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tv   Bloomberg Daybreak Americas  Bloomberg  August 30, 2019 7:00am-9:00am EDT

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as trade remains a wild card markets suffer a volatile august. argentina in crisis. selective default is the country bleeds reserves. and dorian set to strike. arricane dorian has become category two storm, set to hit florida's coast and because billions of dollars of damage. david: welcome to "bloomberg daybreak" on this friday, august 30, the last working day of august. alix: thank goodness. it's interesting to see we are getting some calls to buy stocks. bank of america, j.p. morgan had something similar. some say it is just the end of month rotation. that's what we've seen this week, because of the end of month. david: the bullish calls at bank of america are mainly because it is so bad, it's got to get better. alix: in the market, let's take a look. yesterday you did see the biggest gain for the s&p in
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almost two weeks. you're following through on that rally today, up 0.6%. euro-dollar around key support levels. it is a broadly stronger dollar story. the bond market obviously in focus. no doubt we are going to talk about that terrible, no good, seven year bond option. i wonder, is that a threshold? or was that just a fluke? david: or was it late august? globalime now for exchange, where we bring you today's market moving news from all around the world. joining us in london is tony ahrens, on the phone from hong and on theen leigh, phone from when is a race -- from buenos aires is caroling a milan -- is carolina milan. three activists in hong kong were arrested by police head of
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a rally. karen leigh joins us with the latest. karen: hong kong police arresting a number of prominent hong kong police arresting a number of prominent speakers, including warning protesters that they could share that same space at illegal demonstrations this weekend. these are really raising tensions ahead of a 13th consecutive weekend of as beijing looks to calm down pro-democracy demonstrations. it is a pushback against what has been a largely leaderless protest movement over a bill that would have allowed extradition's to the mainland. david: do we know what to expect over the weekend?we know there was a ban placed on demonstrations. will that have any affect?
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karen: there was a mass protest planned for this weekend that in been protest, but bans the past haven't necessarily stop people from coming out, so we do expect to see some protest tomorrow, but we don't know what shape it will take. we are also expecting attempts to disrupt transport infrastructure. on monday and tuesday, a general strike has been called across the city. it is hard to know how big does will get, but we will be on the lookout. david: thank you very much. we will go now from hong kong to london, where a scottish judge has refused to block boris johnson's plans to suspend parliament. tony ahrens has more. judges havely, two weighed in on the issues, kicking the can down the road for one more week. there are going to be a series of hearings in london, edinburgh , and belfast next week that
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could create one of the most hectic legal scrambles over the ability of boris to prorogue parliament. alix: thank you very much for that update. now we want to turn to argentina. the s&p downgraded the credit rating to selective default, saying, "following the continued inability to place short term paper with market disciplines, the argentine government unilaterally extended the duration of all long-term paper. this constitutes a default under our criteria." milanlena -- carolina joins us with more. what are the broad indications of this? carolina: just three years after the country got out of default status, we are seeing this. thatthey have said here is after the market collapse after and which theons, ,pposition came out very strong
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we are finding support. they are also seeking re-profiling on $50 billion in debt. that becaused note new terms for these bonds will come in place today, there's an expectation that the collective default will be lifted. alix: in the meantime, if credit default swaps are rising, you have bonds continuing to fall, trading now about $0.42 on the dollar. what are investors saying on the ground? is this the worst things can get? it is certainly getting worse for investors. foreign ones, local ones. in the local case, we are finding that retail investors are starting to withdraw from
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mutual funds, so most funds yesterday had to shut down operations, not allowing any more inflows or outflows. there's a question whether they will be open to -- whether they will be able to reopen this morning. it is certainly getting more complicated. david: carolina millan, thank you for your reporting. we turn now to miami. florida is preparing for hurricane dorian over the weekend, expected to become a category four. our jonathan leven is on the ground. just 36: it feels like hours ago when this was expected to be a rain event, it has been gaining strength in the atlantic, now expected to come ashore, possibly as a category four with 140 mile-per-hour winds. this will also coincide with what they call here in florida and elsewhere the king tides.
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it is sort of a seasonal high tide event tied to the lunar cycle, so people are really concerned about the combination of storm surge in the king tied and what it could mean for flooding. the economic damage is really going to depend on where this thing actually comes ashore. you can imagine it is very difficult to plan for this because at this point, the cone of uncertainty still covers the entire state of florida. alix: bloomberg's jonathan levin, please stay safe over the next few hours. we do have some breaking news when it comes to tesla. what we can tell you is that cars will be exempt from china's auto purchase tax. the stock is up on that news. we did see tesla having to raise their prices by 2%, 3% for their model three in china to compensate, but they will be exempt from that tax. david: and china is terribly
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important to tesla, particularly. alix: huge investment in shanghai. how far can china push u.s. companies when they also need it? they are going to want that investment in shanghai for a battery factory. they want partnership tesla is doing with their companies, so they need that, too. david: sustainability is such a high profile item for china. alix: coming up, more analysis on the markets in today's first take. this is bloomberg. ♪
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david: now for the bloomberg first take, where we get you the news and trade analysis of the markets. new tariffs on imports from china go into effect sunday, and
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the administration keeps talking about talking with the chinese. here to discuss our bloomberg's lisa abramowicz and rachel evans. big weekend was tariffs. lisa: it's always a big weekend, right? you have china pulling back a little bit, the u.s. pulling back a little bit. it is sort of hard to put too much stock into that because we had so much push and pull. concerned.very alix: are they pulling back? i don't know. the chamber of commerce doesn't necessarily speak for the government. lisa: 100%. we don't know when the call is. that's why it is sort of surprising to the market trades on this. any sign of hope whatsoever, you start to see a lift to markets, but the mood music, if we are going to paint it that way, is not incredibly negative. david: the markets seem to like the mood music, but we just put a b timeline of this thing.
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this has been in one direction for 18 months. more tariffs on more goods. is there any reason that's going to turn around? rachel: not really. when you look at the political outlook for trump, the idea of getting towards a deal is more attractive than actually making a deal. that's what we are going to see going into the 2020 election. you don't necessarily want to sign on the dotted line because than that story is off the table. if you can keep upping the rhetoric come that plays very well. but markets have been fascinating with this. to lisa's point of looking for hope in the market, they do, but they also take even more opportunity to go down. lisa: jim be juncker of b bianco -- jim bianco of research, in a paper, referenced mockumentary, the saying that "trump is going to
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trade."up to 11 on that doesn't mean we are getting some easy solution anytime soon. i think a lot of people agree with him. alix: about the whole control room was like, "spinal tap," what? [laughter] alix: you will maybe sell a little bonds on the margin, by a little stock. how much of it is that? rachel: this august has been the busiest august for stock traders since 2011. remember what happened in 2011? that was the u.s. debt downgrade. this has been a seriously busy month. people haven't been able to just get out of the office and turn off. they've had to be aware of all of these headlines. it comes at some of the most interesting times of day given the severe tensions with china. people are tuned in late at night, first thing in the morning. we know when trump is going to wake up and decide to tweet, so
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you have to be on the ball. lisa: there's this incredible irony underneath this market. you did see volumes pick earlier this week when we saw an increase -- i was surprised it was actually not light trading. this was on heavy trading. it is in direct contrast to all the real money investors who say, no, i'm not moving around. i'm trading less. so who is trading? people blame the algorithms. no. there are people actually making these decisions. who's actually trying to make money on this, and who is being successful? i think that's going to be a really interesting question that's going to persist throughout the year. alix: not ray dalio, i guess, is what we learned. what i also wondered is that as we get closer and more tariffs are unveiled, the pushback from the business community. as late earnings rolled out, we seen best buy warning on trade. we had the mega horn from the u.s. chamber of commerce talking
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about business confidence faltering, companies taking stock in uncertainty a home and abroad. shouldlieve trump and xi withdraw the tariff schedule and restart negotiations. what's interesting for me is that in the peace, he said businesses agree with you. we want to get something better, but we don't agree with the way you are doing it, and now we are starting to see the real-world effects. david: and by the way, democrats and republic tickets -- and republicans agree on this. but there is a game of chicken being played by the president before elections. he's got to turn this around or he may have trouble with reelection. lisa: i think the key question here is what is the tipping point where he can't walk it back just based on rhetoric. just saying, now we have a deal, everything is fine in meet. at what point are companies so unconfident about the future
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that they pullback business plans so much that it does not matter? right now when i talk to people and ask this question, they say we are not there yet. if you look at surveys, companies are still going into a china and expanding their. -- going into china and expanding there. it is interesting to see that contrast, but there will be a tipping point. at what point will that come? alix: i wonder if that is going to be too late. if you are already pulling back, you are already too late, which brings up the monetary policy relationship with politics. you have to get ahead of it, which is what we've seen in the bond market. that's what that is telling you. rachel: the flows you've seen coming into fixed income over the last month since jay powell in the fed cut rates have been pretty incredible. to your point about getting ahead of the game when it comes to trade, we have seen the fed king at trade as the key indicator for whether the risks are high enough that they want to lower rates. currently we are still looking
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at this midcycle adjustment, but we see many more trade headlines come out since we had that statement out of the fed. you do see again and earnings again in -- you do see earnings statements from companies they are watching very closely to see how trade impacts. a large proportion of the world's supply chain comes from china. there's not really an option to find alternative sources of products. there's also monetary policy, and ray dalio's essay that said we are not midcycle. we are late cycle. in fact, central banks cannot pull this thing out and restore growth. lisa: i think that is the most interesting thing. everyone was talking about bill dudley's column earlier this week and said that the fed should take a political stance and not cut rates in order to facilitate a trade war that president trump is spearheading. i actually think the flip argument is the case, and it is
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actually scarier. what happens if they cut rates all the way to zero as president trump wants, and it doesn't work? right now, what you are seeing in markets is the application that that is exactly what would happen. right now we are pricing in almost five rate cuts by the end of next year, which is a sickly half of the ammunition they have left. the yield curve is still inverted. you still have people feeling like there's going to be a recession, which is the application that this is not going to work. alix: which is exactly what i think the ecb is talking about. over the last three days, a lot of differing views on ecb councilmembers, including incoming chief christine lagarde. "there's no need for qe." "we look at market expeditions to closely." that's the point. will further negative deposit rates actually do any good? will qe actually do any good? i feel like they are really up against it. lisa: you are hearing the hawks
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come out and say, we don't want more quantitative easing. we are good. i love this quote in a piece on bloomberg today, where they are saying, "you start hearing from the hawks more when they are going to lose." this is their last gasp before being snuffed out, so we can probably expect that bazooka. [laughter] david: there's this back-and-forth at the ecb on what they will do in september. does that show up in flows at all? are people trading on what the ecb is likely to do or not to do? rachel: there's a lot of talk about how far the ecb will go. are they going to have a rate cut? are they going to have a rate cut and qe? are they going to have a rate cut and qe that includes buying stock? the stock market has a sense that maybe there's going to be more demand coming from the ecb, so i think that does help buoy things within europe. however, there is still a large amount of uncertainty in europe. there's still an iffy move when you think about germany heading towards recession, brexit
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happening, italian political uncertainty. there's an awful lot of risk there for people to start buying stocks on the basis that maybe the ecb will. alix: meanwhile, you have btp's trading under 100 basis points. you also have the majority of corporate credit in negative yields. you have the curves and countries like germany under zero. you have to wonder, what would it do if they bought stocks? they are all underperforming. lisa: just to be clear, it is important to point out that the outgoing governing councilmember that adding to the ecb policy mix isn't a realistic option. alix: outgoing. lisa: is this the last gasp before being snuffed out? i don't know, but there's a lot of trepidation about that option. rachel: you can't really expect the market to be surprised positively by how much the ecb is going to do because expectations are so high. they cannot possibly come out
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and exceed them because everybody is expecting anything and everything to be thrown at this. david: bloomberg's lisa abramovitz and rachel evans, great to have both of you with us today. you can find all of the charts we use on the program by browsing gtv on your terminal. uber everhere, will turn a profit? the ceo says yes, it just might take a few years. more on that next. this is bloomberg. ♪
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viviana: this is "bloomberg daybreak." the ongoing protests in hong kong are hurting its tourism and retail industries. in july, there is typically a surge in visitors come about the tourism boards has last month, 5.2 million people visited, only about 1% more than in june, the weakest july result since 1997. that's when it dropped more than 60% after the u.k. handed over
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control of the city to china. uber's chief executive it sure looks like former executive anthony levandowski took permission from his former employer google. he was charged with 33 counts of stealing trade secrets. uber previously settled the case by paying more than $240 million in equity. we spoke to the company's boss. when we brought anthony on board, but what i do know is that we went to incredible depths to make sure that any information that anthony might have acquired from google, and it sure looked like he did, didn't make it over to our company. viviana: that is your bloomberg business flash. david: thanks so much. it is interesting that he says i wasn't here, but we really did it the right way, although he did steal stuff. alix: how big is corporate espionage? is that happening quite a bit?
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how does that work? david: i've not run across much of it, i have to say, but we typically think of it as international espionage. before that, it was european countries that were thought to do a lot of international espionage. alix: switzerland taking stuff across the border, so they had to limit switzerland. huber ceoto the about the prospects for the company. -- the uber ceo about the prospects of the company. here's what he had to say. >> i think we can demonstrate progress. i talked about our adjusted revenue growth accelerating for the second half of the year. for companies like ours, usually you don't see revenue growth accelerating. accelerated beyond 30%. we've always been consistent in saying that the bottom line if it -- the bottom line ebita will continue accelerating. alix: it is interesting.
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there was an ipo's perfective this week, data dog -- an ipo perspective this week, data dog. margins however 70%, and we didn't talk about it. we talked about pellet on -- about peloton. david: another company that doesn't expect to make money for a long time. that is a big gap to close. alix: a lot of sales to make up. david: and a lot of custom costs. alix: when you might have to make workers available for insurance income for you. coming up, matt maley, miller tabak equity strategist. this is bloomberg. ♪
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alix: this is "bloomberg daybreak." happy end of august. happy end of summer. rally, the biggest
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gain for the s&p into weeks. is it trade optimism? is it rebalancing at the end of the month? is it the labor day trading? in other asset classes, some interesting moves happening. watch some key levels here the euro continues to decline. watch 1.101. you are still seeing money flowing into the bond market in italy. other areas in europe seeing selling, but in italy there is optimism that the budget deficit right not blowout, they might be able to have a government. crude not participating in this risk on rally, may due to trade. i'm going to hypothesize that is maybe due to the hurricane bearing down potentially on florida. david: in the meantime, we have campbell soup embers now -- campbell soup numbers out now. eps.have a beat on at the same time, they have
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continuing operating loss. sales were $2.02 billion. it is down slightly in premarket. alix: i'm going through the press release to see if there's anything on margins. margins actually did increase a little bit, so that was good. david: the market doesn't like it at the moment. there may be something in there we haven't seen. class,er what the asset august was a wild ride for markets to say the least. we turn now to bloomberg's taylor riggs, who has a closer look at the action this month. taylor: you are right, it was a wild ride, especially when we take a look at volatility. bond volatility, ethics volatility -- bond volatility, fx volatility growing together in august.
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meant itat volatility was all about those safe havens, including gold. as you can see, at least year to date, gold is now up 20%. $1525 an ounce, the highest level since 2015. there was an interesting story within the bond market this month. as you know, in august you have the 10 year falling below 1.50%, so that means you needed to take on a little but of credit risk to get that extra yield. a and bbb clearly the out performers this month, but you are not buying into the junk territory in the ccc's, so staying within the safe havens and investment grade, but doing what you can to take on a little bit of extra yield. i think volatility, gold, single
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a's, those are the good story for the month. alix: thanks for that set up. joining us now for massachusetts is matt bailey, miller tabak equity strategist. we tried to set up the big moves we saw in august. what is your top call headed into september? matt: i think the volatility is going to continue. however, i think we have some risks to the downside. taylor was talking about the volatility in all of the different markets, but in the stock market, there were individual moves within a kind of sideways range, between the 50 day and 200 day moving average on the s&p 500. i think now this whole thing with the trade issue has died down a little bit on a very short-term basis, i think china is trying to play the stall game , but at some point, i think the president is going to push forward on this issue, and when that happens, when you can bide the trade uncertainty with the
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fact that the u.s. economy is buting, 2% growth is fine, it is slowing a little bit, and earnings growth has really come down. full year consensus is really just looking for 1.3% growth. that is very small for a market up almost 15% on the year. that kind of headwind shows that the trade war will continue to create headwinds on the fundamentals, and therefore, i think we have to come down a little bit more. alix: so where do you go? this is world momentum, total return versus world total return. you see the outperformance of momentum, of low vol stocks, of dividends on utilities. do you buy into those groups despite valuations? matt: there's no question -- taylor talked about people not going too far out on the risk spectrum in the high-yield area, we are certainly seeing that in this area. consumer staples continue to hold up even though they are
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expensive. i think you can stay with that trade for a while, but i also think it's a good idea to raise a little cash. that doesn't mean going to 20% or 25% cash, but the reason why i highlight that is what we seen so many times in the last year or two, with algorithms in the trading, whenever we get a move in one direction or the other, it overshoot. we saw that in the fourth quarter of last year. that presents great buying opportunities on your favorite stocks. if you have a little cash on the one, that makes you better paired to take advantage of ace -- better prepared to take advantage of a situation if we do get a scare. david: let's talk about the fall and the possibility of a 10% correction in the market place. what are the odds of that, and what would trigger it? matt: i think the odds of it are at least 50%, if not higher. that's not calling for the next bear market. we can get that without a recession.
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everyone is so focused on whether we will have a recession or not, but we had six 1975sions since the corrections. i think the trigger will probably be another pickup in the trade situation. china seems to think that they've got the upper hand because every time the stock market goes down a little bit, the president becomes more , ifsh, but at some point the president is going to push this issue, he's got to do it now. i think you were talking about earlier in the program, he's not going to wait until election year begins. that is a much more difficult thing for him politically to take care of. alix: let's talk about bank of america's called today, time to buy stocks. basically, investor positioning, you see capitulation to the japanification theme.
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do you subscribe to that kind of thesis? matt: i really don't. i have not seen the report, but i've heard you guys talk about it as i was waiting to come on. it seems to me that things are so bad, they can't get much worse. if that's what they are saying, we've seen things so much worse. we got a 6% pullback in the stock market. that's nothing. credit spreads have not widened out in a major way. people are worried about the economy, but is much as i think 2% growth is not spectacular, it is still positive. the same things -- to say things can't get a lot worse, things can get a lot worse. sentiment, even though it is not particularly bullish, it is not very bearish either. david: we have not mentioned, as i can renumber, the fed. is it relevant or not whether the fed disappoints or delivers the expectations of the market
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in terms of said cuts? -- of fed cuts? matt: it is important to a degree, but the president trying to push the blame onto the federal reserve and blame them for the rate cuts, that they should cut a lot more now, i think the actions of the in the last month have been reacting to what is going on in the trade or with china. that is going to be the main issue. the one thing i do think is it is going to be very interesting to see what they say in the next week or so because we have a meeting coming up in three weeks. they want to set things up. from what i gather, especially some of the other embers besides chairman powell, is they want to be more data-dependent. i don't know if they are 100% sure they will cut rates. i think they want to see more weakness before they do. alix: to rounded out, you mentioned the time to raise cash. when you have something like blue-chip u.s. companies and
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their credit on track for the best august in 37 years, what do you sell? are you selling the winners to raise cash? --t: well, one of the areas yes, to a degree. i don't want to say raise too much cash, but one of the areas i think is technology. we had this kind of respite here on the regulation issue. the one thing about regulation, it is a bipartisan issue, regulation on these tech companies. when congress comes back from their recess after labor day, that is when the reelection year for the president and for congress begins. it used to start the labor day of the election year. now it is the labor day the year before the election year. that is going to become a bigger issue and cost some headwinds for some of these big tech names. i don't think we will have a repeat of 2000, but i think they will feel some pressure politically. david: matt madeley, miller
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tabak equity strategist, -- matt -- mattillie taebaek maley, miller tabak equity strategist, thank you for being with us. now we turn to viviana hurtado for the first word news. >> we shall not surrender. i urge international communities to send a clear message to president xi. sending troops or using emergency ordinances is not the way out. we will continue our fight no matter how they arrest and prosecute us. francine: in november, he and fellow activists were back in court. police in hong kong warned that more arrests may be coming. ned a massban march scheduled for saturday, a harder line stance against the pro-democracy movement. florida declaring a state of emergency for nearly 70 counties
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as hurricane dorian approaches. youran track the storm on bloomberg. expected to make landfall as a powerful category four storm. president trump says it could be "absolute monster." he compared it to hurricane andrew, which devastated south florida. argentina said it would delay payments of more than $100 billion of debts. while the delay could relieve short-term pressure, analysts say it raises the prospect of future defaults. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. david: thanks so much. i think that is the critical point. they've got a problem right now, but it's not clear that by doing what they are doing, it is going to fix it a year or two down the road.
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alix: i complain a lot about congress always campaigning and not actually governing. talk about this, you basically have macri trying to stay in power by making different rules, either a utility freeze cap or oil cap to get elected, and that is totally decimating companies in argentina. and people wonder whether he will get elected, because that seems unlikely. this is very relevant because i went down to argentina in april to take a look at one of the independent shale comedies there. walking it forward now, what are they doing? that is the question that will be entered friday, not a clock p.m. -- friday, 9:00 p.m. they have some any resources, so much for vimplecom -- so much potential, and they just can't seem to get it together. david: you shared parts of it with me. it is fascinating. alix: you watched it on your
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vacation? aw. david: it was really interesting. well done. alix: thank you. coming up, we are going to geek out a little bit and take a look at the periodic table for the 150th anniversary and how it plays into the everyday. did you take chemistry in high school? david: i did. alix: were you good? david: better than at some things. alix: physics, i think both of us, it was right over our head. ustv , you can watch online, interact with us directly. just go to tv on your terminal. this is bloomberg. ♪
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viviana: this is "bloomberg daybreak."
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coming up in the next hour, lara rhame, fs investment chief u.s. economist. you're watching "bloomberg daybreak." here's your bloomberg business flash. its spote again losing among china's five most valuable internet companies, this time booted out by younger rival pendoto. shares surged thursday nearly 9%. fitch pushing to reduce its dependence on chinese suppliers by more than 40%. this as it becomes clear the trade war is going to hurt profits. the company warning that tensions could have a direct adverse impact on merchandise. the chief executive says the move is "time-consuming, but
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necessary." investors are watching tobacco stocks closely after news the ftc is investigating the marketing practices of juul. investigators want to know if the company engaged in deceptive marketing, including by targeting minors. altria purchased a 35% stake in juul. altria is in talks with marlboro maker philip morris about a merger. that is your bloomberg business flash. alix: i find the juul conversation interesting. owns so much of it, and you have the deal with phillip morris, how do you combat that? that is their area of growth. without that, they have nothing. so how do you do with it? david: at the same time, you don't have a teenage daughter yet. you will be much more interested in the subject if you have a teenager. alix: i'm terrified already.
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they've already had to deal with this, the marketing issues with their actual cigarettes, but if they are going to be in e-cigarettes and vaping, they have to do this. david: exactly right. we turn now to "business week," where we profile the latest the issue of "bloomberg businessweek." first up, technology is driving -- driving use the world to use more and more of the element in the periodic table. reinventing table salt and cashing in on a huge and growing business. and building the world's most precise clock takes a paperthin tium to measure a quadrillionth of a second. alix: that's why they had you read the intro because they knew i would definitely not say those words. [laughter] alix: joining us now is jeremy keene of "bloomberg
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businessweek." this is really your baby. actually, how did it come about? why are the elements so important now that you had to do a double issue on it? was the: we realized it 150th anniversary of the table, and there is such overlap with business. we've been calling it the greatest org chart in business history because anything you need, it's got to be built on some material or other. somebody is pulling it out of the ground or extracting it in some other way. alix: what i didn't know is that you could create new element. had no idea until i started reading your stuff. achel: a lot of the --jeremy: lot of the synthetic element's were created at berkeley, and now around the world. 3/4 of thest periodic table are in your cell. isn't that stunning? as time goes on, technology is
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using more and more of the periodic table. jeremy: you've got the chips in the phone, all of the elements needed to do a proper touchscreen, there's all kinds of things required. alix: so if you're not on the phone with the elements, maybe you are eating the elements. there's a great article called "america's salt king turns seawater into a culinary following." how you can blend it with potassium and iodine and chlorine to create the fancy salt everyone is now eating. jeremy: we are sort of used to the old table salt. that is still the biggest part of the market, but this fellow out west had a real passion for salt, one of those people who worked in tech, and followed this thing he was really enjoying doing in his side time. he created a sort of process for boiling down these chunky pieces, big grains of salt that you will know sometimes see if you go to a restaurant, in whole
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foods, even your local bakery that might bring the lid on top of a bun. it is a different feel for how you taste and enjoy it. david: it is like the michelin chefs. alix: if that salt, by the way? david: they are drying it up. let's turn to the world's most size clock. i thought this was -- world's most precise clock. i thought this was fascinating. it measures down to a quadrillionth of a second, but it uses this element i've never heard of. we'll have to tell me how to pronounce it. alix: i think it is --jeremy: i thing it is leutitium. the small andlly out of material for prison chile -- for potentially the biggest impact we covered in the issue. you take a little bit of totitium and there's a race
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figure out which element is the least sensitive to things that might throw the measurement off. if you get this right, there is potentially input asian for finance, trades get that much faster. -- there temple chile is potentially implications for finance, trades get that much faster. david: jeremy keene of bloomberg, think you so much. you can read these stories in the latest issue of "businessweek," out now. coming up, support for angela merkel party's -- franklin markel's -- for angela merkel's party weakening as the far-right gains. alix: if you are heading out, you can tune into bloomberg radio on serious xm -- on sirius
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xm channel 119 and on the bloomberg business at. this is bloomberg. ♪
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david: now it's what i'm watching, and what i'm watching today is the elections in germany happening over the weekend. there are elections in brandenburg and saxony. somessue here is the afd of the very conservative party, is really rising in both of those regions. it may actually take a majority. spd.uld be against the angela merkel's party is in white. you can see what is going on with the afd, and turquoise. in brandenburg, it is the spd. it could potentially pose a threat to her coalition. alix: my question is, from what i'm reading, the afd has no hope
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of gaining any kind of majority, so you are still going to have the coalition come about that winds up helping the afd because it perpetuates the story of, see? we are marginalized. we can't get into power. david: and it is easier to criticize than the government, but it may continue to weaken angela merkel's position as the dominant leader in germany for so many years. in the east where they are very disaffected, a lot of populism. alix: sounds similar to france, the u.s. coming up on the program, lara rhame, fs investments chief u.s. economist. this is bloomberg. ♪
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♪ david: hokum to "bloomberg daybreak" on this friday, august
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30 -- welcome to "bloomberg friday, augustis 30. alix: hong kong activist joshua vowing to continue fighting. >> we shall not surrender, and i urge international communities to send a clear message to president xi. sending troops or using emergency ordinance is not the way out. we will continue our fight, no matter how much they arrest and prosecute us. alix: they are due back in court in november. a massls have banned march scheduled for saturday. david: florida is bracing for hurricane dorian. an emergency has been declared for nearly 70 counties. it is expected to make landfall early next week as a powerful category four storm. president trump said it could be "an absolute monster."
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alix: u.s. lawmakers have been dealt a blow in their efforts to block prime minister boris johnson's plan to suspend parliament. a scottish judge has rejected the argument that plan won't leave enough time to avoid a no deal brexit. the judge held off granting an emergency injunction, saying there's more time to hold hearings on the issue next week. david: tesla hiking its car prices by about 2% in china in response to trade tensions that d on the country's currency. today, chinese officials said tesla is exempt from the country's auto purchase tax. alix: in the markets, the s&p seeing its biggest gain yesterday and almost two weeks. seeing some follow-through around the highs of the session. ggering at thei end of the months, or is it something more fundamental? you are seeing 10 year yield rise, but just by about three basis points. still seeing some buying over in
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italy. euro-dollar materially weaker, down by 0.2%. you still have low yields, now a stronger dollar, and u.s. equities higher. maybe something has to give. bank of america says in a recent note it is time to go bullish on stocks. bank of america merrill lynch says it's bull and bear indicator is flashing a contrarian buy signal. joining us on the phone is michael burnett. thank you so much for joining us. walk us through the details of the call. west: well, three things think drive markets, positioning and profits, and the third is policy. we've been bullish pretty much all year, driven by the fact that investors, we feel, or to bearish, and policymakers have flipped to a much more bullish stance, particularly the
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monetary policymakers. what we found in the last week is the bull and bear indicator has once again, as it was on january 3, reached an extreme bearish positioning. when it does that, normally what you see is markets rally because there's no one left to sell, and on a contrarian basis, you get a trading rally, and that is what we are forecasting in the next six weeks. alix: what do you buy? michael: i think you buy asia, particularly the hang seng, the korean market. europe,you buy particularly the banks. in the u.s., it will be the cyclicals and the small-cap. the reason you are doing that is because you are buying the stuff that is most oversold, and the other thing that should happen, and always has happened with this indicator when it says people are to bearish, is that yields go up, so the banks
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should also be a big beneficiary. david: from history and your experience with this indicator, how much of it is within the market itself? that's to say, the market is over positioned. how much of it is the rest of the world adjusting to the market? policy is the third thing you mentioned. how much might this be, for example, president trump reassessing the situation to get reelected? michael: well, positioning and of itself can lead to a rally. if 100 out of 100 investors are bearish, the market thereafter is likely to go up, no matter what happens. however, if you want a sustained large rally, as was the case in january, february, and march of this year, what you want is a policy shift or a new sort of feeling about where the economy and profits are going. certainly right now, if there were to be more noises that a
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truce or temporary peak in the trade war is occurring, and i think it is, and if, even more crucially, you got some signs that the economy is not tumbling into recession, you could get much more of a sustained bounce over two or three months rather than just the next six weeks or so. alix: i'm glad you brought that up. my question is what happens next? what happens in 2020? michael: i think 20/20 is going to be a tougher environment. it is a different call. that one is much less based on positioning. i think we all have to see lowere that we interest rates, higher earnings, higher credit prices, higher equity prices. at some point that party ends, and it is very tough right now to see significant declines in interest rates in the next 18 months, and significant rises in interest rates.
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you have policy impotency, quantitative easing, and a bubble in the bond market. at some point that is going to pop that is going to cause deleveraging. is going to be a year where we are more cautious. david: tell us about your bull and bear indicator. there's no indicator that is 100% accurate. have there been any instances where it overprotected? what gave rise to that -- over predicted? what gave rise to that? michael: most indicators on sentiment are based on if you .ike one standard deviation
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, ifou get a credit event you get a liquidity solvency event in the financial markets that causes tremendous deleveraging, i don't think sentiment measures are going to help you. what they will do is they will get very bearish, but stay bearish. contrarian too quickly. there was a hint of that last december, but what happened is the policy shift we saw was enough to allay the fears of the credit market, and that is why indicator work. david: michael, thank you very much for joining us. really appreciate it. that is michael hartnett of bank of america merrill lynch. now we go to trade. the united states starts another round of escalating trade war
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this weekend when it imposes tariffs on an additional $110 billion worth of chinese imports. process has continued to -- we talked to economist paul romer about how long this could go on. >> we are in a new phase where there's going to be real contention, and therefore no rapid growth in trade, maybe no growth in trade at all. i think the fear is this might be something that lasts for 10 years or more. david: we welcome now lara rhame, fs investments chief u.s. economist, and from london, daniel morris, bnp paribas asset management senior investment strategist. 10 years is what paul romer says this could go on for. do you see it going on that long? lara: our forecast isn't quite but we are talking
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about two global uber powers who have contention on several different -- global superpowers who have contention on several different spheres. trade could wind its way into these other areas pretty easily. alix: we are starting to hear that on the conference calls as well. we have sort of a list of things on tesla, best buy, abercrombie & fitch, all coming out and starting to say we are trying to shift supply chains, or this is how much we are going to wind up getting hit. do you have to start rotating within the equity market to account for these kind of things? daniel: i think you want to thing about where the opportunity is going to be. some companies are going to be
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hindered by sales to china or purchases in china of american goods, but you want to think about if those companies that are producing domestically or in europe, that is going to be the opportunity for them. i think you need to think about both sides of the coin, where the companies are going to be hurt by the difficult elation with china, but where the opportunity is going to be. alix: that brings up the fact we saw an equity rally this week, but u.s. stocks with exposure to china really lagged. are we still in the continued story of the consumer is going to hold us up, the rest of it doesn't matter? lara: i think we are kind of their right now. we are seeing such an uneven economic impact from trade tariffs. we are seeing business sentiment clearly lower than it was at the beginning of last year, coming through and a lot of earnings statements. when we look at consumer confidence data, rocksolid, record high or 20 year high of the present situations measure. ddp numbers in the second quarter, the consumer rose 4.7%.
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the rest of the economy shrank 3.7%. if i had a portfolio where only one position was strongly performing, i would get nervous. the last reading was weaker. lara: it was a little bit, but kind of near that two-year average. -- conference board numbers alix: does that mean you will have to keep on buying what is working? daniel: that goes to the question of what has been working. where you see divergence in the market is between the technology sector and every thing else. earnings expectations for tech continues to rise. has been reasonably well despite all the trade tensions, but other sectors are lagging. you have a difference between
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what is expected in earnings growth and what may be priced in. david: are we seeing a bit more resilience on the part of u.s. companies when it comes to china? we just heard about technology. we see u.s. company's remaining in china and doing business in china. alix: you can't flip a switch --lara: you can't flip a switch and change many years of production integration. integration. that is the problem. that is something politicians may not understand. companies are going to try to start to explore those alternative routes. it is going to take time and divert resources that could go to investment. i think going forward we will continue to see this underlying layer of tension. itself. it will resolve alix: our guests will be sticking with us. coming up, you get supercharged returns. the best way to describe
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corporate bonds in the return in august. we will break down what to do in september. this is bloomberg. ♪
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jonathan: you can say -- alix: you can say corporate bond investors had a good month. the best august and 37 years for blue-chip high-grade bonds. total returns to the highest since 2009. still with us is lara rhame and daniel morris. daniel, would you be buying corporate credit right now? daniel: you have to think the outlook is not bad. we do not see the inversion of signal of arve as a
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recession in the u.s. not expecting bond yields to increase dramatically, and given the alternative with equities i think corporate bonds look reasonably attractive. alix: is it going to be duration or risk you are betting on now? at this point the assumption is we do not see risk conditions deteriorating at this point. consumer demand is still strong. there are risks from the trade war but at this point that should be priced into the market. we have had to deal with this for over a year. we do not think there is any near-term risk that will have a long-term impact on bond spreads. if your alternative is 10 year treasuries at 1.5%, whatever extra pickup you can get in income is quite attractive. david: what effect is this having on corporate profits? normally you would be thinking they have to pay a lot of money and interest. they do not. lara: that is something we
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continue to get questions about, the size of corporate debt issuance in the u.s.. a lot of it is fixed rates. that is locked in at low levels and we have to look at the broader debt to asset ratio, which is about the same as it has been over the last several decades. it has come down since the financial crisis. i have to agree. our outlook for the economy is for it to be slower, but to avoid recession. in that environment, with low benchmark yields, you still have to consider the benefits of digging deeper into the capital structure and owning corporate's, high-yield, you need to get the income from somewhere. so far, all the moves we've seen have been priced. david: we talked yesterday with bennett goodman, who is stepping away as head of gso. he said he thought may be we had gone far enough right now in investing in bonds and fixed
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income. >> don't get caught up in fads. just because the marketplace is complacent, it is probably a good time for you to be more conservative. just because there's lots of liquidity chasing transactions, good to hit the pause button, reevaluate your investment. david: so what about it, hit the pause button because it is too crowded? daniel: you do need to thing about what's been behind the fall in government bond yields so far this year. inflation expectations i think was a bigger part of the story earlier in the year, or how much is it expectation that the fed, either because of increasing trade tensions or the outlook on inflation, is going to continue lower rates. with think it is more the latter. if that is the case, that would suggest they are probably going to stay allegedly low. from that point of view, it is
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not as risky as it might appear. alix: i hear the fundamental call both of you are making, but what about the relative call? when you have corporate debt in europe now yielding negative, we have the first junk-bond in europe with negative yields, you talk about the economic risk, that is much more in europe than it is in some ways here. so that is just a ball of money going from europe to the u.s.? lara: i think that's really an issue when you look across the global landscape that yields that are so low, negative in many developed markets. if you look at these bond prices that are overstretched, maybe you are not expecting yields to fall from here. but in terms of owning it, carrying the income, it is to a pretty positive picture, so i think that is a real issue. i don't think any of us ever thought we would be sitting here talking about negative yields for bonds come -- for bonds. alix: so daniel, would you buy
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negative yielding corporate debt in europe? now, can0 years from you feel pretty confident the german government is going to pay you back? if you don't really care that much about the total return, from that point of view, that's absolutely the case. there's certainly been pension funds, insurance companies that have been behind the fall in yields we see, particularly in germany. but you are right to point out that, from an asset allocation view, it is more concerning. atyou are based in the u.s. 1.5% treasury yield, you should be quite happy with that. david: daniel, i hate to bring up the word inflation, and what is going on in the euro zone, inflation numbers today underperforming by a longshot. at the same time, once i hear historically it has always been this way, it will always be this way, i get skeptical. do you have to have in the back
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of your mind that we may get inflation? daniel: we've heard that story. this is the year that cpi or expenditure indicators are going to normalize. other than about all of the demographic challenges and questions about productivity, the one factor we may be taken enough into account and maybe help explain why inflation is still chronically solo is technology -- chronically so low is technology. it is becoming more pervasive across the economy. i think that impact is not really appreciated, and if that is what is behind low inflation, that is something that is going to stay for a while and will probably increase in importance. inflation will probably stay lower for quite a bit longer. lara: there's good and bad inflation, too. if we get low in place and because economies are growing at a lopez -- at a really fast
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pace, i think that solves problems. if it is because of tariffs, that could hurt economies significantly. david: lara rhame of fs investments and daniel morris of bnp paribas asset management will both be staying here. coming up, hurricane dorian is set to hit florida as a category four storm over the weekend. we will talk about the possible economic impact. this is bloomberg. ♪ loomberg. ♪
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viviana: this is "bloomberg daybreak." the likelihood of a no deal brexit rises as citigroup says it could cut domestic bank earnings by as much as 25%. citi says if the u.k. crashes economicut a deal, growth slows an interest rates remained depressed. dorian is on track to be the
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first major hurricane to slam into the east coast of florida in 15 years, shaping up to be an expensive one. bloomberg intelligence saying insurers could face damage claims of $53 billion this week -- of $53 billion. the state's main orange growing region could be affected. alix: drilling down more into state'suice, 60% of the orange production is in the path. you had prices very low, so a boost in price will help, but if crop gets hit, it is going to materially hurt that industry. david: a great you're going for them may be put in jeopardy by this. alix: also what is interesting, i've been reading a report that basically storms have become less deadly, but more expensive. if you take a look at the five most expensive storms from $50 billion to hundred $6 billion,
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but because construction and housing support are better, we are better at getting people outcome others less death. thed: a lot of houses in path of those hurricanes. alix: coming up, we are just moments away from the latest u.s. pce numbers, personal spending, and personal consumption. the consumer has been holding up u.s. growth. can it continue? you're seeing a continuing relief rally underway on this last day of august. it was wild. it was crazy. it was volatile. this is bloomberg. ♪
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alix: this is "bloomberg daybreak." i am alix steel. underway.solid rally 1%,pean stocks climbing hitting session highs.
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s&p right behind that. we get the latest read on the consumer in a few moments. in other asset classes, still seeing solid -- still seeing solid -- still seeing selling on the market. the curve still converted. it is still a stronger dollar. europe continues to test key technical lows. personal spending for july coming in .6%, definitely higher than estimated and higher sequentially. personal income was down. it missed estimates, still up but down versus estimates. in line withtor estimates, 1.6%. the takeaway feels like solid spending, no inflation, steady as she goes. david: consistent with the numbers we had yesterday. people spending money and not a lot of inflation. despite the headwinds and tweets , they were still spending more than forecast in july.
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up .6%. like i mentioned, incomes rose less than forecast, coming up less than .1%. still with us, daniel morris and lara rhame. your initial take on these numbers? lara: i think our economy is still heavily dependent on the consumer, which thankfully does not seem to be internalizing a lot of the uneasiness that has afflicted wall street. main street is still looking positive. we were just talking about tuesday and what could happen next week. we get key data. the ism manufacturing numbers out. the number one risk we are facing is not another tweet or another volatile day on the market, the big risk is businesses get so nervous they freeze hiring or layoff. that would finally connect the dots to the consumer that things are less certain with the economy. it is not my forecast, but that
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is what we are nervous about. david: i think she has put her finger on exactly what we are nervous about. at what point does the slump in manufacturing triple threw two employment? -- triple through into employment -- trickle through into employment? daneil: there are some signs that is already happening if you look at the pmi for the services sector. what we have seen as a slowdown in manufacturing, linked to trade. services have stayed resilient. services being a bigger part of the u.s. economy. over the last months you have seen a slowdown in services like you saw in europe at the beginning and the end of last year which was followed by technical recessions in parts of the region. bleakare signs seeing a from manufacturing in services. there is a risk it hits the consumer. there are warning signs. the comforting point with the data just released his inflation
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is still quite benign. as long as we do not see a pickup in inflation, i think there is still scope for lower interest rates. alix: before we moved to the fed, i want to highlight the savings rate was up 7.7%. that was less than estimated. .2%, lessd comp up than estimated. real disposable income up less than expected. is that a trend that tells us something about the consumer were just random numbers? lara: i think what we see if we look at the aggregate of all of the wage data, all of the employment cost data, the productivity data, we are seeing wages rising faster than inflation. a good thing about lower inflation is that even the wage growth has been slower. the prior expansion, we are getting real wage improvement. that is one positive sign. not a good sign for companies
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that now have to pay more for labor. that is impairing profit. from the household side, the overall picture, despite this one month that does look disappointing, is still positive on the income front. david: the chairman of the fed has said one of his goals is to make sure we keep the growth going and do not taper off. at the same time, there's a question of whether the fed is sufficient to do that. we talk with paul romer yesterday and this is what he had to say about the right source of stimulus. paul: i think everybody should be thinking about if we need some offsetting to the stimulus to demand, how could we get this from another mechanism besides cuts in interest rates? david: what is it? can the fed help extend the cycle or do we need something else? daniel: it is absolutely the right question, the same question being asked in europe. the ecb is doing everything it can to get growth higher in europe.
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as mario draghi points out, the central banks can only do so much and that is as true of the fed as it is the ecb. lower interest rates will help, but you need to see businesses wanting to invest. that could happen with tariffs. part of the benefit or the strategy behind increasing aniffs on imports is it is incentive for businesses to invest domestically to produce. those goods they produce may be at higher prices or less productive than goods produced abroad, but there is a scenario where you see up up up up investments because of tariffs. you are shaking your head -- alix: you are shaking your head? lara: yes. we are going into an election year. i do not see businesses making enormous decisions. if we have a change in administration some of these policies might be unwound. not to say you can put humpty butt back together again,
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pressure out of china may lessen. our hope is that the labor market stays strong, low interest rates will help the consumer, but i think the fed risks expending important ammunition on rate cuts it might need at some other point. i do not know if that traditional capital spending interest rate driven cycle is still there. david: what about the personal side? we have heard president trump confirm he has taken a look at payroll tax reductions. what happens with the president that really wants to get reelected? lara: we saw the president's tax cut have a meaningfully positive impact on the economy in 2017. there is room for fiscal stimulus to drive growth. i think that is a more obvious answer. if that is the policy goal, then just the fed cutting rates. david: we had ray dalio have an
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essay about his take, saying basically it is too late. the central banks cannot bail us out, nothing can bail us out. he went through an equation that says you have less central bank power married with internal political issues such as the wealth gap, issues with immigration, and then extern all politics with china. he said may we may be heading back to the 1930's with a real selloff in bonds and a buying of gold. is he right? daniel: that is certainly not our forecast. we think the outlook -- they say if you take the u.s. expansion, even though it has been quite a while, and we talk about how the recovery is getting old, we are due for a recession and do not think there is any inherent economic logic. barring an economic recession and the fed raising rates, there is no reason this cannot go on. we have a risk of escalation in trade tensions between the u.s.
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and china but we do not think that will materialize either. from this point on, we will have steady -- not exciting growth, around 2% or 2.5%, but after the number of years we have had this recovery, we should be quite satisfied. thisis the them -- lara: is the important conversation to have. it is not a binary outcome of recession or no recession. there's so much focus on the "r" word we need to consider what happens of the economy keeps growing, but we get sluggish growth. we get a year of 1% growth. we get one quarter of negative getth or like 2015, we localized or sector oriented recessions. it is a much more challenging environment. i agree with daniel, a recession is not our forecast and the classic sense. i do not think you can compare this economy to prior cycles.
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i do not think you have ever been able to do that. this is been a unique expansion, i think the next downturn mayfield really -- may feel unique. david: daniel morris and lara rhame, thank you for being with us. now we turn to viviana hurtado with first word news. viviana: a hong kong activist is vowing to keep fighting. the protester is speaking today after being released on bail. >> we shall not surrender. i urge international communities to send a clear message to president xi. sending troops or using emergency ordinance is not the way out. we will continue our fight no us.er how they prosecute viviana: he and fellow activists are due in court in november. they were arrested today. police in hong kong are warning more arrests may be coming and police have banned mass march schedule for saturday. it is a sign the government is
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taking a harder line against the protest movement, which began in june. florida is bracing for dorian. the governor has expanded a state of emergency to 70 counties. if you go into the terminal and put in map cyclone you can track the storm. dorian expected to make landfall in the state as a powerful category 4 storm. president trump says it could be "an absolute monster." he devastated dorian to hurricane andrew. in iranian oil tanker says it is headed for turkey again, but the vessel's crew can input any destination so the united states is not convinced. earlier it claimed to be headed to greece. the tanker is worth about $120 million. it was captured and then later released by gibraltar, fueling tensions between iran and the u.s.. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more
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than 120 countries. i am viviana hurtado. this is bloomberg. week,oil having a good even though ending on an off note. it has been very volatile and that has broader implications for producers as well as drillers. i will be speaking with a prominent driller on tuesday on this program. mark edwards is the head of diamond offshore, they specialize in gulf of mexico drillers. he has a specific niche in the market and is very pessimistic. david: offshore has gotten less expensive than it was? alix: so much less expensive. and with some of their drills you can reduce your cost 20%, which raises the question you need less rates, not more. david: you still need demand if it is cheaper. , the fda probe on e-cigarettes and how they can trigger seizures. more on that in today's bottom line. this is bloomberg.
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remember bloomberg users, interact with the charts we use throughout the two hours on gtv . ♪
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viviana: this is "bloomberg daybreak." i'm viviana hurtado in the hewlett-packard enterprise greenroom. coming up in the next hour, mark lehmann, jmp securities president. you are watching "bloomberg daybreak peter: china says -- "bloomberg daybreak." china says tesla is exempt from trader price purchase tax tensions have weight on the country's currency. tesla has no local production
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and is being directly hit by increases in tariffs as the u.s. china trade dispute continues. the ongoing protests in hong kong earning its tourism and retail industries. there is typically a surge of visitors in july but the hong kong tourism force says last month i've .2 million people visited, only -- 5.2 million people visited, the week is july result since 1997 when it dropped more than 50% after the u.k. handed over control of the city to china. bank of america turning bullish on stocks, issuing its first by signal since january. i am viviana hurtado. as your bloomberg business flash. david: it is time for the bottom line, where we look at three companies worth watching this morning. we are joined by taylor riggs and sonali bostic of bloomberg news and brooke sutherland of bloomberg opinion. first we will look at alta. taylor: shares are off more than
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25% in premarket do to second-quarter sales that missed estimates, growing just about 6.2%. more importantly the company is revising down the guidance, sales growing 4% to 6%, down from earlier estimates. forecastas saying the reflects a lack of enthusiasm , plus aproducts partnership with kylie jenner they hope will turn around sales. they will be introducing a new skincare line thanks in part of that partnership. we will see if that is enough to bring back investor enthusiasm. investors not so sure. downgrades from the street. , morganrgo, citibank stanley all downgrading the stop to a market perform or a neutral. alix: next will take a look at the insurers that can be affected by hurricane dorian. reinsurers sonlia:
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-- the hurricane could mean about $10 billion in losses. the insurance company will have to take that on like state farm. the reinsurance companies they are a lot of those losses at a time when a lot of competition has come into the industry. depending on where the storm lands, you can see these companies fall more or we can see them rise if that storm sways a little bit. david: thanks so much. the last company is juul, which is really in the news. brooke: it is, for a variety of different reasons. what we are focusing on is an investigation by the fda into whether e-cigarettes cause seizures. this was triggered by reports from users of juul devices who think that may have been linked to the seizures they had. it is not clear there is a significant link between these devices and the seizures, but it
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is enough to trigger a broader investigation by the fda and they have 127 reports of seizures link to e-cigarette use. is ins coming as altria talks to merge with philip morris. you are seeing altria stop getting hit -- stock getting hit by this news. david: let's talk about the possible effect on the altria/ philip morris deal. that was one that the street did not love anyway. brooke: they did not. it was unclear why philip morris would be making this news particularly with the regulatory uncertainty rounding juul -- surrounding juul. vaping's take away users from cigarette companies. morris is trying to -- they see an opportunity to prevent the cannibalization of their market share, but you're
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also taking on a lot of risk. the news today is another reminder of the issues that juul faces. jonathan: everything you point out -- alix: everything you point out is valid, but does it matter? when your international sales is going down, when altria struggling for growth, you do not have a choice. brooke: you have to hunt the growth where you can find it and that is why you're seeing them pursue the merger despite all the rest. if anyone -- despite the risk. if anyone has experience with regulation, it is the tobacco company. you are facing a number of hurdles. the ftc is also looking into juul's marketing, and they have significant sway. remember the joe camel ads that rj reynolds had to pull because they were believed to market too much to children? juul is under similar scrutiny for tailoring its market
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campaigns too much. david: is there any thought at all they might get in front of the regulations and embrace regulations? say this is a good product, it should be regulated, you regulate the way we market, exactly what is in it. brooke: that is what they have been trying to do. they have pulled their instagram and facebook markets and have change their marketing so they are targeting adults over 30 who were previously smokers as a way to get off traditional cigarettes. they have pulled the fruit of juul cigarettes from stores. they have said they are willing to go into gas stations and put in devices trying to regulate the age of people buying their devices. with health issues that create scrutiny and there is pressure on the regulator to take a chance -- to take it stand. altria has a 45% stake in
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the canadian cannabis company chrome noise -- chronoid. they have to diversify within the cannabis market in matter what. brooke: they absolutely do and that is another growth strategy and something philip morris has not had exposure to. i will say while we are looking at e-cigarettes causing seizures , there is also concern about vaping being linked to a respiratory illness and there have been reports that is light to thc, the psychoactive ingredient in marijuana. david: in some parts, at least in the united states, vaping has become very popular very fast. do we have a sense of whether it is continuing to grow or it has tapered off? sonlia: we will get -- brooke: we will get a report of the next month on teen use. we saw a spike in 2017 or 2018's. we will see if that has increased or whether these efforts to tamp down have had an
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impact. that might be a key indicator for philip morris of whether they want to go ahead with this deal could -- with this deal. alix: brooke sutherland, thank you very much. coming up, argentinian bonds are tumbling, plus a downgrade to the selective default by s&p global ratings. if you're jumping in your car, you can tune into bloomberg 119o on sirius xm channel on the bloomberg business app. this is bloomberg. ♪
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alix: here is what i am watching. the deteriorating situation in argentina, particularly 100 century bonds falling below $.40 for the first time ever. joining us on the phone is damian sassower. this comes after the default. how low can we go?
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damian: that is a good question. they will not be in default by the end of today. it will be upgraded. what it means is it is not a technical default just yet. the government announced that it intends to keep paying the interest on the bonds while the restructuring does -- while the restructuring discussions are ongoing. is that enough to trigger a default? not quite yet. they would have to stop paying your go forward with an obstruction -- alix: what we wind up hearing is if there is a default, they have to get taken out certain indices. his argentina not there yet? damian: i cannot speak for any of the calculators in terms of its removal or the potential. here's the deal. they're proposing $7 billion of short-term yet, speaking of voluntary profiling of long-term debt and they will start talks
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with the imf on repayments of $44 billion. that is over $100 billion of argentinian debt they are looking to restructure. that is a real risk. the market is reacting poorly but it already has. the bonds tumbled to a fresh loaf. -- two a fresh low. -- to a fresh low. from a fundamental perspective, the reserves only cover 25% of argentina's growth. that is not good. alix: no, no, that is not good. happy weekend, david. david: we made it. open"coming up on "the jonathan golub, credit suisse chief u.s. equity strategist. this is bloomberg. ♪
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jonathan: coming up, closing out a chaotic august. today equity markets advancing, bonds retreating. following a week of happy talk, tariffs on china still had to hit september 1. mario draghi facing down the hawks, officials pushing back against further stimulus. good morning. let's get you that friday morning price action. aroundfutures positive .6 -- around 16 points on the s&p 500, up .5%. in the bond market, treasury yields higher by two basis points. the euro-dollar, 1.1040. let's begin with the big issue. a week of trade happy talk not enough to shake away the trait concerns. >> we have an uneasy calm. >> perhaps a cease-fire for now. >> they are saying c

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