free.but now it is personnel changes at pimco.ki, former at blackstone, joining pimco? john studzinski left blackstone in august. after 12 years there. new he was looking for a challenge. his new challenge will be on the stage at pimco. he will be joining the firm and doing similar things to what he did at blackstone. he was an incredible relationship older. he worked with some of the richest investors in the world at lax on. david w.: blackstone changed the business over time. he will buy sovereign wealth funds? whereit is also pimco, they are at. and how they want to build the business? >> that's right. pimco has tried to expand beyond the fund manager. a big push in private equity. it will be interesting to see how they leverage his relationship around the world to will up -- to build up client base. david w.: no sooner did they get the basic ceo job filled, now, who is the number two? game of thrones? do we have -- note, going past you guys. i killed it right there. [laughter] i read the books. by the way. someonethinking abou

vonnie: what do you do at pimco with u.s. treasury? it does not seem there is image bargaining at this point. mark: we have been underweight and the last year and now moving towards neutral. you have the 10 year at 3%. we think the u.s. economy growth rate near 3% will slow a half percent next year. we think we are approaching a bite super bowl -- signal for short to intermediate. julie: do think the trade back-and-forth is also going to limits andm it -- limit the fed? mark: it could. we think the u.s.-china trade talks is the biggest thing for downturn in the u.s. economy. there is upside risk for capital spending. it is a two-way risk. if this trade is not alms,ved in a way that it could slow the fed down. julie: is there a higher downside risk of trade not working out? this, and weussed think the downside risk is larger in terms of growth, but we think the upside risk is larger in terms of inflation. we are entering inflationary risks where grow is likely to grow, but in the u.s., inflation risk more to the upside. the bottom line

the view from pimco next. this is bloomberg. ♪ o next.s is bloomberg. ♪ haidi: i am haidi in sydney. shery: you are watching "daybreak: australia." the canadian press news agency says the u.s. has backed away from some of its by american demand as nafta talks continue. sources told bloomberg that a new deal with canada was unlikely this week or for more, we're joined by libby cantrill, pimco head of public policy. when itlks, especially comes to a trilateral deal, they don't seem to be project -- progressing. what is the likely hood -- likelihood that democrats take over the house and we are stuck with the status quo? libby: my personal view that there is a high likelihood. the reason is because september 30, it it effect a deadline in order to get something signed by december 1. september 30 is right around the corner. some of the issues that remain outstanding, especially with canada are really fundamental issues. resolution,bsidies, they are the same issues that have slowed down progress in the tpp talks. this idea that we can get some

it takes the head of pimco to say we are overpricing. the risk is too high for a no brexit deal. nejra: we're going to talk more on brexit. u.s. futures pointing lower after u.s. stock closed flat on friday. we are going to be talking about whether the america first trade is over. let's get the bloomberg first word news with juliette saly. the u.s.-china trade war has entered a new phase as the latest round of tariffs came into effect. in a significant escalation, $200 billion of chinese products are subject to increased levies. $60 billion of goods from the u.s. will become subject to chinese tariffs. on saturday, beijing called off trade talks amid the escalation. oil prices are higher today after donald trump's demand that opec take rapid action to reduce oil prices got a tepid response. the group said it would boost output only if customers requested it. in contrast to the dramatic u-turns policies tweets provoked earlier this year, saudi arabia and their allies stopped short of promising specific extra volumes of crude. >> we can bring an additional 1 million and a half barr

the global economic adviser of pimco is with us i was catching up with the former colleague and a friend of minute yesterday, he asked what do you think the world will look like in 2019 i'll pose that exact same question for you hopefully he's watching and can get a good answer. >> i think 2019 will be a bit closer to the end of this cycle. we're in the late hicycle environment. next year growth will be slowing. we're still growing but slowing as central banks remove accommodation. i think you'll see some drag from the trade tensions we've seen this year this will also come through. next year markets will be revising up their estimates or recession probables for 2020, 2021 >> so we've had the trump administration say that if the chinese react to the last set of tariffs, then they will be prepared to impose tariffs on all chinese imports to the united states. the chinese did react. if the trump administration follows through with that thread, what is to stop a global recession? >> if that really happens. if the u.s. imposes tariffs on all of china's imports, if china retaliates with other

before i was born, my father said if my grandpa [inaudible] and if i have a child -- [inaudible] pimco society was so hard. there is no calling in north korea. they were hungry and desperate and scared to not conflict the that don't even whisper. the most important thing was the family to me that thinking back to my childhood -- [inaudible] >> your sister, your mother, your father today. >> host: and where did he die? >> guest: in china. my mother in south korea in the countryside and she is in south korea. i'm an american -- [inaudible] >> now, i'm not. >> host: are you going to go for your citizenship? >> guest: of course. if this country without me, i'd be honored. >> host: yeonmi park, what year did you cross that river? >> guest: it was 2007, march 31st. >> host: how old were you? >> guest: 13. >> host: you were in the hospital. my mother made a bad bet that because we had no money to bribe them, my mother had to do everything from keeping my incision clean to giving me whatever food she could find. the hospital is poorly equipped and filthy. to use the bathroom i had to get up an

it will change the competitive landscape in the next downturn if you find managers, blackrock, pimcoeading to incentives in a different way. they already do it today but leading in further to a space where there could be compelling opportunities, is a smart thing for them to be doing. reporter: you mentioned they had already by accident been exposed to private equity in the last downturn with liquidity creeping in. what does this mean for the traditional private equity players like blackrock -- sorry, blackstone, apollo? should they be worried? sachin: i don't think so. there is room for everyone. it is interesting. managers have large asset bases could be leading into this space, it is smart that they are doing so. vonnie: do you see a hole in the markets that will allow you to moneyt longer-term money, that can be locked up for a while and if so, where from? where do you hope to attract money from? sachin: we are a family office. vonnie: but you do not intend to stay that way. sachin: our kind of strategy could be applicable to others looking to generate wealth through generations.

is probably a 2019 question as we get closer to the neutral rate for the fed and as we project at pimcoext year that becomes a question for investors to understand how allocations to risk assets, emerging markets, equities, get baked into the equation in terms of their return potential but more importantly how the volatility in those at risk asset classes plays out. >> you expect the fed to keep hiking at this faster pace four times into next year do you agree that you want to be in emerging markets? doesn't it hurt their currencies >> we want to be cautious. most importantly we want to differentiate risk factors so there may be opportunities in emerging markets but we want to be specific about how we're taking allegations, just like corporate credit risk. we want to be specific during this late cycle. this is a time for differentiation. you don't want to be benchmarked, you want to be looking actively to differentiate away from those benchmarks and taking risk allocations you think are prudent in a rising rate environment. that means a little risk reduction and allocating to less volat

pimco writing in a blog today that the fed, they're concerned in fact the fed will take this hawkishbecause they're ignoring the lags in monetary policy and looking short term, looking at the neutral rate. where is it? does it need to go higher rather than looking down the road and seeing what the rate hikes could do which again gets us back to the trade war and this question over what the fed will say about this through jay powell's press conference because they have had concerns but so far the fed's view has been whatever we lose on a trade war the tax cuts, fiscal stimulus in 2018 are going to more than make up for that and of course the strength in the stock market underscores this. so a big question but mostly people are still thinking we'll get a rate hike in september and signals for another rate hike in december. yvonne: all right, kathleen. thank you. bloomberg global economics and policy editor. just want to go through some lines coming through from this presser in beijing right now the oomberg subscribers, chinese economy they're saying can resist risks from trade disputes

if you look at pimco's and blackrock's of the world, they are seeing esoteric valuation opportunities the em space, but there is no doubt downward pressure is continuing, and sentiment is fragile. what you are looking for especially with this part of the world, places like china, the biggest emerging market is what around your asset allocations and whether you can kind of start to take a bigger position if you think policy can in some way contribute to a stabilization of some of the issues that have been around in emerging markets, but what has been interesting about the latest leg down is it hasn't been corresponding with a stronger dollar. you have not seen that kind of usual strength like the greenback and a particular negative impact. that is what people will watch this week as we see whether or not we go into the jobs report friday, the rest of this market leading to the fed hike. we presume at the end of this month, how the dollar performs now i think will be the next kind of way em will perform if we get a little bit of sustained rally in the greenback. ramy: despite the news w

balls of pimco will stay with us. let me show you twitter.o be streaming all of bloomberg surveillance on television. this is our home page. it is a miracle, it is digital. do i look digital? ♪ francine: this is bloomberg surveillance. budget -- over the over the italian budget hangs in the balance. there is fear of a breakup of the government. coalition leader's demand such as tax cuts and basic income rest on statistics. fargo. us now is wells political experts are saying has want risk because liga so much space that entrepreneurs that are northern-based. is that our premise? >> it is one of the factors to consider. the compromise must be reached. francine: who holds power? thisthink it is 50-50 on one. salvini is on the right. this is an alliance between partners. they need to find partners. they are not going to risk bringing down the government. they will reach a compromise on this. they will make noise. they are supposed to announce a new decree to deal with migration. no major drama, no crises of government anytime soon. francine: what

joining us is gene frieda at pimco.ack at that time, gene, and saying, man, it was touch and go every single day. there may be new risks out there. do trade and tariffs pose the same kind of risks perhaps as the debt levels a decade ago >> yeah, i think they pose a different kind of risk in some ways they're very much a manifestation of what we went through with the financial crisis with crises, you tend to encounter extreme fear once you get through the crisis, at some point the anger manifests itself you can see that anger playing out through the ballot box in terms of populism in a lot of different parts in the world people generally want to retrench from that perspective you can emergency globalization being an important secular threat i'm not sure it's akin to a financial crisis it's something much slower moving i would say a lot of people are focusing on liquidity as the new leverage from a leverage perspective we've gone from a world where debt levels are still very high but we have a lot more capital behind that

earlier, i spoke with mark easel of pimco to get his thoughts on the 10-year yield. look at u.s. rates relative to other developed markets, they are very high. a lot of that foreign capital is coming into the u.s. the fed is raising short rates but we don't see a break on inflation. what that is doing is causing the yield curve to flatten quite a bit. with rates at zero in japan, close to zero in europe, all of that money is looking for higher returns, coming into the u.s. with a strong dollar, that is also acting as an additional catalyst of support. vonnie: with that in mind, let's bring in our market guest, lower ural -- lowell yura. money comingn into the u.s.? lowell: when you look at foreign buyers of assets, they are chasing safety. you have a lot of market participants outside of the u.s. that are not financial buyers as well. look at the sovereign wealth funds, central banks. they want to manage their reserves and purchase these instruments, the long end of the u.s. curve, regardless of where rates are. the other element is the defined benefit pension plans looking stron

of dollars, giving him a net worth of $167 billion on the bloomberg billionaires index. 41-year-old pimcotfolio managers specializing in interest rates derivatives is retiring at the end of this year. he joined in 2010 and managed its extended duration and $1.2 billion u.s. government fund, among other strategies. his comanagers took over the fund at the end of last month. that is your bloomberg business flash. anna: thanks very much. onto corporate reporting. ayer has warned -- will be lower than estimated. that is after a purchase of monsanto. let's get analysis now with our european joe -- drugs reporter. why is buyer's earnings forecast lower? what changed? function of a timing. bayerk longer than anticipated to close this deal. a larger portion of monsanto sales, the first half of the year. therefore bayer was not able to book those. they are not benefiting as much from monsanto this year as they expected they would. a symptom of is technical reasons as well as anything underlying going on. what about the other challenges with the mega business they put together? how many court cases

we are going to dazzle pimco with this. dennis knows this chart.p of the usa. good morning on radio. i will put it out. the reagan deficit at 5% of gdp. with greating there speed. what happens when we click 5% deficits to gdp? >> id. no. it is disconcertingly little. backup when interest expenses are crowding out -- tom: you are not calling for that. >> no. two, an important point here, it limits the ability for future fiscal stimulus. if and when we go into recession, it means congress and fiscal authorities have less ammunition to mitigate the , which of our recession means our recession will be shallow, but longer because of that dynamic. >> the fed will do another round of qe. if we can't do anything physically, we would do something monetarily. francine: if they have the ammunition. >> you can create the ammunition. tom: print it. >> there is an argument that fiscal policy might be a more direct tool. >> that is correct. francine: what about the unintended consequences of extra stimulus? inequality? >> i will let that pass. >> i will let that

they released an interactive report titled "a brief history of trade wars pimco great to have you hereade wars." great to have you here. this takes into account the fundamentals. i'm curious how you look at this come in terms of what is happening fundamentally and if you think we will still be ok. >> very good to be here. in fact, that is the slight bit of silver lining. on the whole, although in the from 1900have studied onward, has had many instances of protectionism, on the whole, global volumes have continued to grow. ofaking to the futility trying to redirect these kinds of things, the economy does eventually find a way and where there is demand, supply emerges. that is the good news. the bad news is that in almost every instance that protectionism was attempted on any serious skill, the market did not like it. there was a degree of risk aversion. happen now, that and if this continues, we are likely to see more. bits, the more worrying the one time we saw a time weant times -- one saw significant decline in volumes was the smoot-hawley tariff. there are some parallels between wha

they are looking for the fed to actually raise rates a bit to slow the economy tony from pimco writsa decision point in the next year when market participants have to decide whether the fed goes beyond current market pricing. what exactly market price something right now sarah awicht lf they are in the sure but the fed is hiking tomorrow and probably for christmas. >> how many nextier and the year after? is it harder to make the rate projections in the environment qb steve, where you have the new cast of characters on the fed and unpredictable events like the trade tensions. >> you named two key factors we have new folks on the fed as well we don't know preciselyhow the come in in terms of hawkish or dovish we are not sure how much the tariff problem matters there has been ac backing off of concern in this spray. with the new concern being the fed makes a mistake. that is the number two position. and there is also the stimulus and tax cuts nobody is quite sure if there is a piece that's a tax cut that it's around for a while. then a piece that's the sugar high, waiting to see -- ther

pimco worried that the fed could hawkish turn as the spectrometer indicates because they don't put enoughlicy questions, if you're looking forward to expected rise in inflation and not paying hike ratesyou could too much. trade war another thing. i think after the meeting, assuming they raise that key rate, signal for rates and could 2019 rate hikes. many say two in 2019, some looking for three. if it's a more aggressive forecast, i think there will be more questions about trade and what powell thinks about that and when and if it would slow the rate hike path. >> that december hike is still in question, particularly if we see increase. shery: mauricio macri has told that his government is close to a deal with the i.m.f. new credit line and suggests there is zero chance of defaulting again. >> given the pace at which things have deteriorated over five months, it is difficult to predict with any confidence what's going to happen in 2019. if, even with additional funding from the i.m.f., you of dollars?f short what will you do to keep defaulting?om >> there is no chance for argentina to def

let's bring in pimco executive vice president at post nine also with us the wells fargo global equityould you characterize the big driver behind the breakout that we are seeing in stocks >> well, markets claim to worry about something and this was the tariff story for some time markets worried about tariffs and the impact on sentiment, particularly corporate sentiment but there doesn't seem to have been meaningful impact. last week small business owners reaching the highest level of positive sentiment in 40 years of surveying they said the amount of people they intend to higher is the most ever so market sentiment changed and it should have because tariffs amount to about 0.4% of world gdp. mine skul in the larger scheme of things so markets have been able to shrug it off because the u.s. economy is service oriented. >> the new round of $200 billion of chinese imports, you zemin mall impact? >> it's a 0.4% impact. growth potential, how fast kgb go without generating inflation somewhere in the high ones so it's okay to the investor that you might take a small hit because it could help

. >> well, remember that rich in his role at pimco owns the idea that we're in a new normal and the appropriatedon't think he's as low as some of his colleagues so i expect a little bit of drifting up the cost of that. now, mary daly was the director of research for john williams, and so she was overseeing the research that john -- and collaborating with williams, so i think that's just two dots that are the same, hers and williams we know john williams' record. he's done a lot of work on estimating the equilibrium funds rate back when we both worked at the federal reserve board. i would expect a little drifting up of the dots importantly because we got a lot -- we're tracking 4.25% gdp growth in the third quarter. since the last time they did it, they revised the gdp all the way back to 1929, and that would suggest a little stronger number >> you know, vincent, i find something really interesting, and maybe we'll put a light on something. many pay overlehiy high attentin to the hyperbole of this president. it seems like the hyperbole of the fed is, hey, i'm a low interest kind of guy but on th

on commodities, does pimco believe in a commodity deflation ?e have a neutral view. our view on china on to commodity prices, particularly metals, we see downside risk. the chinese have continued deleveraging and the easing they're are doing in response to trade frictions is marginal. our tea on commodities -- our team on commodities linked. dr. o'leary and, in the 9:00 hour. this is bloomberg. ♪ tom: good morning. lots of breaking news on turkey, the united kingdom, and the imf. francine lacqua in london and i am tom keene in new york. nine days away from a fed meeting. how much is chairman powell, central bankers of the world -- central banker to the world, central banker to the philippines, central banker to india? gene: it is an on popular view to say this but what the fed does matters for every other central bank, particularly emerging markets but not as much as many seem to believe now. the first half of the year was about the rest of the world not being able to keep up with the u.s. the fed continues to plod towards neutrality around 3%.

what's ahead for q 4 weighing in now, pimco's head of public policy lindy cantrell and the chief investmentallianz global let's tart with trade, libby, the president accused china on the global stage of interfering in the midterm elections does that escalate the trade war? >> absolutely. this is going get worse before better is our long standing view this is broader than trade this is about who is going to be superior about the global economic stage and president trump is saying via various mechanisms that he wants the us to maintain global superiority. >> yet markets go up and the headline is they're slugging off trade fears. >> and i still think there is this view that this is part of the art of the deal for president trump that he doesn't mean this, this is a means to an end. again, i think we would just underscore how sincere president trump has been on trade for his really entire public life and especially with china. bob lighthizer has been a china hawk for 30 years and, again, i don't think this is going to get better we thought that -- i think some folks were optimistic that we migh

does pimco feel there is enough tension here within the self china state to get to some sort of militarytony: no, we don't think that is xi jinping wants to get into a trap. your $13,000 by 2021. cannot -- xi jinping will outlast him. francine: tony stays with us. coming up, the republic of botswana minister of investment, trade and industry. we will ask her about commodities at 6:30 a.m. in new york. this is bloomberg. francine: this is "bloomberg surveillance." we are live from new york this week. the fed announces its latest policy decisions wednesday. the market expects a hike after weeks of the u.s. 10 year staying consistently above 3%. days after the ecb kept rates unchanged but altered its outlook for the u.k. and european economies. tony, overall, the ecb is starting to consider a range lift off. is this the right time? tony: no. the highest of the ecb policy rate will go in the next five years is plus 0.25%. markets think it might be closer to 1%. that is still a very low rate. we think that summer in the next five years, europe will go into recession. the united states probabl

. >> he feels -- >> the pimco nominee and the woman accusing him of assaulting her when they were inspectful. one of the mature once. >> 32 people dead in the wake of hurricane florence. >> we will start over again. >> the only white people who think jesus are republicans and ex-crackheads. >> that was a really low blow. >> on honor of the united states air force, 71st birthday today. >> just to serve our country. to be bigger than ourselves, those interests that are dear to us. >> live from new york city, we get up to four inches of rain from the remnants of florence. welcome to "fox and friends". ainsley: thanks for joining us. the storm is traveling up the east coast. brian: two major stores, when the president dropped on us yesterday afternoon and he decided to make these documents, declassify a lot of documents including the fisa application that says we need to spy on carter page. he is enemy number one. the president also said i went these text messages and rejected and released in its entirety from bruce ohr, james comey, peter stzrok and former deputy if you bought -- fbi di