matt: welcome to bloomberg markets, i'm matt miller. quick check what is going on at this hour, the s&p 500 down .4%, adding to losses that we saw yesterday. the u.s. 10 year yield continuing to rise at the highest level we have seen it since 2007. four spot 5951, going up five digits. tightening financial conditions. the u.s. dollar index as well, 1272, the highest we have since last year and nymex crude resuming the climb at 9386. that is west texas intermediate up three dollars 48 cents, brent

approaching $96. look at shares of meta-, the owner of facebook. they have gained 150% so far in 2023. but over the past two months, shares of come under pressure, falling about 4%. they are about to begin the connect event where we expect mark zuckerberg to speak. for more on this event and the long-term outlook, let's bring in the roth and kim senior analyst, thank you for joining us. what do you expect to hear from zuckerberg and what are you can for? >> the most widely expected thing from today's conference that they hosting is a new headset. they will probably launch it, have it ready for shipping by halloween time. that is something that is expected. i think the surprise will be if they launch some sort of glasses

or mixed reality glasses like we have seen from companies like snapchat. that would be the upside surprise but it is something we have heard as well. matt: how much are these ar and vr things hitting the bottom line? i know they have invested a decent amount of money and they obviously changed their name and ticker to meta. the most of us are not shelling out thousands to live in an alternate universe. >> from an investor community standpoint this is an experiment that has extended beyond what we thought it would be. they are about 15 on the outside , $16 billion every year on this experiment. with the hopes that over the longer term they have a sufficient competitive mode that another large company could overcome when the new form

factor becomes prevalent. i think investors are not excited with the progress they have demonstrated. less than probably 6 million people using this on a monthly basis, that is not exciting. it would be something that investors would be excited about. i doubt zuckerberg would be willing to say something like that today or tomorrow, that they are going to be controlling investments in this experiment. but that is something to get the market excited again. matt: it looks like they have the competition excited. we saw a news out of amazon that they have lured away a long time microsoft executive to head the device and services business. and of course on the ai front, everybody is competing as well.

microsoft is the leader there but you've got google as a challenger as well. how head-to-head do you think these companies are competing? is meta-able to compete with microsoft, google and amazon or does it lack crucial businesses like a cloud unit? >> and they definitely don't have a cloud unit to monetize ai and large language models they are creating. i feel there bifurcating and the goal is to open-source the large which models, the models of google, amazon and microsoft creating. facebook is on the others of the coin, but creating these open-source models and i believe they are also to some extent hurting they longtime monetization of these expensive models, gpt four coming from openai. if facebook is going to be a

comparable model, make it open-source, freely available for a non-enterprise setting developers. that could curb how many people would be willing to pay openai on google, on models like their peers. a different strategy. from a moneymaking standpoint, facebook and neither of the others have figured out how to make money from ai. based on the amount of investment going in this year. matt: just to talk more about facebook, as we head into an election season, how concerned are you about the misinformation problems they've had about the regulatory issues they may face? as we head into one more campaign cycle here. >> this is probably going to be a topic for incentive for the next six months or so.

that is also going to go into a very important investor debate, which is the amount of expenses the company is willing to make during 24. that will be the driver to the stock for the next three to four months. that is why the stock has been under pressure. to the point about elections and misinformation, i feel the curve is that a company like facebook ends up spending more terrain -- to ensure that ai created information does not get widely dispersed on the platform. that is a harder problem to solve and probably more expensive. data has been the biggest investor and of concern, given how they do not repeat the mistakes in 2016 and 2020. matt: hopefully we talk to you again after the event, and see whether or not you got what you wanted.

coming to us from roth and can. coming up, do ws ceo with stefan hoopes joining us to talk about the $900 billion asset and the outlook as the firm sees the return to strong inflows. sonali basak joins us, our start wall street reporter. this is bloomberg. ♪

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ed: matt: this is bloomberg markets, stefan hoopes has been a star at deutsche bank, through many of the ups and downs of the bank. maybe facing his biggest challenge, running the asset manager dws, and earshot away from being a $1 trillion money manager. he joins us now with bloomberg's sonali basak for an exclusive interview. shery: -- sonali: what is the grand ambition that you have in terms of turning this into a $1 trillion asset manager or more? >> as a publicly traded company

there is always organic getting past. our heritage is special because having $1 trillion we have more than $100 billion in equities, asked income, we are quite global. we have roughly 50-50. in two weeks we have a promising organic path but there could be something innovative. sonali: what is that means -- mean in terms of your hunger for acquisition? >> it is difficult to find something truly. you think about our starting position, we are so diversified that we don't need to add any specific cap abilities. we feel we have what we need. so organically it would be mostly to say german engineering, some precision, proper bets on certain things where we feel we can do better. but you always want to feel -- you always want your eye on the bolt is what happens. sonali: when you were brought

in, it was tumultuous. you are facing remarketing allegations in the u.s. and abroad. you've settled with the sec on some questions they have had, so facing questions abroad. how hard has it been to turn the page on this issue and what hasn't changed in terms of how you think about the state ability? >> i was well covered when i joined six months ago. it was great to put the sec matter behind us. we acknowledge what they found, we appreciate that they credit us for a proper corporation. and we looked at exuberant marketing. for new things especially, there will be in a washing -- a eyewash and lawsuit in a couple of years. you have to tone it down. for someone quite evolving, we are quite immature.

we fix it since then. we can look forward to what we made. sustainability is important and we feel we can be more fruitful. sonali: do you believe in esg? >> it is a company to term. there's difference between biodiversity, governance, gender diversity. we like to look at it individually. the sustainability piece, specifically climate, is a giant challenge. it really deserves the utmost attention. sonali: germany has been in the center of the story when you thing about energy security. how are you thinking rather relative dynamics between what is happening in germany, broader europe and the u.s. and how are your investors putting their money to work in these tumultuous times? >> it is unfair when people call germany the sick man of europe.

i like to think of us as a sore athlete. we have a strong foundation but they are naive in not appreciating who we get stuff from and who we deliver stuff too. germany is quite good at getting commodity -- commodity small of the world and from people we rely too much on. given that we are probably the most long mobilization country, we have been suffering from this from the last couple of years. sonali: what does deglobalization mean in terms of your footprint and where you might double down? >> we are operating in seven markets in asia. a quarter of our um is in the u.s.. the majority in europe but we are still in seven markets in asia. i recently spent a week in india which i find an interesting market. not easy to see how we can amend the market we are looking at. japan can do more, we own 30% of

the largest ones in china. asia is interesting, but a quarter in the u.s., it is also a market to grow on. sonali: you said something about ai washing. interesting to bring up when there's so much exuberance in the ai trade. do think it is misplaced? >> there is a lot of buzzwords and people talking about it. it is real but think about what it could mean in terms of management. personalized emails, people watching fed speak, that can be done by ai. can the essence of what we do in management be used with ai? i think it can. if you are a hired analyst, the way that you look at securities would be a certain way. if we can get your perspective on the market in the algorithm, they would allow you to be much more precise, efficient, always

challenge whether the security is aligned to the thought process. the challenge would be if we get humans to explain their way of thinking in order to create algorithms. sonali: think of how fast wall street has change of the speed of technology. you think wall street can keep up with the ai revolution? >> asset management is probably the least disruptive part of the industry. we think about the financial industry 20 years ago versus today, retail banking has been disrupted. think about equities, they look simply different earlier in your career compared to 20 years ago. asset management looks the same. i feel the combination of ai, which can take out certain things what we do, but also digital assets would be interesting, i disruptive element. sonali: you have a tie up with galaxy when it comes to disturbing assets in the digital asset space.

there are a lot of questions around blockchain, bitcoin and the value of digital assets. >> i'm trying to run out the time on this topic. this getting. we are focused on crypto, knots of the that we advocate, but their clients care and they need to be able to provide safe access to crypto. one thing we do is launch a couple of crypto this year. when it comes to the fear at blockchain, it will be interesting. in europe, the digital will take some time. and blockchain, it will simple five the chain between investor and investment. sonali: if ai is not coming out of the asset management industry, what about other technology giants? what role do the apples take in the terms of pushing to financial services?

>> in the terms of being the least disruptive, it worries me. i spent the last many years in transaction banking and in many cases the payment element has become an afterthought, pushed back by the paypal that you see. we basically became indebted in things clients were community with. could you imagine somebody less educated on the market saying i want to invest 8% in ig or 7% in something else, so on, without requesting a product behind? that could happen. we need to be as embeddable as possible into whatever front and the clients can medicate with. that keeps me up at night. sonali: when we think about the markets, we are on fragile footing, what worries you the most? >> geopolitics but that is easy to name. next year could be tame but

could be a lot of weirdness. to give the central bank's credit, the fact that over the last 12 months, we went from feeling the recession to debating whether it has reached the rate of inflation, it is a massive achievement. but with a lot of new technologies, one of the things that worries me is if you look at countries and their wealth creation, there is a massive amount of wealth created in ai, but i don't know if the whole population would benefit. something to keep in mind. sonali: you were talking about your relationship to china's asset management industry. what are you more concerned about, the relationship between the u.s. and china or china's own economy? >> that is a question that could get me in trouble. i think china is doing better than people give it credit for. it is growing at 5% real, and that is substantially more than what that u.s. has grown.

for us to dismiss china as not growing at 8% or real estate being in trouble, i don't think china cares much. they have a or diversified economy afterwards and when you think about the alliance the u.s. has on china processing commodities for tesla, that dependency is something we should always keep in mind. we will always have politics, but the real economy flows, they have not been impacted over the past couple of years. sonali: that was stefan hoops, thank you for your time. matt: thank you for continuing to bring us fantastic -- stefan hoops, appreciate being in the studio with us. meta is about to unveil a headset that could be 1/7 the cost of apple's competitive product. we'll discuss that with mark next. this is bloomberg. ♪

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matt: this is bloomberg markets, i'm matt miller. breaking news on crack income of the crypto exchange lands to offer trading in west listed stocks and etf's, exchange traded funds, marking the 12-year-old company's first foray outside its cryptocurrency roots. an interesting story i thought we should bring to you. we will continue to bring in details as they come across the wire. in a few minutes the owner of facebook is unveiling its latest products and software updates, let's turn to mark gurman in l.a. to find out what we should be watching for and how long they will test how well they compete with apple. the product from facebook is going to cost 1/7 that of the competitive apple product. are they in the same market?

>> they are in the same market if -- but not the same league. they're both in the mixed reality, the x are market. meda is repositioning their foray into headsets from the metaverse, from devices where they thought you would communicate with people or video chat with people virtually. they are transitioning to more of a productivity and gaming device, something more of a computer replacement using mixed reality, which is what apple is doing. they are in different leaks. in terms of the overall performance and keep abilities, resolution and clarity, that is going to be infinitely better from the operative -- apple device that from the meta device. but is it worth spending 3500 for those improvements versus 500 for something works well? i've had the opportunity to have a couple devices and i came across the graphics power, the overall performance, resolution

is a big improvement. but this is going to shape up three years down the road as the future, instead of ios versus android, it could be the apple operating system for mixed reality versus the meda operating system. with the low end and the high-end, two alternatives. different leaks, same market. matt: i imagine these are going to be devices that you upgrade every year or two. how big is this market? >> i respect your opinion. i disagree. i don't think these are devices you are going to upgrade on an annual basis at this point. it is a very nascent market. this is going to be more so on the tablet or computer upgrade timeline. it is possible that people hold onto these and never get hooked on it and never upgraded. it is also possible people

upgrade these every three to four years of soy don't think they will be on an annual basis. right now it is quite the small-market. in the first year for apple and their sales, they will only make three to $4 billion in revenue on this, which is half or a quarter of apple watch or airpods sales. over time it could grow. the reason you are seeing a higher price on these devices in the higher storage tiers is they want to start making money. it has been a money-losing proposition and it is time for them to turn the corner. the hope is that the quest three at the low price point compared to the 3500 could be the one to do the trick. matt: mark gurman deep in the research on these devic 3500 coo do the trick. matt: mark gurman deep in the research on these deviclet's taa government shutdown would affect the fed's rate path.

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jon: welcome to bloomberg rockets. matt: let's get a look at what's going on, it is a risk off day as financial conditions tightening. the s&p 500 down .7%. the u.s. 10 year yield continuing to rise. now the highest level we have seen since 2007. the bloomberg dollar index climbing to the highest level we have seen since last year.

crude oil continues to climb. this is a nymex quote. brent crude is at 96. nymex crude is $93. substantial moves in asset prices today. jon: especially with the data suggesting a tighter supply picture in the u.s. and that's where i wanted to start. energy stocks are outperforming another down day for wall street. it's interesting the 7% slide we have seen from the s&p 500 since the end of july does not match up with the energy stocks like exxon that has rallied about 10% since stretch. cold has been struggling in this environment. we are seeing that in some names. on the retail front, i want to return to a couple of stories we have been tracking. costco out with quarterly results that basically showed a

picture of consumers sticking with the membership driven retailer. those shares up 1% right now. amazon down today as investors are digesting the ftc antitrust action. bloomberg doing its own reporting on some of the behind-the-scenes innerworkings of how amazon does business. matt: definitely a fascinating story today. none may be as big as the prospect of a government shutdown which looks like it will happen on sunday. it is getting more and more attention from economists as well as political watchers. kevin mccarthy means hopeful. >> we will move a continuing resolution, bring of will to the floor -- bring a rule to the floor to keep the government open. jon: one person watching the situation is neel kashkari who

said earlier today we might have to do less with our monetary policy to bring inflation back down to 2% because the government shutdown or thought oestreich may slow the economy for us. david wilcox is director of u.s. economic research at bloomberg economics. he put together a really helpful breakdown of some of the key areas to focus on right now. let's start with the economic assessment of what happens in the case of a shutdown. what do we need to know? guest: the playbook is pretty apparent. a general rule of thumb is that for each week that a shutdown persists, gdp will be nicked .2%. for example, a five week shutdown will take one percentage off the growth of

real gdp in the fourth quarter then growth would be bumped up by a percentage point in the first quarter restoring the level of gdp roughly speaking to its non-shut down trajectory. matt: what are the permanent effects? what leaves a mark because i don't think it matters that much if we lose a percentage of gdp one month and gain it back the next. guest: from a macroeconomic perspective, the permanent marks if nothing really untoward happens, the permanent marks are pretty small. i wouldn't want to underestimate the microeconomic marks because there will be federal workers who normally exist paycheck-to-paycheck who have to go without pay during this time. it will be federal workers who have to work during the shutdown without getting paid. contractors will never be paid even attractively. at the individual level, there will be hardship and then of

course there will be significant consequences from the normal operations of government simply coming to a screeching halt. matt: john was reading the quote saying this could do some of our work for us in terms of defeating inflation. to me, the autoworker strike seems inflationary because you have less supply of vehicles and wages when the thing is resolved they will rise at least for those 150,000 people. what about a government shutdown? is it inflationary or deflationary? guest: the main effect for the federal reserve two objectives is pretty much neutral. this will be a self-healing pothole on the on a plummet rate. -- on the unemployment rate. that could jump by as much as .4%. that will come down soon as the

shutdown ceases. for the price gauge the fed ties its policy to, there basically won't be any discernible effect. there could be a little withdrawal of purchasing power, a little hesitancy as households pull back on their spending on like -- in light of the greater uncertainty, but that will be a subtle effect. the real concern is that this shutdown doesn't come in any average time. we are in a delicate moment macro economically. the fed has restrained the economy by undertaking its hiking campaign of more than 500 basis points in rate hikes. there are other turbulence factors at work including as you mentioned the uaw strike, the restart of federal student loan payments. those are slowing the economy and the fed doesn't need and the

economy doesn't need yet another source of turbulence. jon: then how do you assess october data if you are the fed and we see a shutdown? thank you very much. meanwhile, blackstone is expanding despite economic uncertainty. it has opened an office in toronto and plans to invest more canadian real estate. earlier i spoke with the blackstone president and chief operating officer who shared his view on the economy. guest: the good news is, the inflation is starting to come down. that is starting to show up in the data. i think we will see more around the world. we certainly see it in input costs in our companies where goods are basically flat your and your from a cost standpoint. we are seeing in the u.s. shelter costs rental cost come

down. their growth rates come down which will be very helpful, it's the biggest component of cpi and core cpi in the u.s.. then in the labor markets, we are starting to see softening there. wages were growing as high as 7% per year are now growing 4% in our portfolio companies. i think what we will see is inflation come down which will allow central banks to pause early soon. -- it will allow them to pause fairly soon. they don't want the experience of the 1970's where inflation came down, the cut rates, inflation served again -- surged again. i think they are likely to be more hawkish. we have to expect that. the output from the will be likely and economic slowing. we've began to see that in the u.s. and i would expect we would see more. it's not 2008 four 2009 in terms

of imbalances, but you have to expect moderation given the sharp increase in cost of capital. jon: a few years back, blackstone ceo helped to play behind-the-scenes in bringing together the new nafta agreement. jared kushner described him as having a pivotal role in that process. since then, we have seen growing tensions between countries like canada and the u.s. and others around the world like china. getting that deal done in retrospect, how is that opened the door for stronger performance throughout north america and a world that might continue to change? guest: as you think about trade, getting that deal in particular done between the u.s. and canada i think was very helpful. if you think about investment, it's all about certainty. when you know here's the economic framework, here's the trade framework, you're able to

deploy capital. what we have seen around the world is when you have abrupt changes, when there are geopolitical tensions, that makes businesses pullback. the best environment is when there's policy around, uncertainty around policy, economic policy, trade policy, tax policy. countries that migrate in direction particularly em attracting more capital. if you look at greece, it has been remarkable under the leadership of that government. we would encourage governments to find ways to encourage foreign direct investment and to have certainty of policy. i think we found that business that balance in the u.s. and canada. matt: coming up, the latest from meta connect. you can see the live feed. mark zuckerberg is speaking on

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if you're trying to get a view of the whole organizational financial health and you're trying to do that through multiple systems, that makes it very, very cumbersome.

♪ it's not just tech, it's not just people. it's how they work together to provide that experience to the customer. as a finance organization that is what you want to do. ♪ jon: this is bloomberg markets. we have been tracking meta shares. for been losing momentum over the last few minutes. the company hosting its annual developer event as we speak. the stock has had a huge run this year helped in part by the ai boom. we want to bring in ed ludlow joining us from san francisco. aside from the metaverse update,

it feels like this is an opportunity for meta to explain on the headset side how they will stay relevant versus apple with the vision. are you watching? ed: i can tell you the street is super focused on ai and that's away from the metaverse and hardware side. we got the quest three, they told us we would get the quest three at meta connect. they are raising prices from $300 to $500. it's a mixed reality headset and some of the functionality they are talking about speaks to the strategy against apple. you can have virtual reality were you are playing a video game or watching a movie within the headset. but a top of the button turns it into mixed reality, images printed onto real life around you. one source i spoke to ahead of

meta connect at the company was saying we are keen to demonstrate that we have worked out how the software and hardware together. the apple vision pro is at a completely different price point $3500 but it comes with the exclusive apple software and content that everyone is excited about. a lot of folks were looking to meta and saying you have your hardware, you have taken a gamble to raise prices, because you have led the market to this point, what will you be able to do on this thing? jon: what are the most killer app uses for this? is it for a consumer who wants to play video games or mark zuckerberg was showing sports you could get involved in with it or is it for b2b purposes? is anyone have products for that? ed: so far, it very much consumer focused. heavy emphasis on video games in the vr context.

in mixed reality, the images they have shown so far is the use case of imprinting graphically generated image onto your living room. that speaks to who they are going after with this. the comparison with vision pro is that the vision pro is targeted at the developer community. to answer your question, remember what i reported earlier in the year. one recent meta had cut prices on previous versions of quest is it was not resonating with enterprise customers. they really wanted to position this as a productivity tool. there is an emphasis on activity with this, but not aimed at the height and enterprise. -- the high-end enterprise market. jon: thank you to ed ludlow, the cohost of bloomberg technology. bloomberg originals got a chance to catch up with a guest who

explained how meta is making the distinction between human and ai generated content. guest: ai systems generating content. we've been working on how people can distinguish between the origin of something generated by ai rather than human being's. we will have watermark visible clear watermarks on the photorealistic imagery that people will be able to use in our photorealistic tool integrated into meta ai. ♪ i did have hearing aids from another company... i was just frustrated... i almost gave up.

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jon: the actor strike can come to conclusion soon. do you see that happening? guest: i think so. this sets up a situation where the writer sets up the tone. the next step is to get the actors on board. i think that will happen. this sets a precedent moving forward. it shows there is movement on the producer side willing to come to terms with the writers. you have to have writers of course but then you need actors to perform. this is a two-tiered situation that we are so grateful i think

whole industry and even those outside of the entertainment industry those who have ancillary businesses that are affected in a positive way by film production, they are looking forward to this being resolved. sooner than later is better. this a gun on until next year like a lot of people thought, that affects the production pipeline for tb and the big-screen. that would not have been -- it affects the production pipeline for television and the big-screen. this is a great result and i think the actors will follow suit if they can come to an up -- equitable agreement. jon: one of the concerns is that you won't need as many actors or writers if ai shapes up the way people fear. matt: how much ai is already being used in content that we watch and how do you expect that to change over time? guest: i think we are in early days. there's a lot of fear in terms

of ai. ai can be used to help write a script or an entire script. in other authors have seen that their works have been either used as a model for were used to create stories or scripts or books that ai generates. i think it's about trying to harness this technology in any time there is a new technology, you need either new caselaw or new protocols to deal with it. the big fear is can people be replaced by ai question mark when i see people, i mean actors and writers. that's why in the writers agreement, there is a clause about ai. saying that a writer can use ai to assist their work, but ai should not be used to replace writers entirely. it shows you how powerful ai is looming over everything up to and including entertainment and the creation of artistic works.

jon: now that you get some kind of resolution and may be more with actors on the horizon, what becomes the immediate focus? obviously you had a big box office summer. at the same time, we are retooling on the streaming side. what are the priorities on the business side -- where they end up going once everyone gets back to work? guest: a big part of this is the ability of actors to go promote their movies. you look at a movie like dumb money out there right now, it is a star-studded film but the actors aren't able to go out. the writers can go out and promote domes -- promote films or tv shows but to have actors out there, that's a number one priority. the number one priority is to get writers writing, get production ramped up for tv shows and movies.

but we didn't all realize how important the actor participation is in the part -- promotion of movies. we saw doom to moved to next year. other films moved in anticipation of this strike. now that it has happened earlier , those promotional abilities by the actors and creators can shift into high gear and get that going. matt: we've also seen the fall schedule is a lot of reality tv shows. it's a lot of tv talk shows. in a sense, it seems that the writer strike has forced the studios hand. will that be hard to turn around? can they drop themselves out of future revenue question mark guest: that's a great point because sometimes out of the situations comes an opportunity for other content to come to the

forefront. reality shows and talk shows are able to move to the forefront now. i think people will want that solid diet of diverse content not just one category or another. i think that will work itself out it doesn't show how powerful the other types of content are and if we look at the taylor swift film, for theater owners that was a dream come true. that opens october 13 in theaters. the taylor swift tour is a concert film, not a narrative film although there may be documentary footage, but it also shows how turn it of content for theaters is also a big deal. i think it will continue as well but i think these things will work together in sync and at the end of the day, it's us the viewer who wins in the end because we want new content. >> thank you so much for joining us. talking to us about the end of

the writer strike and hopefully the actor strike and will follow. we are looking at mark zuckerberg at the medic connect conference talking about ai. this is bloomberg. ♪

romaine: a downside scenario for almost every asset class. katie: kicking you off to the closing bell in the u.s., it's not too pretty of a picture. about two hours to go, the s&p 500 off by .6%. same if you look at big tech. building on yesterday's losses. once again, you have a selloff in the treasury market. the 10 year