trade escalation in may that we have seen leadership from the defensive sectors. lagging behind, consumer discretionary and tech. -- because they are expensive. and we don't think there is the high -- recession. they provide a good income. caroline: we saw some downward project during -- downward trajectory. just 2900 on the nose. out of those overall levels look in terms of the money flowing. what was it? romaine: we surpassed sarah's target. $1.4 billion. sarah, you will have some redemption tomorrow. 2900 on the s&p 500.

let's call it 2600 on the dow jones. the hundred on the russell 2000. -- 1500 on the russell 2000. caroline: volumes down. >> let's get a deep dive. mike: i am watching the bloomberg agricultural sub index. a rebound over the summer in commodities has basically completely faded, and that leaves this index new the lowest it has been. as we gauge inflation, districts very well with -- this tracks very well with bond yields. corn and soybean. obviously, the trade tensions with china is hurting crop prices. but there is another thing, the epa decided to give 31 refineries exemption from biofuel acquirements. this is pitting the energy

department and epa against the agricultural sector of the economy. bloomberg is reporting that there was a meeting today to try to figure out ways to boost ethanol demand. it is not clear that any of these measures will be taken in force. abigail: with stocks trading lower, it is not a surprise it was a risk off day. bond futures are higher, gold futures, and japanese yen features. what might be surprising is that haven are doing much better and stocks year to date -- better than stocks year to date. the s&p 500 down 2.3%. we have the yen versus the dollar futures, rising. gold also rising. treasuries higher as well. third quarter shaping up to be a risk off quarter. gold and i mentioned

just want to give people a little bit more perspective. it has risen close to 1% during $1500y, back above that an ounce level which many considering bullish signal. it is recouping a third of what .t lost monday speech in's keynote jackson hole and also posting bond yields which typically help non-interest-bearing assets like gold. >> the rest of the markets team is still with us. i wanted to touch on something you had previously said more cautious than you have been in the cycle and yet pockets of risk on where you think you can

add because it looks so expensive. within technology, emerging-market, is that right? gabriela: 100%. when we think about recession risks, they are the highest they have been this cycle, but we would only put them at 40%. the base case is below average returns. exactly to your point, we want to find pockets of opportunity, a little bit of high-yield. parts of the cyclical sector within u.s. equities. but we also want to make sure there including some defense. romaine: as you search for those opportunities, we talked to a lot of folks who are testing the limits of risk, going pretty far to duration risk in regard

fixed income. do you see the risk that this could blow up in your face. we set our base case and we have our overhang and the story remains, but we are a tweet away from that changing is also why you don't also want to be full in on the defensive side. that includes not just duration heavy u.s. focus. you want to find a balance between being a bit more defensive than usual in still finding pockets of risk and opportunity. caroline: what is the most unloved at the moment? gabriela: banks cannot catch a break. volckerfolk are -- you 2.0 today. the 200 a we

average. 2.0, you look at volcker bloomberg's report on how it has been framed, many are saying it is not going to be enough to change the trend we have been seeing when it comes to the climbing trading revenue. you have lowering interest rates, flattening yield curves. the banks, it has been difficult for them to get off their feet. taylor: where do you think the biggest downside risk is right now? emerging markets, italy's government blowing up in our face? what area presents to you the most downside tell risk scenario? a we can put them under bigger umbrella economic absurd, truly global -- economic uncertainty, truly global. the trade tensions, but you have

the italy, brexit. it is really a global issue of economic policy certain d and unfortunately won't be completely offset by monetary policy. romaine: do you think that fiscal policy will step in? do you think the companies -- the countries out there that have the capacity to do this actually will do it? gabriela: it seems like it will only be in area fashion, after the markets have already sold off. and is true u.s., germany, china. caroline: the more important news is yet to come jackson hole.for -- jackson do you think monetary policy just can't pick up the load?

gabriela: we don't think monetary policy can offset these other clouds and engineer recent -- engineer the exhilaration. re i think -- engineer acceleration. but i think analysts are watching monetary policy. i'm looking at the data. thursday is the important day. we have to continue to see that afloat with consumer goods and services. romaine: are you optimistic? gabriela: we are hopeful. i think you are starting to see some cranks emerge. the question is how much consumer spending slows down. romaine: our thanks to gabriela santos, and ovarian sarah ponczek -- and our very own sarah ponczek.

"what'd you miss?" is up next. this is bloomberg. ♪

from bloomberg world headquarters in new york, i am caroline hyde. romaine: on romaine bostick. taylor: i'm taylor briggs. joe weisenthal is off. caroline: stocks on the downside. perspective problem. my top analyst red wallace is raising the red flags and of we work's ipo. in italy'sst

political drama. ande minister conte resigns points the finger at league party leader salvini. romaine: the filing for the we company going public turning heads. one analyst at some fighting words for the wework. company. willins us right now and tell us what. is rett wallace, ceo of triton research. forgive my inability to pronounce. i read the wework filing. romaine: explain to me what -- look, i think the

is it is likework uber. we rent office space from big landlords, we have bone and beer, and -- we have ping pong and beer. i think the challenge in this document is what the actual economics are. this is a particular issue for this company in terms of burden of proof. if you lost $1.6 billion on the bottom line, it would make it really easy for investors to hand over $3.5 billion more to you. but obviously they did do that. -- they did not do that. taylor: one of the issues you said was the reclassification, into operating expenses two yea

technicallyn though that expense has a changed. is that -- that expense has not changed. is that a margin story? an obvious geisha story.- obfuscation it should be easy to understand. putting it into different cost buckets even though they have hundreds of units and you can't tell. we don't know what the vacancy rates are over time. the other thing we don't know is they talk about their memberships over time as if nobody ever left. of course, people leave wework all the time. how often do they have to replace those staff? none of those are clear in the filing. it is murky.

that theains to say money so far this company has come from softbank and fidelity and benchmark. these are smart guys and they have obviously seen numbers that would show them making money. clearly, this story is not a slamdunk. anoline: this perhaps is that rare when -- is not that rare when it is not always the clearest. the fact that you have an index. is theot only that, it most correlated about other pieces of the index. caroline: if you do well, if you meet your end, your shares tend to outperform. rett: it is interesting, negative correlations.

thescation is good for stock going down. it turns out that fuzzy stocks tend to be overpriced. the other thing, fancy investors. caroline: who is fancy? like --e lowest with the lowest would be like uncle bob and the highest would be warren buffett. they seem to be signaling that they will ask for a price that is lower than that last private market price. they are just fast forwarding and saying, let's not talk about $47 billion or whatever. romaine: if you look at the ipo's over the past few months, overall, how do you rate the quality of the? to buyare still going this.

rett: maybe. a lot of investors sat out uber. the burden of proof is to explain to investors why they should invest. fidelity is a very large ester in wework -- large investor in wework. the question is, how much more do you want to buy? that everyone else is in that position. what will be interesting is to see if investors feel like they have to get it. the only reason they would do that is if they feel like it would trade away from them. fear of missing out is a very big motivator for investors. they feel like, if they price it wrong, they may wait. it sort of brings up the issue of what kind of models if we don't have data. we can use pe.

do you use price to cash flow? future lease payments? what are you doing to determine its worth? rett: the academic value -- the academic answer is the discounted value of the future cash flows. we have ipo dossiers to build the model to figure out what the long-term prospects are. even in five years. most of these companies when they list, with rare exception, are losing money. when zoom comes along with profits, people are beside themselves. i have a theory, a narrative about what the earnings are going to happen. we try to quantify that. that is why we don't like obfuscation. if you don't tell us what we need to know. pinterest is an example, they don't make money today but you

can look at the moneys -- look at the numbers they give you and say, this company makes sense. caroline: when they held the show, inviting analysts over to beer, avocado on toast, they were not real estate analysts, they were tech analysts. rett: it comes up over and over again. meat aond -- is beyond tech company? they claim to be. we have to respect the ability to raise money at these prices. you must give credit where credit is due. he has raised money from people who are very smart and knowledgeable. he has been able to raise money at tech multiples and tech

investors will look at this deal as if it was a tech deal. is this tv show a technology enterprise? yes, it is. do you think of yourself as you -- as media? probably. everything will be tech eventually. taylor: the analysts cover this tend to be rate analysts as well. street years up for volcker 2.0. this is bloomberg. ♪

romaine: time for a look at what stories are trending. big lassquare garden's

vegas bet that sent shares falling. disclosed the amount of cost -- the cost overruns in a venue with a construction budget of $1.2 billion in contractor costs estimated at $1.7 billion. today's u.s. lot of apple this u.s. launch -- today's u.s. launch of apple's new credit card. they flushed a deal with uber that would give people -- they launched a deal with uber that would give people cashback. new rules against toxic gender stereotypes. the first two ads banned by were showing the stereotype that men were unable to care for their children, and also showing men as adventurers

and women as passive. you can follow the stories of your terminal, bloomberg.com, and tictoc on twitter. taylor: wall street regulators appointed by president trump aitedunveiled a long aw overhaul of the volcker rule. the senior finance writer for bloomberg news joins us now. --ic or real changes today symbolic or real changes today? >> the rule is so complicated. everyone is scratching their head to figure out whether something is needed. even the original version was very hard to implement. everyone, including the regulators, complained about how difficult it was to implement. about 150 pages of the

300 page thing. it is still very complicated but they are trying to streamline certain things. there's a lot of criticism that it is actually narrowing the scope. that could give banks some leeway. the volcker rule is never been .lone there are so many rules since 2008, banks are tied in multiple ways, not just one way. ruleis eases the volcker restriction, there are other things that will kick in. caroline: and lobbying. we have a clearer picture, but ist remains prohibited

proper trading basically cut -- trading, at least with your own money. trading has been suppressed for a lot of other reason, not just rules. different,ment is so interest rates have been so low. 0% for years. negative yields on $15 trillion of bonds. that makes fixed income security tough. who wants to buy and sell negative trading stuff? the u.s. as a and that bad but our yields are approaching low territories. bee of our treasury yield to negative well that negative as

well. trading revenues of the big banks, regardless of where they are in the world, have been declining massively, more than 1% overall. does make it difficult anyway. rules just sort of add to that. spice. caroline: maybe all of these rules make working on wall street less appealing but seemingly people want to go through the rules and regulations to be one. a record number of people will be able to add the initials cfa after their names. rate,were 56% pass unchanged from last year. residentt to our cfa in chief. taylor: greater compliment.

congratulations to all those who participated. and over 30% are women. this is bloomberg. ♪ ♪

at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond.

conte has officially resigned as italy's prime minister. he was asked to stay on in a caretaker role. the president of italy will have talks tomorrow about forming a new government. conte blamed the collapse on his 14 month old populist government on his deputy prime minister, matteo salvini. british prime minister boris johnson today accused the european union of being, in his words, a bit negative about negotiations. on the eve of his trip to berlin

to meet with angela merkel, he recalled -- he called again for the northern irish backstop to be removed from the agreement. thatohnson: one thing frighteningly complicates the picture is that our e.u. friends still think there is a possibility that parliament will block brexit. as long as they think there is a possibility, they are unlikely to make the concession need. -- the concessions we need. johnson'se minister government said, as of september would stop attending all meetings where its vital interests were not at stake. oftenent says russia is discussed when the leaders of

italy,, france, germany, and japan meet as a group. president trump is scheduled to fly on saturday for this year's meeting of the group of seven. russia fromexpelled what was the group of 8 after president putin annexed the crimean peninsula. president trump is calling on the federal reserve to cut interest rates by a percentage point over a fairly short period of time. he said it would make the economy better and greatly and quickly enhance the global economy. he made this comment during an oval office meeting with the romanian president. pres. trump: you have to be proactive. we need a fed cut rate. if you look at what is going on with the european union, germany, what they are doing it

paying, they are doing something inverse. we have to keep up to an extent. mark: this forestry tensions with china market -- as far as trade tensions with china are concerned, trump said somebody had to take china on even if we go into a recession. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. romaine: some breaking news. earnings from toll brothers, the -- toll brothers, the largest u.s. homebuilder. .hird quarter revenue, a beat, $1.7 billion.vs. as far as full-year deliveries, 8100.e of 7700 to

it has bumped in -- bumped up the low end of that target to 7800. caroline: initially, the prime minister announced -- in italy, the prime minister announced his resignation today, blaming it on salvini. he said he wanted to gain full powers by grabbing the premiership. from, finance professor the chicago school of business. incinating what is happening terms of italy. we know that conte himself was an epidemic -- was an academic. he wasn't a politician. what sort of coalition are you envisioning? alwaysian politics is very complicated.

triggered i think was islooking to gain own popular consensus he acquired recently. twover, it seems like the other parties, the democratic party and the five-star, formed this alliance. is whether this is a serious government with a coherent program or just a way to postpone elections. taylor: talk to me a little bit about the market reaction that we are seeing typically, uncertain bricks -- we are seeing. --ically, uncertainty bring the 10 year relative to germany's is contracting, so the market is like what they are

hearing. what do the markets like about this? luigi: i think there is a part of the leak that is part of the -- i think there is part of the league that wants to get out of europe. the fact that they get out of government has reassured the market. that is the play, i think. romaine: salvini, he talks a good game, he really knows how to stick it to his opponent. but if he were to be prime minister, do you think he could deliver on a lot of the promises he has been making? luigi: first of all, no onitician will ever deliver all the promises. what.k that depends on

i don't think salvini will get out of europe. i think he knows it is too costly. on immigration, there are things he wants to do. i think he would be a little bit like trump. i ask you, did trump deliver on the promises he made? you could argue that he did, most of them. how effectively is the question. the economic of theents, seemingly went league and five-star bullet boarded together, they were pushing hard for more spending. what coalition, whether one for the interim between the democratic party or the pd and five-star on one side, or indeed if we do get salvini at the helm, do we see italy as still

having credibly competent when it comes to spending? aigi: i think salvini has program of taxes that would inevitably increase the deficit. in the short-term, it would increase the deficit. the government made of the five-star and the democratic -- it would be inevitably coalition.european in fact, the of this new of theent is the name

person who is president of the european commission. .ecause the five-star voted pro-european coalition. taylor: thank you. that was luigi zingales from the university of chicago. coming up, mark mobius of mobius capital partners weighs in on the fed's next move in maybe a little bit about gold. this is bloomberg. ♪

theor: fx traders can dollar. the bloomberg dollar index in a high this week. bloomberg spoke with veteran investor mark mobius.

he shares thoughts -- his thoughts. problem is a very strong dollar. you have got to get that dollar down against the renminbi. towill be currency war tied these interest rates. i think it will happen, maybe sooner than later. >> that strong dollar, what does it mean for em assets? mark: it is good, under normal conditions it would be very good because it means these emerging-market countries and export to the u.s.. the problem is, in some cases, like in thailand, you have the local currency getting stronger. you have to pick and choose which country you will be dealing with it how they will

benefit from exports to the u.s.. the other problem is that these countries cannot fully replace china and some of these high-tech areas. it will take some time before you see this working through the system. >> mark, let me continue with that. which emerging-market are you liking right now, a low yield environment given a slowdown. some people are saying indonesia is looking resilient. there are a number of markets looking good. domestic consumption is growing at a good pace. turkey is now recovering. we have been through a tremendous decline in markets.

many of the asian countries, korea, taiwan, philippines, liquidity is limited. a number of these countries look quite good because they continue to grow and domestic consumption is at a good pace. >> do you worry about interest rates being so low because they do mask problems about future spending. that works pretty corporate world as well. that could be a problem in the future, couldn't it? question wes no learned the lesson during the asian crisis. they borrow in dollars and can't pay back when the currency tanks. that is why mentioned this problem with u.s. dollar bonds

in these countries. speaking, these declining interest rates are good for consumer markets. they eventually will be a bust. meantime, the party goes on. mobius ofhat was mark mobius capital partners. sticking on the same topic, the yen has been on a hot streak this year. speculators not going this bullish on the currency since 2015. let's welcome it kathryn cry --t -- kathryn cry felt katherine greifeld. is there some obfuscation going on that i don't know about? word.t is a good s.a.t.

it has gained over 3% against the dollar this year, in a year that has been defined by supertight ranges. it speaks to this broader haven rush we are seeing across assets, the fact that hedge funds have decided it is time to get long. taylor: this is sort of a bigger picture question. when you think of yen, you think classic safe haven. does that trade still work? katherine: i think it does. it is definitely the safe haven of choice. when you consider the other flight to quality that they choose, the swiss franc, there is concern that could have some contagion risk from a broader european slowdown.

the yen is really a clean choice and it has the strong bid from japanese investors repatriating their savings back home. caroline: much of this frustration at the boj and leadership in japan. we saw it with swiss franc when they had to move into the market and revalue or devalue. is there any risk that the haven could be called into question because the boj fights it so hard? katherine: that is a good question. 105, people aren't worried yet. worryvels, that is when may be rising and they may step in to stem that. romaine: i don't understand. explain to me. up pretty welld given all the issues in japan

last two decades or so. what does that mean for the dollar? does that mean the dollar has the potential to really hold up the way the yen has. katherine: it is kind of the beauty of currencies that it is a relative price. talking about worst-case scenarios, if we do hit a global slowdown, who is the real winner? people say it is the dollar, the yen broadly. where dollar-yen goes come a will depend on how it shapes out. taylor: you talk about dollar-yen. come into my terminal here. 1%.e are just you are seeing standard deviation moves relatively

frequently, perhaps two standard deviation moves. i have heard that the yen is the classic widow maker and also heard that the yen can go further given the heightened geopolitical risks. katherine: they have a 100 forecast for yen in the next 12 months. it can be a kind of painful trade. if you go back to january, there is this currency witching hour, the handover from new york to asian trading when there is very low liquidity and i think it was bad apple earnings that set it off in january. a surprise risk off event, you can really see dollar-yen move and take out a lot of people at the same time. caroline: we thank you so much. a quick check of the latest business flash headlines.

the largest operator of pizza hut restaurants in the world. debt after second-quarter results show the franchisee closer to reaching the terms of its bank credit line. shares of home depot are higher. a stronger second half for the home improvement chain in spite of a lower sales forecast and uncertainties about tariffs. the ceo says consumers at a stable housing environment are supporting the business. walmart has sued tesla's energy operations, formerly solarcity, for breach of contract, saying they set up panels that resulted in multiple fires across the country. this is a great bloomberg scoop. leastores is what they out to tesla. seven fires. romaine: walmart basically

alleges that you could see some of the defects with the naked eye. you mentioned the fire as well. it sounds like there was a pretty long dispute here. taylor: tesla shares are falling, down about 1% in premarket. it is always interesting seeing a retailer like walmart using its size and scale toward another company that we talk about frequently. romaine: they did approach tesla for a comment. we have not gotten a comment yet. caroline: coming up, mckinsey looks at the balance sheets of more than 23,000 companies across 11 asia-pacific countries and it has some bad news. more on mckinsey's morning. -- warning. this is bloomberg. ♪

caroline: mckinsey will have

some bad news. the global consulting firm are saying that signs of an asian debt crisis are imminent. the key finding, where are the most ominous? shery: not really surprising to say that it was mostly china and india. what they were looking are the long-term debt of these corporations with interest coverage ratio of less than 1.5 times. this means companies will have to spend a lot of earnings on repaying debt. what we see is that india, china, indonesia, more than 25% of their long-term debt was accompanied through the ratio of less than 1.5 percent coverage. is it sort of a broad macro economic the echo what would be that shock that triggers it?

shery: there are lots of elements. you are hearing from mark mobius that there is a party going on but it has to stop at some point especially when you have so many companies making long dollar-denominated debt out there. there are those who said the credit profile is issue debt has been proven, but not enough. ratesations in exchange could be a big here. shares ofen the that global financial inflows, extreme interconnectedness with the rest of the world. affectl slowdown really the asian company. romaine: any ideas on how to avoid falling off the cliff? shery: the usual stress testing, looking at risk portfolios.

they have to assess the risk by sectors. we have seen energy, industrial utility companies in hong kong, india, where those debts have been more pronounced. own, ie: know what you feel like we have heard that before. shery, thank you so much. don't miss this tomorrow. the fomc releases minutes from its lasting -- from its last meeting. taylor: i will be looking at retailers. romaine: more earnings. nordstrom and elle brands reporting second-quarter results. taylor: have a great evening. this is bloomberg. ♪

♪ emily: i am emily chang in san francisco and this is "bloomberg technology." pres. trump: somebody had to take china off. china has been ripping countries off. emily: plus, more frustration for facebook. eu regulators are already