city global chief economist. ♪

♪ kailey: this is "bloomberg daybreak." second-guessing beginning over the uber ipo in the first two days of trading. shares of the ride-hailing service have fallen 18%. focus is on morgan stanley. critics asking whether the syndicate set the ipo price to aggressively. they also want to know if they steered too much stock to begin busters who pledged to hold it long-term. nissan has forecast profits for the current here that was less than expected.

the japanese automaker is trying to recover from slumping u.s. sales, aging model vehicles, and an out of sync product cycle. twice in the last year, nissan cut forecasts after the arrest of former chairman carlos ghosn. vodafone dividend cracking under the strain of falling revenue and rising cost. europe's biggest telecom slashing its outlook. the company has to deal with buying new spectrum and paying for the purchase of liberty global asset. that is your bloomberg business flash. alix: thank. you so much u.s. futures facing a recovery after major averages closed 2% lower yesterday for the second time so far this year. joining us on the phone is in km technician.ief take a look at the options market. what is that telling you? guest: i think when we look at

our indicators, specifically from the options market, we are seeing signs that a reversion is like to hear. what we look at is how many puts are bought relative to how many calls. that is the standard ratio. you smooth it out over five days to remove the gyrations and volatility, we find that indicator is at levels that have historically represented prior troughs in the market. those have been viable. the last time they were at this height was to simmer 24th. alix: if you take a look -- was december 24. alix: if you look at how far we are below the moving average, what does that tell you about the potential snapback? powerful can be pretty , especially over the shorter term.

when you go bowling and hit one bumper, you revert the other way. yesterday we closed below the lower band. we typically get a very powerful snapback. not to harp on that december 24 level, but the last time the s&p undercut its lower band was december 24, the start of a very powerful rally. alix: i definitely use bumpers and bowling. does that mean you are looking to buy the dip? jc: the issue is timing. i think a lot of managers are overexposed, reducing their pope for leo to a more comfortable level -- their portfolio to a more comfortable level. i think we are due for a bounce here, and i will become a little more increasingly bullish if we recover the 50 day moving average. we are still above the 200 day. if we can climb back above the

50 day, that will invite a few more investors back in the market. alix: jc, thank you. david: now let's talk about what that has to do with the economy. citielcome catherine mann, global's chief economist. thank you for being here. what this shows is while they are still positive, they are coming down. they are tightening. is that because of the trade dispute? catherine: absolutely. the financial condition indicators are a variety of different indicators. the stock, the volatility, the credit. a number of thing go into the fci's. david: when will that show up in things like gdp growth and employment? catherine: there are a lot of different factors here. if financial conditions are relatively less important than policy uncertainty, that one has

blown out. the real issue is facing the real economy, this protracted period of policy uncertainty. that is weighing on investor decisions. what am i going to do with my supply chain, with my purchases? alix: when the market shakes out like it did yesterday, is that reflected in the economic data you see as justified, or should it be even more dramatic? catherine: the stock market is an aggregate. i think what we need to do is get below the top line and look at the different kinds of businesses within the s&p. what we found is that firms relatively more domestically oriented in the revenue stream are outperforming the firms that are relatively outwardly oriented. that makes sense because the global economy is the one under stress. the domestic economy, job growth, wages are doing great. the s&p is a combination of those two, so one part is doing

well because the domestic economy is doing well. the other part is under uncertainty because of a trade war. david: explain to me how this works in practice. onyou take to any 5% tariffs $300 billion -- take 25% tariffs on $300 billion, that is substantial. how might there be material effects in the economy? catherine: there are two channels. one is the sentiment channel. the change in uncertainty ways on investor decisions, the timing. in terms of how the tariffs ,ercolate through the economy it is part of the global economy. you can get a lot of tariffs percolating where the final

tariff is much more than 25%. alix: how long can to domestic economies hold up when internationally, we are all struggling with trade? how long can the divergence last? catherine: it has been lasting for about six months, with the trade war really started in earnest. there has been this increasing divergence between the international and domestic economy. the divergence cannot go on for our. this must -- go on forever. this most recent rounds of trade tensions pretends to cover a much larger portion of the economy. the consumer sentiment and attitude towards the pocketbook is a key element for the domestic strength. david: larry kudlow over the weekend said 2/10 of 1% if we put tariffs on all chinese does that sound

plausible to you? if you run the numbers on just the tariffs, you end up with those numbers. but what we ought to be thinking about is the complement terry terry -- is the couple metairie -- is the complementarity. it is an opportunity for firms to raise prices. david: ok. catherine will be staying with us. we are going to take a look next at the strength of the economies and how they play into it. at the same time, new news. alix: more tweeting. respect and friendship great, but it xi's have told them that we must have

a great deal." this is bloomberg. ♪

david: the u.s. and china appear to be near a stalemate on trade to come up with believing the strength of their economy gives them out of hand -- gives them an upper hand. globalne mann of citi is with us. you can look at the top line, which is gdp growth. there were many policies and china that were starting to have traction. we expected there to be a rebound in chinese growth trade going into the second half. at the same time, we expected for the u.s. for fiscal stimulus to start to fade. so the two would start to

converge. expected a deal to get made in the first half because it would be the strongest relative position from the standpoint of u.s. growth. things are changing now, obviously. david: this chart illustrates that. it is a little misleading because china is working on a 6.5 base. we are working on a two base. catherine: that's why we thought we would be looking at a trade deal by the end of this quarter, the beginning of the summer, because start to look a little different as we go into the second half. policies are fading in the united states and are rebounding in china. trade tensions change that. they do have a more negative effect on china than they do on the u.s. right now.

sometimes that gives the u.s. a little more time to maneuver, but it is maneuvering yourself into a corner, so we have to worry about that. david: what about their debt situation? that chart basically shows they are running a deficit, their debt to gdp much more modest than ours is. gdp is an debt to important indicator for many financial investors. it is also not a summary statistic of how vulnerable a country might be. the u.s. prince its own currency , issues its own debt in its own currency, so we can't treat it like latin america or other countries, which have currency mismatches. for china, they don't have a lot of exposure through international capital flows, they have capital control, so have less vulnerability from that channel. alix: in terms of what we see

from the government and the pboc , do they have more firepower? catherine: they have a range of tools they've been deploying. they chosen -- they've chosen to try not to deploy the credit channel as much as they have in the past. they are using more tools to deal with consumer demand because that is the area they'd like to support, but they have come back to the credit. alix: catherine mann of citigroup will be sticking with us. coming up, our exclusive interview with new york fed president john williams. this is bloomberg. ♪

alix: this is "bloomberg ."ybreak are we going to have a bounce in

the markets, or what we have something more to stay noble -- more sustainable and hit a low? bmw with a sigh of relief they were not included in any of the china tariffs. that sector up by over 1%. you can see we will have a reversal of what we had yesterday. euro-dollar eking out some kind of gain. i do want to highlight what's happening with the dollar you on -- the dollar u.n. -- the dollar-yuan. crude up by over 1%. we can talk trade all we want, but there's some geopolitical risks in the market finally being priced in, and they are quite extreme. david: at the beginning of the day it was all about the geopolitical, and by the end of the day oil succumbed and went with the market, and now coming back again. really those supply

tankers getting shut down, perhaps outages. david: not good. it is time now to find out what is going on outside the business world. viviana hurtado is here with first word news. the u.s. is on the verge of escalating the trade war with china. the trump administration is preparing to impose new tariffs on about $300 billion of chinese goods. among them, mobile phones, laptops, and children's clothing. president donald trump says he will meet with china's xi jinping at next month's g20 summit, a meeting that could be pivotal in resolving the dispute. turkey considering a move aimed at easing tensions with the u.s.. delaydogan government may the purchase of a russian missile defense system until 2020. the u.s. is unhappy because it says the system was designed to shoot down american and allied aircraft.

a delay could give the countries time to work out the dispute. montana governor steve bullock has become the latest democrat to enter the presidential race. electedhas twice been to lead a state donald trump carried by more than 20 points. there are 20 to democrats running for the white house. 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. 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. i w an hour todd of. this is book -- i'm viviana hurtado. this is bloomberg. david: 22. alix: it is really hard to keep count. david: are you running? alix: we'll think about it. u.s. terrace are acting like a negative supply shock and boosting inflation. that's according to new york fed president john williams. kathleen hays sat down with him in an asus of interview in zurich.

>> my point of view is always look at the medium-term. where is the economy going in terms of employment, in terms of inflation? just try to keep monetary policy and a nice balance in terms of our goals. i'm not going to opine whether the markets are right are wrong -- right or wrong. we will have to wait to see if these risks materialize or don't. at the fed we are in the mantra of data dependency. that means to continuously reassess what the data is telling us about the outlook for the economy to see how best we achieve our goals. go a littlet me further on this. when does the damage from a , and war, if it continues even if there starts to be some deal made, the tariffs a stay in place. so when would it become severe that it is time to start

looking at a possible rate cut? tariffs asnk of the a negative supply shock. .t has affected the economy it will probably boost inflation by a few tenths. ed affects demand and growth. it also has effects on the value chain and how are our economic system works. we just have to keep assessing, evaluating what are we learning from the data in terms of this effects, but also in the broader show development. it is not a specific point. it is just assessing where we are in terms of our goal. if we need to get inflation back to 2% and keep it there at a sustained basis, making sure we can sustain this economic expansion as long as possible. the economyst year was somewhat shielded by the

tariffs because they weren't so much on consumer goods, because chinese currency declined. that helps offset the impact on importers. how big a boost in inflation. if we can't be sure, how much could this boost u.s. inflation this year? >> it's hard to know. i think based on the research this happened, the studies have been very detailed looking at this. can probably get to tenths on on whatation rate based has already been announced if there were further escalations in terms of tariffs. right making exactly the point, that this starts affecting consumer prices as these tariffs are applied more broadly in the consumer starts seeing it in terms of the prices they are paying at stores. it is definitely a significant effect, something that will be part of our analysis in watching how the economy is doing. reporter: will this be a relief after the fed's consistent

shortfall, or will it start in climbing the fed on the other th towards a rate hike this year that they boosted enough, maybe it is more appropriate think about taking that step? >> it all depends on all of the different factors and assessing the outlook for the economy. typically in the past, a change in the value or the dollar or the tariffs in some way afflicts inflation. i don't see it affecting underlying inflation for an extended period. you can look through that a bit. you don't want to overreact. the same time, clearly a big moment and inflation would be something we would cover carefully and be sure we understand how we keep inflation right around 2%. david: that was our exclusive interview with new york fed

president john williams. he was talking with bloomberg's kathleen hays. still with us, catherine man of citi. 2/10aid your numbers say because of what? is that because of the tariffs effect? already o an does that include the $325 billion they will be adding over the course of the summer. catherine: our 2/10 is on the full range, but i think it is important. that is just running the numbers without considering that are not being burdened by the tariffs might choose to do. i think that is a key issue. atms are looking through some that have had to do with

wages, some that i had to do with producer prices rising, some with transport costs. there have been oil shocks that need to be passed through as well. have priceoods increases, then nontariff goods prices could also go up. that is an important agreement in the overall consumer pocketbook. david: how does that factor into the possibility of a fed rate cut? now markets are saying it is pretty close to a certainty that closed.rate cut will be catherine: they've been talking about their symmetric target for a while, and he we ♪ -- and we haven't been over 2% with any durability. the market is pricing in a rate .ut this year

aboutd has not talked that being the most likely direction. they've been talking about data dependency, the strength of the economy. a very low unemployment rate, currently, and rising wages. and that kind of backdrop it is hard to argue that you should be cutting interest rates. alix: under what conditions would that change? catherine: i think we have to think about whether or not the two big components of the .emand, one being my investment more than financial conditions. -- policyrtainty uncertainty is a more important driver. even more important is consumer attitude.

if consumers close the pocketbook, that is something the fed has to react to. david: all of our discussion is on the downside of tariffs. what is president trump is right? what is by using tariffs, he does extract the concessions that aren't just buying more soybeans come of it changing and >> will property rights, access to markets. what about the potential upside for the u.s. economy? the section 301 case that started this particular rounds --tariffs catherine: the objective of market opening, if that were to be achieved, would be to expand u.s. exports into china, but

also importantly, expand direct investment into china. that would create jobs and economic activity in china. it would also expand it in the u.s., but would expand all of those activities in china. whether or not that meets the objective of the administration's approach, that is a question mark. it is not necessarily going to lead to a lot more auto exp orts. beancial institutions would able to open up in china. china makes a great opportunity, but of course it is a challenge for the policy changes to be undertaken in china to make this happen. alix: what areas of inflation in the u.s. economy are subject to tariffs and will see the trickle through, and what won't be? how does that influence the fed? catherine: i think it is important to distinguish between consumer goods and producer goods.

these are things the tariffs to apply to and will apply to if we get to the iphones and clothing and furniture. , that is aer part much larger portion of the consumer spending, is on services. things like restaurants or entertainment, health care. those prices are starting to rise because of wages rising. people are going out. they are going on vacation. that is ably hotels to raise prices and restaurants to do well, and people are spending more. we also see more spending on discretionary health as well. david: it all goes back to the consumer in the end. thank you so much, catherine. coming up, the trade war hits tesla. .hares fall on tariff concerns

more on that in today's wall street beat. this is bloomberg. ♪

viviana: this is "bloomberg daybreak -- this is "bloomberg daybreak." coming up, bank of america chief technology officer. ♪ viviana: this is "bloomberg daybreak" with your bloomberg business flash. t-mobile and sprint looking for ways to make their merger acceptable to u.s. regulators.

bloomberg learning the two mobile carriers are considering possible concessions to save the $26.5 billion deal. one of the options, the potential sale of their so-called prepaid business. regulators are concerned a deal would hurt competition. today, bitcoin rising past $8,000 for the first time in about 10 months. it is the latest milestone for , following arency 25% increase yesterday, the biggest for bitcoin since 2014. reasoning for the rise has been revised interest. a rare original costume of darth vader will be auctioned off. it could fetch $2 million. the costume was morning "star wars: the empire strikes back."

it is owned by a computer engineer hired to impersonate vader. that is your bloomberg business flash. alix: you know what is pretty cool? david in a darth vader suit on halloween. . that's your picture. i'm not going to shop at -- i'm not going to show it, but it happened. david: and my young, blonde son was luke skywalker. there's a thing you put inside the masks the did the breathing thing. alix: but you still talk like you. it would be good. we turn now to wall street beat to give three things wall street is buzzing about this morning. first up, wall street points after an 18% tumble in its first two days of trading. the u.s./china trade war re-escalates, and bonds get copied. aston martin debuted the replica

seriess bond's legendary five. david: lisa abramowicz can't believe this. [laughter] by the way, this is lisa abramowicz with us right now. you are right about that. be careful what you wish for if you are morgan stanley. they get the big and gelato. -- the big enchilada. now not so good. bear let's be clear, who has not placed -- uber has not placed any towards of anger to morgan stanley, but this is an absolutely terrible situation for uber. the question for me, did morgan stanley sell uber shares ahead of the ipo to their wealth with promises that were

perhaps overly rosy? david: the question is did they soak up some of the demand ? people were saying i've got to have a new per share. or morer more -- alix: investors were not willing to old onto it. ho questionable what they got. alix: regardless, the argument is you were going to price at the high-end, than the middle end, than the low end. clearly there was something off in the marketing process in that capacity. stanley, and fairness, has a very difficult situation. the ride-hailing industry is very hard to value.

this is obviously a very difficult business. it is coming at an uncertain time in the market. clearly private evaluations were too high. david: we have to remember facebook. it did not do so well. people were talking about it being a disaster when it first came out, and look at it out. lisa: yes, but there was a lot more. carol: yes, but there was a lot more. be a materialld fundamental weakness for tesla. this is an to tweet. lisa: although that could be a fundamental weakness, too. shares are at the lowest since

2017. tesla relies on china for its growth, for meeting a lot of it's a dictation's. it seems like a really good market. we knew that elon musk was subsidizing ships of parts to try to assemble the tesla vehicles ahead of the tariffs this is a huge problem. even though vehicles have not yet been put on the list of things to be tariffed by the , people think they could still be left. there's definitely a backlash. it used to be that any buyer of an electric vehicle got a subsidy. now they are not, and you are seeing that directly impacting the vehicles. didn't elon musk say he was going to assume some of that extra cost to offset this.

again, crimping the margins, cash crunch. alix: that's cool. david: let's get the story that lisa really wants to talk about. we all rumor -- we all read member "goldfinger> -- "goldfinger." they will bring back a limited number of these james bond cars that go on sale for $3 million. it is also really slow. alix: really? [laughter] david: it is also illegal to drive in most places --viviana: it is also illegal to drive in most places because it does not comply with regulations, but it has fake machine guns. david: and there are sounds. carol: you can have an oil slick --lisa: you can have an oil slick and things that come out at different times. system andake radar

oolses to put all your t and weapons. it just raises the question, who's buying this? [laughter] i just think it's a dream. taylor: did you watch "goldfinger --lisa: did you watch "goldfinger" when you were a 12-year-old boy? [laughter] david: they are making 25 of them. most of them are already sold. we could go on for the rest of the show with this, but we won't. coming up, justice brett kavanaugh sides with the supreme apple oniberals to sue cap charges. what i'm watching could be really important to antitrust cases for tech. live from new york, this is

bloomberg. ♪

david: in a nutshell, this is what i'm watching, a big decision on antitrust. brett kavanaugh voting with the liberals against apple. it said you can actually sue them for monopolization of their app store, which could mean something about the future for tech more generally. more to cover on "balance" tomorrow. -- on "balance of power" tomorrow. alix: very much looking forward to that. it is going to be big. coming up on this program, dan suzuki, richard bernstein advisors portfolio strategist. this is bloomberg. ♪

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president trump tweets that his respect and friendship with xi is "unlimited." markets calm after yesterday's brutal selloff. new york fed president john williams talks up uncertainty. the u.s. have four weeks to receive deal -- to reach a deal. withclusive interview heyman capital chief investment officer. david: welcome to "bloomberg daybreak." , here with alix steel. -- i'm david westin, here with alix steel. it is almost trump tweeted markets to calm down. alix: and it worked. we didn't have a buy in the dip yesterday. of it ishow much typical net cap balance versus

their version of the meeting. david: certainly he is taking credit for it, and it is not clear he's wrong. alix: they will meet in japan, and osaka. david: president trumpdavid: says he's going to meet with president xi, but they will have to do a lot of work to come up with a deal. alix: and any deadlines to get things done. in the markets, a bit of calm after yesterday's set off. have we found a bottom? s&p futures up by about eight tense of 1%. all the safe haven trades reversing. you'll kind of going nowhere. you had a little bit of selling on yields moving a little higher, but nothing immaterial. crude has geopolitical risk, so that is its own story. ofestors weighing the odds the u.s. and china eventually weighing a trade deal. >> a trade deal is probably still on the table.

it is the interest of both parties. >> it looks like a deal is in the making. the question is how long does it take. >> it does not look like it lends itself to a quick resolution. >> if we get the right deal out of this, it actually is a progrowth trade effort. i'm not pessimistic that this isn't worth a fight. >> we were hopeful they would make a resolution, but there's also some downside risk. i think the markets were ignoring that reality. >> we still think there is downward momentum to these markets. >> we try to pull a little closer to benchmark because markets seem vulnerable to us. athink we have to look like longer-term investment thesis and not look at so much of what is moving the headlines, but what is going to do well longer-term. >> with all these trade wars going on, there are absolutely no winners. alix: joining us is dan suzuki, richard bernstein strategist.

are there no winners, or do you look for strategy? guest: there's no winners in a trade war, but you can always look for opportunity. my case has always been since the argentina g20 that we are going to get a deal. i also say input he much every -- what youve that are seeing from the president is typical trump posturing brown getting a better deal. that is to be expected, but whether it takes weeks or months, i do think we will get a deal. it only adds to the uncertainty of an environment where un-valued fundamentals were already weakened in our view. david: a lot of participants agree there is going to be a deal. what major deal has president trump gotten done at all? you can say the usmca, but it is not ratified. so what major deal have we

actually gotten done? it may come, but president trump tends to say it is on its way. guest: i think if you step back and look beyond trade deals, we were able to get tax reform. hardball during all the negotiations that come through, and i think this is just another example, but i agree. even if we get something agreed to buy trump, it is not -- the wills out on whether he get it through congress are not. david: he had a majority in the house and senate. maybe not control, but pretty close. he doesn't have that with the chinese. he does not have the majority of republicans sitting around president xi. isn't this a much more difficult task? it is, but it is clear that everyone wants a deal. most people in congress i would say are antiterrorist, so they

are ok with using tariffs is a leverage point, a negotiation tactic, but not necessarily into place full-time. the way to avoid that escalation and avoid tariffs permanently is to really sign off on a deal regardless of whether you disagree on some of the key points and whether you are democrat or republican. alix: that is kind of the reality versus the interpretation. if you come inside to bloomberg, this function shows the action yesterday in the s&p. it is a classic safe haven trade. how do you play something like this? what do you even buy? dan: we are not focused on trading it, so who knows? there may be a short-term buying opportunity with some of these. theint is if you look at parallel that goes through all of those sectors that are underperforming, they are all very cyclical. regardless of the trade wars,

obviously they get hit pretty hard. if you look at this earnings season, the sectors seeing a negative earnings season are the cyclicals. all of them are posting negative returns, a lot of them negative sales. guard list of this, you want to avoid those sectors, but this is all the more reason to focus on high quality. david: let me give you two different paths. one is they reach a deal. the other is this drags on at least through the end of the year with tariffs in place. how do those two things change your investment thesis? how would you invest differently under those scenarios? dan: obviously the outcomes would be quite different in the past to the end of the year would be very different, but our game plan would still be the same. we are not short-term traders. we are not going to trade on whether we know more than the market does about whether we get

a deal or not. profits are slowing. we had 21% earnings growth last year. we journey is out whether will have it all this year. you want to avoid the cyclicals and focus on quality. investors are getting a little more optimistic, clearly not this week, but relative to the last 10 years, investors are feeling a little more bullish on the longer-term outlook for stocks. alix: what is stable growth in quality? dan: i think you want to focus on health care and staples. people also throw utilities into that mix. i think that people's expectations for rates at a little would have risked that story -- a little bit of risk to that story. companies that have stable

earnings growth, pretty safe balance sheets, i think that makes a lot of sense to where we are in the cycle. david: next year is 2020. there's a presidential election. we seem democratic presidential candidates going out saying things that have taken hundreds of billions of dollars out of the market value of health care stocks. how nervous does that make you? to the short-term trades relative to the long-term story. the short-term trades in these stocks, health care stocks are always a lightning rod for political criticism. you see it all the time. but if you step back and look at the longer performance period, it is not the politico story that drives these stocks. it is a fundamental. when profits growth is accelerating and doing better for everybody, that is when the cyclicals tend to do well and care. what you're seeing now is an environment of slowing profits growth where health care tends

to do well. obviously some of the stocks in the sector are down quite a bit, but people don't realize there's actually been a bit of a comeback in the last three or four weeks. health care has outperformed the s&p. not many people are talking about that because they are focused on the political day-to-day. alix: dan suzuki of richard bernstein advisors will be sticking with us. coming up, retailers set to report in the heat of a trade war. we will see how that weighs on their outlook. this is bloomberg. ♪

david: the week ahead is a big one for retailers, with macy's and walmart reporting first-quarter earnings, which puts the focus on the u.s. consumer. the new york fed president john williams says the consumer is strong. still fundamentals are pretty solid. job gains have been good. real wages have been growing. i think the underlying momentum in the economy is still solid. watch financial conditions. it is an important input, but not the determining factor. david: but tariffs could sue be hitting the consumer, posing a risk to retailers. we turn now to emma chandra for more. emma: macy's kicks things off when it reports earnings wednesday morning. the retailer has had a tough start to the year. the stock is down some 27%,

currently on a seven-day losing streak, the longest since 2017. this big drop here is when macy's said it had to re-give expected holiday quarter and the stock hasn't recovered since then. consumers may be strong come of a lot of the purchasing data the spending has gone to discounts whether the department stores. trying to shift to online spending while dealing with a large brick-and-mortar store fleet. investment comes at a cost, not least a margin. analysts say macy's is undervalued and could be a buying opportunity. there's a better story over at walmart. they report earnings on thursday morning. there's an expectation of that would make it the 19th consecutive quarter

of same sales -- of same-store sales growth. they have been spending to compete by offering free next day shipping with no membership fee. that is a jab at amazon, but it means that margins will be back in focus. the other thing that could impact margins of course the costs associated with tariffs. a lot of the goods are not included in the tariffs. that would change if donald trump followthrough on his pledge to tariff all goods flowing through from china. this escalation is too great a gamble for the u.s. economy. retailers can absorb some of those costs, like walmart, costco, target. has so, the ceo of walmart

been very vocal in his opposition to the president's trade policies, as have many of the retail ceos i've spoken to over the last few months. alix: thank you so much. great reporting. retail investors for now brushing aside any kind of trade risks. tariffs were cited not as a risk factor, but monitored closely for department stores. joining us now is oliver chen, and richard suzuki of bernstein advisors. what was your interpretation of the result in the survey? >> we are thinking colder weather is a big problem. also the later easter. retailers work over inventoried coming into the season. all of this combined with the amazon threat, and millennials engines a shopping differently, these are negatives for a department store. on the other hand, we are more positive on broad line and mass

retailers such as walmart and planet fitness. alix: when you take into effect that no one is looking at the trade war impact, is that a good thing because if you retailers can handle it, or a bad thing because it should be on everybody's radar? guest: it will be terrible for earnings-per-share. 30 pointt a 10 to hit. prices for consumers could go up, and who is most vulnerable? clothing retailers. planet fitness is a gym, so then have met -- they don't have as much exposure to the risk. is it particularly difficult in the retail area because price discovery is so perfect with amazon? howcally you can figure out much stuff cost right away.

guest: just look at all of the earnings for all of these different retailers. it's been tough, and then you throw on tariffs and what that does to the consumer, it is not a great time. when i look at the retail space or consumer discretionary as a whole, you definitely don't want to own these late cycle, but also when the fed is increasing, and when jobless numbers are increasing. the fed is on hold now, but you have seen kind of a pickup in the jobless claims. that is one late cycle sign, but that would be a pre-warming, a big warning sign for the retail space overall. david: what do you see is the overall trend line on margins? there's been a lot of pressure not just from amazon, and now we have tariffs. is anybody bucking this? >> gross margins are under pressure from price promotion in

a very competitive environment. some are bucking it in terms of private-label penetration increasing. we like walmart. we think walmart is a great stock for a low to middle income consumer. it is a cautious stock. dividend yield can compete against amazon. curbside pickup and drive up is a big driver, about half of the e-commerce growth for next day delivery. you also want to own big, large retailers that are indexed to a healthier consumer. the consumer is a bit bifurcated, but the low to the stocksumer with is a good thing. alix: target, walmart definitely weighing on margins in terms of their technology come but then you add on something like a trade war, how much more wiggle yoom do they have until the

have to move it on? >> what will happen is -- it is a tough environment for pricing, so you should stick with the bigger retailers and 's which the -- the edlp have scale to negotiate. it is inevitable regarding passing through some of the costs, and there will be market share gains and losses. david: the question is not whether the retailer can handle it, but candy consumer handle it? employment is up and they have real wage increases, so that maybe they can afford more. >> they definitely have the ability to withstand higher prices, which is why you are seeing for the first time in decades a lot of these consumer staple companies raise prices on their goods. diapersknow if you buy

and toilet paper and tissue, but the prices have been going up over the last year. i think that shows you that the consumer has more ability to withstand price increases, but 10% to 15% is a big deal. that would be something where you would see a real negative .mpact on the economy tax, thatat kind of a is not a pretty story. alix: who don't you want to own? >> we are more cautious on department stores, specialty retailers, those with direct sourcing to china. that puts retailers such as macy's, american eagle, and others at risk. apparel is in a tough category even before this with deflationary pressures. the shopping mall is a more cautious place in general, and this only adds more pressure for the mall and other department stores like jcpenney. david: does that mean you like the high-end? >> we like lvmh and tiffany.

we are selective about the high-end. there are considerations from brexit to the mainland chinese consumer more in china. we had so much s&p market volatility. this does often correspond to the wealth effect, so if something -- so it's something that we are cautiously optimistic about. tiffany has a new ceo. they have very unique characteristics. alix: and rihanna, right? [laughter] taylor: what is happening -- >> what is happening in luxury with millennials this really interesting, too. david: thank you both for being with us today. coming up, bayer ordered to pay another $2 billion over cancer claims for its round up weedkiller. more on that next in the bottom line. this is bloomberg. ♪

david: time now to look at three

companies worth watching this morning. volkswagen has put back on the table and ipo for their truck division. it was talked about earlier, took off the table, and put it back on the table now. they need the cash to go into electric vehicles. they have a huge investment they want to make. also, they are thinking they may have more flexibility around the world, including with navistar so it will be better off on its own. this is their theory. alix: i'm looking at walmart, apparently matching its free one-day shipping if you are in las vegas or phoenix. you can get free one-day shipping if you order $35 or more of goods. they say it is actually going to cost less because they are moving goods in one box closer to your home. david: and you have to order off the menu. it is fascinating. the third company where watching is bayer. for more, brooke sutherland joins us now. so $2 billion.

brooke: it is a lot of money, and that is the amount a jury in california has awarded to plaintiff's, saying that bayer's monsanto'sctually round up that they are acquired, causes cancer. this is the third in a row that bayer has lost. their argument all along has been that the science is behind us. the science shows that roundup is safe. juries, over and over again, are finding that that is not the case. the $2 billion in damages will likely be reduced, but still, pretty strong signal being sent out of the courts right now to bayer. david: is there any movement afoot to settle these cases? brooke: we haven't really seen that yet. you are seeing a lot of pressure from the investor and analyst community. we had that votes were bayer shareholders signaled a protest vote against management, saying

they wanted them out. i'm not sure that that helps that much to get rid of its management right now, but clearly shareholders aren't happy. i think bayer's perspective is they may be see some of these cases going to appeal, they still believe in the science. the nature of these cases are somewhat unique and individual, and they want to see how this goes. alix: due diligence, man. they didn't sign on for that when they bought monsanto. brooke sutherland, thank you very much for joining us. coming up, playing hardball with china. calls forfund manager president trump to walk away from trade talks. he joins us in an interview. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. today? do is there a bounce or have we found a bottom? s&p's off the highest.

90% of the s&p lows yesterday. europe holding onto gains. yesterday, daimler bmw a big sigh of relief. that stopped seeing volatility today. if you change up the board, all the safe haven bids reversing. euro-dollar flat. the 210 spread, 20 basis points. on one to watch, dollar you -- dollar-yuan. just how far china will let the currency devalue. crude continues to grind its way higher. saudi arabia saying there were outages because of more tension and turmoil and attacks in the middle east. david: pretty sinister over there. story, the united states and china are ramping up tariffs on one other even as president trump says he will meet with president xi at the

g20 summit in japan. we have heard from experts about the advantage china may have because of its political structure. >> economically, we have more power than the chinese. do you're right, the chinese not have to care of their people like it or do not like it or feel like government policy is bad policy because the people do not have any voice. >> in some ways the chinese system is built on this. the chinese economy is built on anti-foreign sentiment, anti-imperial sentiment. david: we welcome longtime china bear kyle bass. thank you so much for joining us. you have said the president should hang top with the chinese. why do you think president xi will have to back down? kyle: when you look at the construct of china's economy, their economy is nowhere near as strong as they would like the world to believe. they have moved to a situation

where they built dollar reserves over time by being the world's factory floor and also by stealing intellectual property from us and earning a return on investment. what you have seen in the last couple of years is their pile of reserves in dollars has declined so precipitously that they are having problems with their desperate need for dollars and resources. they are the largest importer crude oil. they import food and raw materials. they have to pay for those things. their own economy is denoted in r&b and they can print as much r&b. toir problem is their access dollars. the u.s. is in the best position they have ever been to reset this relationship. these trade negotiations are much more of a clash of cultures in a simple trade agreement. we must reset the relationship in every way. david: a clash of cultures.

they have to play by the same economic rules as united states but they have different political rules. can't they sustain more pain than we can as a practical matter? kyle: what everyone must understand is the chinese communist party cannot accept a written agreement or enforcement measures that are not entirely under the room control. they are not going into an agreement that is both measurable and enforceable unilaterally. counterintuitive to the entire dogma of the chinese communist party. president xi is willing to sacrifice economic well-being to maintain control over his country. we think in terms of pure economics, what will be best economically for the world. not the well-being is key to establishing the legitimacy of the communist party. alix: does that mean you want to be shorting the yuan right now?

kyle: look, think about the way china operates. we think china represents 15% of global gdp. if you convert their r&b gdp into dollars, at the current exchange rate -- less than 1% of all cross-border currency is in their currency. the joke is on us. if they were open their capital account, if they were to allow all of the chinese to invest abroad and move their money abroad into countries that have rules of law, their currency would appreciate your he percent in a day. what the chinese are trying to do is probably their currency and hold on long enough to maintain rule and never enter into a trade agreement like the united states would like them to enter into. i think we are making the right moves in taking a little bit of market pain to maintain a

national security of our country in the long run. jonathan: how aggressively -- alix: how aggressively would you be shorting? what is the play for you? kyle: this is much more than a currency play for me. i will be clear with you and with all of your viewers. i have taken such an interest in this in helping our country do the right thing that i closed my chinese currency positions. i have other southeast asia currency positions. just say you can hear from me, i do not have a vested interest in china's currency. this is such an important moment in time for u.s. national security that all of the work that i have done over the last seven years is moving more into the political sphere than the financial sphere. if you have money invested in china, what you have to do is

realize there is no rule of law there. once you get over that fact, that they do not respect human rights and they do not play by our rules, if you can get over those things, maybe should invest more money in china. i think the u.s. institutional community is breaching its fiduciary duty to its own investors by investing in a country that has that many problems. the unitedhave said states is making the right moves in this trade battle with china. to what end? what is the goal? have alsolmost -- you said it is almost impossible for the chinese communist party to agree to the sort of agreement president trump is insisting on. what can we accomplish? is it mainly to bring down the chinese been slow down the economy? kyle: our goal is not displayed on the chinese economy, our goal is to protect u.s. national security.

they have stolen intellectual property from us every year for 10 years. they have done so many things to the united states because we have been a pacifist nation over many different administrations and we are finally standing up and saying this has to change. -- presidentle is xi set in the rose garden with president obama and told us he was not militarizing the south china sea and that was never going to happen. time, he was militarizing the south china sea. it was president of president. he lied to us. u.s. needs to think about our national security in the long run and we need to think about how we are going to trade with china, how are we going to have a relationship with china when we do not trust one another. we need to bring trust back into the situation and we need to set the ground rules for what the u.s. is willing to do in a trade relationship.

from, not face industrial policy that could put various industries in the u.s. out of business simply by selling things below-market prices. the chinese communist party has different idea of how it wants to rule the world. whether you are looking at china in 2025 or the 100 year marathon that ends in 2049. china's goal is simple. china's goal is to maintain their control of china's communist party, and they are willing to suffer to do so. they do not have economic well-being as their number one goal. leeir goal is to maintain ru and the legitimacy of rule by the communist party. those are different things than the u.s. looks at. david: if this is about geopolitics rather than economics, doesn't your position go far beyond the effect of tariffs?

u.s. company should not be doing the work in china, because whether through officially or unofficially, when u.s. companies go in, we are losing intellectual property. doesn't the logical positions a we should be disinvesting in china? kyle: you said it perfectly. if you're investing direct investment into china and you are a u.s. public or private company, you know that at any point in time the chinese can change the rules and take more of your intellectual property or kick you out of their country. chasingpanies are all el dorado. they are chasing the 1.3 billion people and the alert of potential -- and the allure of potential profit. u.s. companies will realize they are little and they give up too much for being in china. to take your question to the

wet level, i do not think should have any strategically sensitive companies in china. chipd not have silicon manufacturing facilities in china. should not have industry is that also blur the line between commercial and military use and that technology be sitting in don't whatclearly you call -- what you call china? my at thehem our frene moment. there are friend -- they are enemy militaristic lee in movements in south china sea. what we will all realizes they were never our friend as time moves forward. david: thank you so much for your time. kyle bass. alix: president trump still tweeting this morning, talking about the fed versus the pboc.

match, it ever dinner would be game over, we win. -- call this and said david: i think he does believe he would be in a much stronger position if he just had jay powell on his side. alix: which is a key difference. president xi does have the pboc. david: coming up, big banks and fin tech. is coming up next in today's follow the lead. this is bloomberg. ♪

i'm vivianaiana: hurtado in the hewlett-packard enterprise greenroom. coming up on bloomberg markets, nato secretary-general.

david: time for follow the lead, a deep dive into the stories making headlines in moving markets with insights from industry veterans and insiders. tech,our focus is on fin ai and cybersecurity in the banking area. u.s. banks faced hours of questioning on the largest subjects and they all talked about cybersecurity. is the biggest risk the financial system faces. >> i believe cyber is a clear and present danger to the financial system. >> this is the single most existential threat to the financial system. >> we are in a war on cybersecurity. welcome catherine bessant, bank of america chief intelligence officer. congratulations, you are in charge with the war. this is a big issue for banks.

have you address that from your position? catherine: i was watching that moment live with some colleagues and we all sat in the room and i thought their perspective was accurate. there is no question the thread is huge. i think the thing that makes this difficult for boardrooms and ceos is this is a different risk than bankers normally face. it is a risk that is unpredictable and hard to model. it is a risk where the past is not any sense of prologue. investment, the key is great talent. cyber defenses possible. david: china is in the news today with things like huawei. as you look at cybersecurity, how do you take into account, when you source things like software or hardware, if you have to take into account where it is coming from and what risks there might be? catherine: absolutely.

our customers relying us to be possible -- to be responsible for what we deliver. sourcing is just as responsible as what we produce internally. and risknance management around third parties and forth parties, understanding where code is delivered, all of those things are incredibly important and have to be. a look at you take what is happening between the u.s. and china, does that change how you think about things? does it change have you allocate capital? what your priorities are? catherine: good risk management is always about understanding the worst-case scenario. current events in china do not impact what we are doing in the day today. it does make us want to make sure everything from strategy text huge and lineup to handle whatever the risk is today. is difficult thing in cyber the risk of today is interesting, the risk of tomorrow is what is most important. david: let's talk about in tech, much talked about through your

industry. give us a sense of your strategy. i know erik: is part of that. where are you in moving into fin tech? catherine: i used to say five years ago that banks should be fin tech companies and the reason is there are times when fin tech firms can be better and cheaper to market than we are. our strategy at bank of america is to buy from fin tech when they have done something effective it is that capability we want to deliver. sometimes we partner with tax are we sure the economics -- techs where we share the economics. sometimes we will compete like crazy. bigre not the firm making announcements about acquisitions in fin tech. we believe the entrepreneurial spirit is better cap by buying

or codeveloping. alix: what will it take to get behind blockchain's? catherine: i am looking for the use case that works in financial services. it is like full of sound and fury you to signify something. -- i'm notckchain blooming on it, i think it holds potential. i believe there are use cases that make sense today. we have yet to find a scale and financial services. we are experimenting heavily. we have more patents than any other financial institution in the blockchain space but i've yet to find something makes a difference for a client or customer. david: let's talk about artificial intelligence. you've been a leader in the responsible use of artificial intelligence. you were behind the formation of a group to focus on that. tell us what the responsible use of artificial intelligence looks like. catherine: for a company that can say is strategy in does

gewirtz, responsible growth, it should not respect -- in two words, responsible growth, it should not surprise anyone that we believe intelligence should be deployed responsibly. it is not enough for one bank or a series of banks to take technology firms public policy regulators and buyers and sellers all to come together. the purpose behind harvard is to create a place where people would sometimes views an agreement and sometimes in opposition to discuss the ways we responsibly use this incredible tool. alix: what does that do to hiring? what does that mean on a granular level? catherine: the word granular is important. we can say at the macro level, workforce transformation. when we use the word transformation to an individual worker, that means you are transforming me out of a job.

to us, that is the antithesis of responsible ai. my belief is jobs and the number of jobs will not change. individual tasks will change. the idea behind ai is to take the things that can best be done and free upy individuals to do what they do best. think, advise, judge. david: how does that synapse exist between the human and the algorithm? it is not two operations. humans have to interact with those algorithms. how do you train people to know when to use ai and not use ai, how to use it responsibly? catherine: it starts with a culture that says ai is a tool, not the answer. it is a series of outcomes that enable humans to be better in their judgment. the other thing we have to focus on his ai and algorithms are created by humans. unwell, they should leverage.

the best of -- don well, they should leverage. poorly, we repeat the sins or the risks of the past. david: for those of us who may not be as familiar with ai as you are in the real world, what is irresponsible use look like? it helps to understand responsible use to know what you are policing against. catherine: i can give you a simple example in hiring. if the question is how do i , i will produce an algorithm that takes the quickest hiring i have done in the past and leverage it into the future. leverage those candidates, the selection choices. that repeats the past at scale. if the question is how do i have a more diverse workforce, which we all want, the algorithm has to be produced differently. what you have seen is when an

past,wth am repeats the -- when an outgrowth am repeats the past, it ignores ways we want to be different in the future. responsible ai bends the curve of the past to make the world a better place. alix: great to catch up with you. thank you so much for joining us. here is what i'm watching. the new tariffs coming from china. joining me is to lori and chairman. he was the first human in the u.s. that saw the lng export market developing in the u.s.. intimate knowledge of the relationship between u.s. and china. good to talk to you. i have a chart i will bring up and described it to you. it shows how much lng costs when you look at the 10% tariff and a 25% tariff. how would that ever wind up being competitive in asia? case ofis a classic

cutting your nose to spite your face. it will be spent by chinese consumers, not anybody else. [indiscernible] china is the biggest importer in volumes. to the extent the prices , charging the tariff paid by its own consumers. furthermore, the driver of lng is the permianet basin. the last time i was on your show, you asked me if i thought -- could go to zero and i told

you of course. dynamic of at the what is happening in the united states, we need to export our lng. it is not that we don't -- if not we do not produce our oil. we will have the cheapest gas in the world. if the chinese want to prevent themselves from having access to this opportunity, that is their issue, not ours. alix: fairpoint. what does need to get done is overseas investment in the u.s. export facilities. the driftwood project for tellurian is courting investors. you need to not look in asia for that money? >> china is not all of asia. we are talking to different places of the world. we have not spent a lot of time with the chinese since this started because there is too

much uncertainty. ,e will have gas underwater competitive with any other nation in the world. the driver will be exxon in chevron, not china or india. if exxon and chevron do not find something to do with this gas, they are not producing oil, the whole world is in trouble. if you're looking at an oversupply in the market and global lng prices have been falling and then you want up having these export facilities that do not get running, what happens? what does not get built? >> it will get funding because we need to evacuate our gas and produce our oil. it is not a question of whether we want to export, we have to export. it is not an american issue, it is a global issue.

we will add export, one million barrels a day of oil production per year for the next five years. this, we are going to have 20 pdf of natural gas we do not know what to do with. we need to triple our export capacity over the next five years. it is a critical issue for the united states to be able to continue to produce our oil and it is a critical issue for the rest of the world. alix: i appreciate you joining us today. thank you for that insight with your deep knowledge of the industry. that wraps it up for bloomberg daybreak america. bloomberg -- the open is up next. ♪

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jonathan: coming up, the calm after the trade storm. equity futures bouncing up yesterday's ugly lows. the federal reserve's john williams says high tariffs will impact growth and inflation. the president says he will meet with president xi at the d joining -- at the g20. he has a feeling it will be successful. good morning. that is all it takes to give futures a lift. of 18 on the s&p 500. .7%. the treasury market is not buying the optimism, yields up by just one basis point. euro-dollar 1.1213, a slightly weaker euro. let's begin with the big issue. headline risk taking center stage. >> it is extremely difficult. >> hard to navigate. >> a lot of uncertainty. >> the president is not consistent with his rhetoric.