abe has resigned and warren buffett will participate in the future of -- he buys into the centuries old trading houses. an earthquake, it is still in jackson hole. the aftershocks being felt. the real yield ever more negative. will 1960's inflation return? the summer of our discontent is not over. from kenosha to portland, protest and death. good morning, this is "bloomberg surveillance." from new york, i am tom keene. so i amy is off today here by myself, which is a good thing. i am looking forward to this terrific news flow in the final week of summer, a lot of kids back in school. you see it in the celebration of mr. buffett's acquisition of 5%

of these trading houses. there is room to expand up to 9.9%. we see futures up 12. dow futures up 91. there is a lot to talk about american politics. the yield space and indications of what to come. >> joe biden has accused president trump of fanning the flames of hate and violence. a trump supporter was shot and killed in portland, oregon after a clash over shootings by please print president trump called his supporters great patriots. inicials blame the violence portland on democratic officials. president trump is praising shinzo abe.

abe twoident spoke to days after he announced he was resigning for health reasons. president trump told abe the u.s.-japanese elation ship is stronger than it has ever been. index overturing factories had orders. in belarus, thousands of protesters gathered to demonstrate against alexander you hasat rejected claims of a landslide victory. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. tom: thank you so much. equities, bonds, currencies and commodities.

stocks advance in the advance worldwide. ftse closed for a bank holiday. good, ahas been really great reading over the weekend. the interesting idea of the market up and the vix up at the same time, that is unusual. 23.89 on the vix. yields are a jumble right now. what is important is the foot on the two-year yield. third year bond, 1.49%. the real yield -- a residual off the nominal yield an inflation expectations are clearly up in the united states, of -1.06.a real yield what else can i say? the dollar is weaker. the euro is 1.19.

not only a stronger one, but an acceleration of strength. what we will begin the day with is to look at europe and look at what happens after everyone, including francine lacqua comes back from her vacation -- kidding -- tom kinmonth rights onlly, really detailed notes bank dynamics. what happens in september for european banks in debt? tom kinmonth: essentially on the bank side, it has been monetary transmission. the sovereignty of banks is stronger that when they started the year. risk hassure of

decreased. proactive, very positioning for the future, and we are positive on the debt dynamics going for. tom keene: what will change? is people in europe set up and the city sets up to return what is left of the city, as they return, what is the thing you are looking out for? what are you trying to observe into september and october? tom kinmonth: essentially default have been moved into next year. the coronavirus impact has been pushed forward and we are not that optimistic on inflation. countries over 50%. we will not get some of those heavy wage pressure dynamics on inflation. next year, we will see unemployment rise and be caught in these low inflation and

deflationary scenarios. we are not too optimistic, g4, we expect a double-dip recession. bank of england will still be there providing support. it is similar to what we see in japan, despite huge government spending, it is not always a bad story. modelene: can they negative interest rates in the united kingdom? tom kinmonth: that is a good question. it is not negative at the moment. it is a different mindset in europe. in europe, the ecb is trying to help every member and go as quick as the slowest member. ande is a lot of support the banking sector with monetary transmission. it is a tougher environment to bounceback and try to provide a solid proportion. the currency begins to negatively impact europe.

francine: i don't want to get you -- tom keene: i don't want to get you in trouble with your executives. pretty grim out there. getting a lot of support, will we get to a fragility in q4 and q1 where banks have to consolidate? tom kinmonth: it is a huge divergence. equity is down 40% for european banks. regulators are heavily protecting debt and equities have suffered. if we continue to see recessions, if the top line revenue is not growing, there is still a focus on costs and the most efficient way to do costs is consolidation. forced his away when banks look forward five or six years and they see the roe won't be 10%.

anticipatingwe are over the next few years print forced on a longer-term basis. tom keene: it is too early in the morning for me to do greek letters. help me out where the opportunity is. where is the training opportunity to play toward q1 of next year? tom kinmonth: for us, it is high yield. against tier two. the most subordinated possible. we continue to see strong support. solvency in banks is very, very strong. banks have been very strong, the ecb is hoping for monetary transmission to flow through. huge pickup,ee a 250, 300 basis points are potential. 3% keene: this is to percent

, price up, yield down. can you group the german banks and their? german bankshe into that bundle? yes, essentially, it is a bit different because we have issues at the moment. you have low profitability. bank branches, density is one of the highest outside of italy, perhaps. the german branch is a little bit more struggling with structural reforms but have to occur. german banks will perform. tom keene: give me one other insight. what will you observe this week heading into september? the increase has

been interesting. tom keene: continue, please. in kinmonth: for example, march, we had corporate taking cash for liquidity purposes, a huge spike in lending. that really means going forward, we are trying to work out is that precautionary? the uncertainty in japan? not much capital investment has been done. spur thate a huge households and corporate have a lot of cash. a lot of excess capacity for spending to be done. that is the real story. a huge increase in deposits and corporate spirit -- corporates. tom keene: thank you so much. he is with abn amro. there is a lot coming up, not only framing up the end of

august and into september, but the ideas of the dynamics of the market. futures up 11, equities advanced worldwide. market all the bond jumble. stay with us. this is bloomberg. ♪

>> as a turtle has succeeded. whoever takes over would continue on. continuity isicy

key from a market standpoint or a yes standpoint -- a yen standpoint. in monetary policy has yield curve control, bond buying orchestrated by the bank of japan. he still has a couple years left on his term. >> political uncertainty may raise concerns and markets about a revolving door in japan's leadership. we do not see a big shift in the near term and policy. there will be a lack of continuity because there is not much room that the japanese bond can deviate from mainstream reform strategy. .> i don't blame him he has done a terrific job. >> whoever takes over from prime

minister abe is likely to maintain that crucial relationship between government and central bank. involved.to see him it has been the heritage of "bloomberg surveillance" for over two decades to speak of japan. bloomberg has had a huge commitment to japan and all of the pacific rim, there is an understanding of the importance of tokyo. sophie jackman joins us right now with bloomberg news in tokyo. speaksffett transaction volumes. 1865, these are the trading houses of japan, they are absolutely unique in the culture of japan. what was the reaction of the elites and the people of japan

by this announcement of mr. buffett? sophie: in a world of a lot of uncertainty, it is a bit of hope. hathaway has been building these stakes in the trading houses for about a year now and have fed to disclose because the stakes exceeded 5%. japanesepanies have dna. their heritage goes back hundreds of years. if you go back to their history, you see huge conglomerates that in some cases powered the second world war. they have diversified their businesses. in many of the big joint ventures around the world, some infrastructure, commodities remain a backbone of what they do. vote forery much a commodities, japanese stocks and

the japanese future as a whole. tom: there has been a lessening of them down to five or six and some recent mergers in recent years banked on bankruptcy and challenging times. are they fragile now or stronger than they were 10 years ago? sophie: the have to be stronger. they have been through the ringer with a successful financial crisis, it is not quite there yet, but they are seeing a blossoming of actual corporate governance in japan and we are seeing that reflected in what they do. the accounting practices they have, there have been scandals in japan, but this endorsement by berkshire hathaway speaks to the trust that the rest of the world has of the practices in japan. tom: patrick ryan at the japan

times and his wonderful series of articles on these conglomerates notes that part of the secret here for mr. buffett is it is not about japan export and import, but these companies now have ex japan businesses moving between germany and china is one example that have become dominant. is that the play for mr. buffett, non-japan part of these businesses? expectt -- sophie: i that is the case. the more diverse they get, berkshire hathaway has that currency hedge against the yen. you will see regardless of the direction of these trade wars between u.s. and china and all around the pacific and the eu, that kind of transnational, the investment that goes out of japan and between those major

powers will give those trading houses something to get them through whatever the trade wars might cough up. tom: the nature of this is well known going back to 1950 and 1955, when they really been to expand. how does the dominant political party of japan, how are they involved in this relationship with mr. buffett? sophie: the ldp has been in charge for almost all of the postwar period. there was a little blip when there was a change in government that ended in 2012 with prime minister abe. the ldp is everywhere, it is like a giant octopus. they resemble these trading houses, as well. young people getting a job that one of those trading houses would be a dream come true. if you look in japan's

parliament now, many of the big names in politics hail from those trading houses. tom: this is really, really important for the culture of japan. the same deal where you go to work for mitsubishi and you move from job to job every three years, or is there a new way they are trying to do business, something mr. buffett would be attracted to? sophie: yes, i think there is, and i think this virus crisis has put into the open some of the changes that have been bubbling under the surface. it is no longer the case you get a job at one of these places at 23, leave at 60 and get a pay raise every year for not doing things. that is already changing things. the culture here is ready to move. there is a positive feedback loop with investing coming in from outside. they won't get more than 9.9%

holding in these trading houses but that is a big chunk. the outside is influencing japan. japanese companies have a few ideas of their own. tom: warren buffett on his 90th birthday changing the financial fabric of japan. coming up, we will come back to the virus and to the pandemic. nhl hockey game this weekend -- thank you new york islanders for that. guess what? there was nobody in the stands. we will speak to a member of the u.s. tennis association. we will do that during the 8:00 hour. futures up 11, dow futures up 79. this is bloomberg. ♪

>> this is "bloomberg surveillance." yet.iggest acquisition the agreed to by therapeutic company for triple its market value. first approved treatment to help with allergic reaction to peanuts. government now saying it has the ability to block a sale to microsoft by

imposing tighter restrictions on exports. tiktok has a new regulations. that is your bloomberg business flash. tom: let's get a data check on a monday, what you need to know as equities lift, left, lift. futures up 11, i can't believe i'm saying this -- 3515. up 69 points. this is the oddity, the short squeeze. 24.02 on the vix. must watch on tech. this is bloomberg. ♪ so you're a small business,

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which i think shows up tomorrow. flow,come you, huge news we will get to that on bloomberg surveillance this morning. a cool conversation, a little off of the radar. he is with a venture partner out of london and they do lots of startups. far more importantly, hussein brings to technology everything -- this is one of the coolest majors in america. it is considered close to what oxford ppp was, it's just absolutely cool a melding of technology and psychology and behavioral are -- behavior. i want to take the apple stock split as a symbol of tech maturity. his tech maturing as these giants get bigger and bigger -- is tech maturing as these giants

get bigger or will it be the same silicon valley forever? hussein: silicon valley will never be the same thing,. quite honestly i don't see that changing. i think tech is embedded in our way of life. all the things we talked about in the dot-com bubble about tech being big coming into fruition. three to 5 billion people are online using their devices every day. tom: what is the arrogance meter you have at hochstein ventures ventures? apple if it wasn't split would be $28,000 a share. that arrogance changing into something constructive when all of them feel they have to split, that they have to become more accessible to global finance and investment? hussein: i think stock split's in general generally have to

split to become more accessible. to the institutional investor it doesn't make that much difference, but to the retail investor it does. it is hard to afford a $28,000 security. you do have to split. is aboute stock market retail investment. you really do want to cater. the caveat is these days a lot of commission free brokerages like robin hood are now offering fractional shares. it doesn't matter what the stock is priced at. tom: well said. is thefind fascinating social and cultural pressure to be not the tech boys -- terry winokur out of stanford is iconic on this. bethere a way for tech to more accessible by signaling a stock split? tech is i think

becoming more accessible because of fractional shares. these commission free brokerages are enabling everyone to invest which is why you see retail -- the bigger and wider question is what is the responsibility of the tech giants and the tech industry as a whole as they become a bigger part of the economy. tom: marc benioff was rather sharp the other day in a bloomberg interview where he spoke of the philanthropy, the visible philanthropy of these tech giants, have they been philanthropic enough? hussein: they are still immature organizations, some of them. you have seen the bill and melinda gates foundation and the mark zuckerberg and priscilla chan foundation, but as organizations i think the tech industry is catching on to how significant it is and is not taking on the responsibility to wider society as deeply.

enough, immature organizations are like teenagers and still growing up to try to figure out where their place is in the world. when they get more prominent there is more responsibility. where is their place in the world if they don't want to repeat the mistakes they fear of industrial america? like christiansen where they get stagnant and soggy. how do they avoid those trends? hussein: that's a good question. there are enough critics within the industry -- marc benioff is the early investors mcnamee hasroger written a scathing critique of the value. this is the big question that the valley needs to grapple with as these companies become so important to the world, what is

the responsibility of them and their founders, executives, and a balanceers to keep with their responsibility to society. mcnamee's go to roger whose ability to play a grunge qatar is widely understood. if he is scathing in his criticism -- i don't want to just pick on the big companies. what is the catalyst to move to an industrial maturity? hussein: it will be fits and starts and it will be a conversation. you need to embed the maturity into the conversation. i don't know what stanford is teaching these days in programs like computer science, but i imagine the ethical ofponsibilities computing and business are part of the curriculum. these organizations never knew they would be so significant so fast. it's not like facebook 15 years ago and they would be able to shift world politics because of their platform.

it still has growing up to do in terms of figuring that out. of a dialogueh happening within the industry that i think the industry will figure it out. industrialke the giants like rockefeller and carnegie figured this out during the golden age of industrialization. they figured it out towards the tail end. i have a little bit of hope. i think things happen fast and the tech industry, they don't look like they are happening fast because we are a daily or weekly cadence, but i think the conversations are happening faster than they were in the roaring 20's. tom: is it a lock that amazon will do a 10 for one stock split? companiesore of these as they keep growing as their share prices get bigger it's more likely. stock split shouldn't cause any change in the financial share price, but they do. there is lots of academic research on this, five to 10%

upwards at least. kanji, thank you. this is a huge debate. orget about all the cfa talk about the stock split, look what happened to salesforce entering the dow, look what happened to apple shares off the announcement, like lemmings off a cliff they will all go that way. i would add you to our allies that a value on a monday morning, here is your first world news. ritika: president trump calls for law and order in a tweet storm following the death of one of his supporters in portland, oregon. clashn was killed in a between trump supporters and black lives matter demonstrators. of a trump members caravan rolling through portland shooting teargas and paintballs. democrats say the president encourages unrest because he sees it as a plus for his campaign.

president trump's intelligence chief is defending his restriction to restrict congressional briefings on foreign interference in u.s. elections. john ratcliffe says he will brief with printed materials but will rollout -- rule out all member briefings because of the threat of leaks. democrats say right cliff is only doing the bidding of president trump. the head of the fda promises transparency when it comes to reviewing potential coronavirus vaccines. he tells bloomberg the datable dictate what decisions he makes. president trump accuses the fda of trying to hurt and politically. a plane through lou through saudi arabia and airplay -- the flight was on its way dhabi in the united arab emirates which agreed to establish ties with israel. global news 24 hours a day on air and on bloomberg quicktake powered by more than 2700 journalists and analysts in over i amro to could

group to -- tom: we need to recalibrate on the equities market, dow futures up 74. no one better to do that then christopher. not on the stocks you associate with them. christopher here on the greater markets and the courage to stay in the market. at -1.06 at the 10 year timeline. francine --london, there is no one there, london is closed. this is bloomberg. ♪

tom: bloomberg surveillance, good morning. tom keene, francine is off this morning. been a fascinating set of days since chairman powell upon important speech at jackson hole. bloomberg finished strong with robert kaplan and a conversation with michael mckee. hisas delicate in interpretation of his chairman's delicate about the statistic of 2.2%. >> it's possible it will take a while to get to 2%. technology, technology enabled disruption in particular are limiting the pricing power of businesses and inflation has been muted for close to 10 years. policy articulation is really a reaffirmation of the situation we have been operating

in and our decision function for the last few years. radical shift, it's an affirmation that we are in a more muted inflation period. , but i don'tge view this policy articulation as a radical change, it's a reaffirmation of the way we have been operating. thate new policy is appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time. how do you define moderately above and how do you define some time? robert: we have left it deliberately undefined. to me, price stability is still our dual mandate, full employment and price stability. 2% is our best indicator of that. if me, what it means is that we get in a situation -- and i hope we do -- where we are running close to full employment

i am willing to take more risk and have a greater tolerance in my monetary policy judgments that inflation could run a little bit above 2%. for me, a little bit means a little bit. 2.25e said publicly percent, may be than that. i think price stability is the overlying goal and this framework does not change that. michael: why's this not a return to 1960 style fed policy, trading off inflation for lower employment? that did not end well. robert: that is the danger. it is not that i am going to lose a concern that we could have a spike in inflation, and i am not going to lose a concern and this framework articulates a concern about financial stability. i think those concerns have not gone away. issays on the margin, this

my interpretation and the way i will be operating, on the margin i am willing to take more risk in service of getting underrepresented groups into the more risk on inflation, but i will not be willing to take risks that will lose price stability allow the 60's or 70's -- that an is a concern overrepresented group, people on wall street, may be the main beneficiaries, you cannot increase -- you can pump up the stock market. robert: that is something we need to be cognizant of. not just on the fed funds rate, but also on our purchases of treasuries and mortgage backed securities and the 13 three programs we have implemented this year. i think it's important that we articulate those programs will last, and i do think we do need to be conscious of financial

stability and excesses that could build as a result of our policies. i will view that as an important consideration as i make judgments going forward. still at goldman sachs looking at your bloomberg terminal do you think we see bubbles forming now? concernedwould be that when the fed takes the type of actions we needed to take you have excesses and risk assets. not just prices, but what i am concerned about is that build up. tom: robert kaplan, an interesting speech. michael had a strong week last week, he cannot do that again this week. what an interesting jackson hole to say the least. coming up, we continue with the pandemic. cases are better, deaths are better, those dynamics are inderful, particularly here

new york city it has been remarkable the improvement in the new york area. fstein will join us from johns hopkins university. stay with us through the morning, this is bloomberg.

ritika: this is bloomberg surveillance, i am ritika gupta. the u.s. airline industry coming up with ways to get more travelers on board. united airlines has put an end to its $200 change fee for domestic flights. warmcan airlines adding weather destinations in florida and mexico after cutting flights 55%.ober by chinese banks have suffered their worst decline in decades, the problem is a cascade of loans from businesses that are going bad. a potentially record size ipo raise past heights of the dot-com bubble. the financial tighten aims to

raise $30 billion in october. to theirech firms highest since 1999. despite global uncertainty. that is your bloomberg business flash. tom: ritika gupta, thank you. ago and far away 15 years ago i believe i was in the office with the interim chief of bloomberg news matthew winkler and we were trying to figure out how businessweek would recover from an insider trading scandal that involved people sneaking into the printing presses to get a copy of businessweek six hours, 10 hours, 12 hours early. things have changed. joining us now the emeritus of bloomberg business news, the guy who hired me, matthew winkler joins us. your new article is a tour de force from how we have changed from that time 15 years ago. it's not about businessweek and

stealing a magazine early, is it? matt: no it is not, good to be with you. there are so many technological tools today that make it possible for people with inside information. that is information about an event before it is disclosed to the public to act on that information. there are all kinds of derivatives, there are all kinds canecurities that one choose to use to benefit from such inside information. at bloomberg we have the capacity to look at the breadth and scope of financial markets and to see unusual trading patterns and other activity that corresponds to what we would call insider trading. the other activity that is fascinating in your opinion piece. you are getting into not so much emails but information queries

about a potential company. matt: if you know something is up then what you are going to do is look for ways to take advantage of it. what we can see using our own algorithm with bloomberg automated intelligence is we can see the frequency of people searching for articles about a company. tradingee whether the is greater than the 20 day its weekly gain is insignificant. we can see that bonds are changing hands at a far greater rate than they would ordinarily. we can see that the volume of trading in the equity market is greater. when you put those things together they show you what pattern and the pattern is inescapably leading you to the handiwork of insider trading. the most recent example of that

is this month, this is the last day of august, earlier this month google bought a 6.6% stake in adp, the largest u.s. security company. they appreciated 100% as soon as the stock market opened. the headlines that were detailing the transaction were not a total surprise. clearly a few people knew what was going on. thenow that because frequency of people searching for articles about adt and reading them exceeded the 30 day average. we have time for one more quick question. is the sec using these tools, do they have a bloomberg terminal where they can get out front of the potential crime? matt: they do have bloomberg terminal's, lots of regulators do. but so far we have yet to hear from the regulators on any of

it. it's a bit disturbing because there are numerous examples going back more than two years and we can see them and that was the whole point of this. the team that created bloomberg automated intelligence, they are really doing the hard work. this is an amazing thing. people who have the bloomberg terminal can see this is happening and they know something is up, long before a deal was announced. you sott winkler, thank much, our editor-in-chief emeritus. a hyper detailed article. for global wall street, it is a must-read simply because of the detail involved on adt in that purchase by google. let me do a data check. on a monday morning, a pretty simple market. we still have this oddity, futures up 11 in the vix, dow

futures up 11 which mean the vix is supposed to come in at a lower statistic. how thatave to see unfolds when we get to the market open at 9:30. i have mixed bond market right yield to fourar digits, .7195, we can round that up to .72. gold, negative four. note of thisa strength, six point 85 on the chinese yuen. this is bloomberg.

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resigned, japan shaken. warren buffett will participate in the future of japan, he buys into the century-old trading houses worldwide stock celebrate. an earthquake in jackson hole and the aftershocks still being felt. will 1960's inflation return? the summer of our discontent is not over. i'm kenosha to portland, protests and death as biden and trump consider two different americas. this is bloomberg surveillance, i am tom keene, francine is off. we see the sunrise in new york. uneventful first monday of the last week of this summer. ups to talk about, futures 10, dow futures up 64 with some dollar weakness this morning as well.