This is "bloomberg surveillance." kurdish ministers join a new iraq government.
In gaza, the cease-fire fails.
60 targets are struck in gaza.
Be of good cheer.
Bill gross on a pessimistic and neutral america.
Uber confronts cities.
They hire the president campaigner in chief.
Good morning, everyone.
This is "bloomberg surveillance." we are live from new york.
I'm tom keene.
Joining me, scarlet fu and adam johnson.
The markets are on the move.
The dollar is headed to new strengths.
The dollar has been getting a bump.
Very good numbers.
Strong numbers out of japan.
That is good for the global economy.
The whole economy is about exports.
In england, the bank of england officials are split on the interest rate increases.
I would also argue that is wrong, given there are several members of the board of governors.
We get on airplanes today.
Michael mckee is on an airplane today.
Jackson hole -- they will argue about all of that there.
It looks like not a lot will change out of jackson hole, but everybody is talking about the future of monetary policy.
We get the weekly mortgage numbers.
Up down, up down, up down.
The fed releases minutes from the june meeting.
[laughter] words, syllables.
We will try to glean what they are going to do.
We suggest it.
[laughter] it will be an intellectual exercise for all of us.
Of any come out?
-- have any come out?
$5.2 billion for the second girders -- quarter.
The other one that has just come out is lowe's. the second-biggest home-improvement retailer.
Profit beat analyst estimates.
The full-year sales forecast is up 4.5% versus the consensus of 5%. do they just underperform home depot every quarter?
This is the 30th consecutive quarter that home depot sales have exceeded lowe's sales on a quarterly basis.
For a while, lowe's was doing better than home depot.
They had a targeted approach, women for instance.
Targeted not to be confused with hitting the target.
[laughter] enough, enough.
Lowe's, staples, where are we?
After the bell, we have hewlett-packard.
There you have it.
Hewlett-packard will be important.
Look for bloomberg television as afternoon for those rates -- reports.
Futures go negative.
The 10-year yield does nothing.
The euro is the news.
It is a sharply weaker euro even in the last seven minutes.
On to the next.
. -- on to the next grid.
The equity markets.
Dollar yen, a weaker yen.
There is brent.
This is janet yellen's worst nightmare.
The bloomberg terminal.
We had a little bit of a spike down in negative yields.
You can see the persistency here.
This financial repression that we have enjoyed.
This is the price of salvation by our central banks.
The two year yield minus inflation.
We actually have negative returns.
Negative returns for retirees.
What an on front page this morning.
It is jammed.
Let's start with iraq.
The u.s. may send airstrikes in iraq.
Targets were hit near the mosul dam.
Kurdish and iraqi forces are trying to expand the control of the region.
This is a developing story in the last hour.
The kurds of northern iraq want their fair share.
That is their price for taking the dam.
There was a report, a little less unconfirmed that i would like, that they will support the new government.
That is the big deal here.
That could be good news for john kerry and president obama.
Islamic militants released a video showing them killing an american journalist.
This has not been confirmed by our state department, by the white house, etc.
This is just news organizations reporting.
They said it will kill another american journalist if the president does not stop airstrikes.
Let's move on to apple.
Investors are fearing that the pipeline would run dry.
Apple is trading at its record high.
The shares are up 25% so far this year.
The previous i was in september 2012 before the ifo 5 came out.
-- the previous high was in september 2012 before the iphone 5 came out.
It is trading more than 6.5-7 times its earnings.
People say it is overhyped.
People are talking now that you have got to buy apple because there was going to be a new release of the iphone and a potential iwatch.
People are bullish on tim cook once again.
Carl icahn had been pushing apple to buy back shares earlier this year.
His claim that apple is undervalued is validated.
Our third front page, uber.
This is one of your favorite services, tom.
It has hired david plouff.
He has appeared on "bloomberg surveillance." he is a contributor to bloomberg television.
He plans to resign by the time he starts with uber.
He is no longer a contributor because he will be starting at uber next month.
He will be the senior vice president of policy and strategy.
A very shrewd move.
He will be a leader on the uber campaign.
They have a lot of work to do with regulators.
The idea that this is not safe versus the cab is nonsensical.
It is absurd.
It is absurd.
We have a legal jurisprudence system whereby if you get injured, you have the right to sue.
David plouffe, you are buying lunch for everyone next i'm. -- next time.
We have our guest hosts for the hour.
To be direct about it, these are two wonderful guests.
Let me start with the idea -- adam, we have so many different ways to go.
I guess we should go negative interest rates.
[indiscernible] i think there is no question that plunging rates in europe has been driving down rates globally, especially in the u.s.. even though the u.s. has been doing better, rates continue to fall because the u.s. is rallying rates by contagion.
To your wonderful holistic view, are we seeing all of this happen in a time of stability or is it creating instability?
I personally think instability.
Rates are going down.
European equities have been performing at the major markets.
Rates are falling because the market is slowly coming to the conclusion that even if the ecb were to do qe, policy has been ineffective.
European gdp's are shrinking.
This came up three times yesterday.
Is europe in a depression?
Deflation is one way of looking at it.
I don't know about depression.
How does this effect what fed officials will be discussing in jackson hole?
I think the fed tends to be very u.s. centric.
In addition to the global view, i think they will have to take it into account.
The bull market is starting to knowledge this.
Yesterday, you had weaker than expected u.k. cpi numbers.
Now people are saying, europe could actually be harming the u.s. let's throw this to one of our true experts on the deficit in the nation.
If there are reduced to gdp's around the world or a better gdp in the united states, is the government correct?
It is as good as it's likely to be.
We're somewhere between 2.5% and 3%. i don't think that's far enough off to make much of a difference.
How much of what we see the fed doing as a result of fiscal policy not being available as an economic debate in the united states?
I think it is to a great extent.
At least until the midterm elections, fiscal policy will remain relatively tight.
Let me translate.
Can fiscal policy help if it cannot help right now?
The answer is that janet yellen has three arms tied behind her back.
She is doing everything ben bernanke tried to do.
Let's ask our twitter question of the day.
How is the fed helping or hurting your personal finances?
Forget about all the mumbo-jumbo we are talking about.
Your personal finances.
Helping or hurting?
Let's start with walgreens.
A forecasting error cost to the cfo his job.
He miscalculated pharmacy unit earnings for fiscal 2015. walgreens pharmacy chief is also leaving the company.
A record mining industry spin off.
The new company will be valued at about $15 billion when it begins trading next year.
International customers of overstock get a new way to pay, bitcoin.
The online retailer will start accepting the virtual currency next month.
It is the biggest merchant to extend that option beyond the united states.
The big question.
What is happening in ferguson?
We will go there live.
Attorney general eric holder will be heading there.
That is certainly the debate and the issue that is gripping the country at the moment.
We want to be part of it.
You are watching "bloomberg surveillance." on bloomberg.com, bloomberg television, bloomberg everywhere.
We will be right back.
? good morning, everyone.
"bloomberg surveillance." paul ryan 10:00 a.m., market makers.
-- paul ryan, 10 a.m., "market makers." i'm tom keene.
With me, scarlet fu, adam johnson.
We have to talk about another top story.
U.s. attorney general eric holder arrived in ferguson today.
We want to bring in our bloomberg correspondent on the ground.
Another night of violence in ferguson.
Set the scene for us here as eric holder enters the scene.
What is the level of tension?
Last night, just a few hours ago, there was another round of violent clashes.
It was not quite as violent as it has been.
Police have not used tear gas or smoke arms.
They dispersed the crowd using force.
They arrested about 40 people.
Eric holder is hoping to heal the community and bring peace.
Is there any sense of who he will be meeting with her when he will be making public statements?
We are not quite sure yet.
He has been in close contact with the family.
He is ordering a separate and independent autopsy of the body of michael brown.
That is one of the things he will be talking to the family about.
Yesterday at this time we were talking about 15 or so people you cited as instigators who were rallying the crowd.
Has that minority, that faction quieted down somewhat?
There are still those elements.
We still see those elements in the crowd.
A lot of them are taunting police officers, some are throwing bottles.
They are still there.
They had less control last night than they did in previous nights.
Police showed more restraint in not using tear gas on everyone just to apprehend those individuals.
Going back to the beginning or the formation.
It has always been a federal and states rights issue over police forces.
Will attorney general holder be greeted with open arms in st.
Louis, in ferguson and within the state of missouri?
At least in terms of the rhetoric, everyone has said they are opening their arms to as many investigations as are needed.
They are opening their arms to the federal government to come in and look at what is going on.
In terms of the rhetoric, that is the official statement.
We don't necessarily know what is going on behind the scenes and whether or not eric holder will be completely welcome as the federal power coming in.
Every morning, we wake up and hear about another night of violence in ferguson.
What happens during the day?
What happens in the hours during daylight?
We have things like shopping centers that are not police command post.
-- now police command posts.
For the most part, things are calm during the day.
There is a police presence on almost every downtown corner in ferguson.
The violent elements usually come up at night.
That is why people have only been encouraged to do protesting during the day and to leave at night.
Thank you so much.
Coming up in the next hour of "bloomberg surveillance," word mccarthy will be joining us as a guest host on bloomberg television.
He will give us a preview on what we can expect from jackson hole, the symposium were fed officials will be discussing labor economics.
This is "bloomberg surveillance." streaming on your tablet, your smart phone, and bloomberg.com.
? good morning, everyone.
"bloomberg surveillance." futures atnegative after two good days.
We have strong top headlines for you.
Here is adam johnson.
A complete disaster.
The ebola outbreak in western africa.
The virus is killed at least 1200 people across four countries and nearly twice that number are expected.
Thomas says an israeli oestreich -- hamas says an israeli airstrike killed the wife and daughter of a leader's wife.
. ukraine says its troops of the upper hand in the eastern part of the country.
Talks will start next tuesday with russian pledges it up -- president vladimir putin.
It is almost conflict fatigue.
You can almost barely keep up with the cities in ukraine.
Every truce has ended.
This has been the longest one.
It went for about 10 days.
Every truce has ended.
A morning must-read.
I think it is a morning must listen.
It is on the heels of huber -- uber announcing they have hired david plouffe.
Take a listen.
The way i like to think about it is that uber is running a political campaign and the candidate is uber.
We are lucky enough and i am lucky enough to have just partnered with the best campaign manager in the world.
The candidate is uber and the opponent is a big taxi cartel, that is what he calls them.
Uber is trying to break into new businesses.
Bicycle courier delivery.
Not just offering rides through the mobile booking service.
The city that comes to mind for me is brussels, belgium.
They have said no.
All across europe, there have been protests.
Think about that conceptually.
Effectively, uber is an agreement between consenting adults.
What is wrong with that?
Your merrill lynch office is over by hyde park.
Do you use uber in london?
I use the black car because it is reasonably convenient.
We transport analysts around in busy traffic in london, yes.
Is there uber in washington?
Yes, and it is very popular.
I drove a cab.
I had hair at the time.
Let's put it that way.
They never thought they would be that kind of competition.
That you could start getting into the business without spending.
You have devalued that investment.
I remember you threw me out of your car.
It was a $45 ride.
[laughter] when we come back, congress is coming back from recess soon.
Will they address the budget issues?
We discussed this next.
? good morning, everyone.
"bloomberg surveillance." i'm tom keene.
With me, scarlet fu and adam johnson.
For exchange -- foreign exchanges on the move.
Apple is over $100. nymex crude is under 96. $80 per barrel.
Nothing subdued in washington.
The summer of discontent.
The quiet miracle for the obama administration is the improved budget deficit.
Our guest host, stanley: there -- stanley collander has spent years analyzing the process of the deficit and the surplus.
The new fiscal year starts on october 1. the improved deficit and the need to bring the bacon back each and every congressional district.
In some of the calling somebody up at 3:00 a.m.? sure.
Let me just correct one thing.
You said they will come back after labor day and confront the budget deficit.
They are not.
Can we get a surplus?
I remember the last time we had a surplus.
Why can't the president, why can't we have an obama surplus?
The deficit is a lot higher now than it was back then.
From an economic standpoint, the deficit has been following.
We will be about 3% of gdp and it will continue to fall for the next four or five years.
If we have a surprise and the economy starts growing faster, we are going to get close enough.
Close enough to a surplus?
Yes, but what happens when you get a surplus is there would be politicians who will have a tax cut or spending increase.
Ring up the chart, adam.
-- bring up the chart, adam, the budget surplus from the revolutionary war.
[laughter] you can see the civil war.
No, this is back from the 1970's. there is the deficit.
There is the surplus.
Down we go.
It is ugly.
How is it that we just got so completely into production that it is ok to have a deficit?
We should bring david in on this.
The deficit does not seem to make much of a difference.
David, feel free to weigh in.
I think the dollar has definitely benefited from the fiscal cliff that led up to this improvement of the fiscal position of the last two months.
Foreign investors are saying, i can't believe the u.s. deficit is only 3% of gdp.
The dollar is back.
It is a more responsible government.
But are they getting ahead of themselves?
The deficit is shrinking and we are not getting into surplus territory and all indications are we are not going to get there.
I'm not sure we have to.
Typical economists are saying that as long as the economy is growing faster than the debt, not the deficit, it becomes less and less of a burden.
It becomes a higher and -- it is like adding a better job or your expenses stay the same.
Would need to talk about paying down the debt.
The last time we talked about doing that, everybody said no.
Paul ryan is going to come on and he is going to say that we need to pay down the debt because that is what constituents want to hear.
Certainly his base.
The people he tends to talk to.
You have got to understand that paying down the debt becomes a politically very difficult thing to do.
You are asking people, when you have a surplus, you have the opportunity to cut taxes.
I was talking to phil gramm and alan greenspan about testimony on a surplus.
Greenspan had the courage to say that they are bad features at paying down the debt.
What is bad about paying our bills?
There is nothing bad.
I just want to say this.
My model for the 10 year treasury yield shows that as a result of the massive reduction from 5% to 3%, that would have reduced the value of the u.s. government 50 basis points on the 10 year yield.
We have already gone to a very low rate.
Faster than any other country has managed to do it.
That is good.
I'm 100% with you.
What happens when rates go up and u.s. borrowing costs, because there with the debt -- ou worrywart.
U.s. debt has gone up, but household debt has gone down and corporate debt has gone down.
The rest of the world has gotten a lot more leverage in the last couple of years.
The u.s. is one of the fewest economies that can limit high interest rates.
The world is going to really struggle.
A substantial part of u.s. data is short-term.
The fastest-growing part of governments pending is going to be interest on the debt.
Why are we issuing a 50-year bond?
[laughter] why are we doing a 50-year?
2064? next we will have a 100-year bond.
They are issuing bonds because there is a demand.
It is craziness.
Rates are so low.
If he said interest rates at zero, the only way fixed income will take up to show for it is by taking risk, by going all the way out into the maturity to get the yield pickup.
I'm not sure we want to buy longer-term right now.
That is what we should do.
Can we go to break?
This is great.
We need to go to break.
We will talk about the budget deficit.
A 50-year bond.
A 50-year bond for the u.s. what would the rate be?
3.40. more like 5%. really?
Maybe 4%. we will split the difference.
Corn prices are not so far off.
The bumper crop for corn farmers this year means lower prices.
This is "bloomberg surveillance." ? good morning, everyone.
"bloomberg surveillance." the fed is moving to jackson hole.
It is the twitter question of the day.
I was the federal reserve helping or hurting your personal finances?
That's is a question loaded with ambiguity.
That is out on twitter.
Speaking of ambiguity, this is "bloomberg surveillance," where we specialize in it.
Admittedly, nothing ambiguous about the first deadline.
A month line in japan killing 10 people.
This is overnight.
-- a mudslide in japan killing 10 people.
This is overnight.
The death toll is expected to rise.
The streets of ferguson, missouri are relatively calm at this hour after another night of violence.
Authorities dispersed protesters without using tear gas, unlike the past several months.
It appears there has been somewhat of a let up.
Police made 47 arrests and seized several handguns.
We will keep you apprised of attorney general eric holder's visit.
Selling the new york islanders.
A pair of investors will take over in two years.
Tom keene is one of them.
He is a fan.
The team has not won an nhl playoff series in 14 years.
They are going to move to brooklyn.
There was a lovely palace for there to maybe play in.
The islanders are not one or two players away.
There seven or eight or nine.
They have a long way to go.
But they have a cool stadium to do it in.
We have a wonderful single best chart.
Yes, that is right.
A healthy harvest has left u.s. farmers with too much corn.
If we can show the chart right now, you can see the excess supply.
A sharp increase on the right-hand side of the screen, the highest since 2000. the white line tracks the prices.
After reaching a high into thousand 12, it is now at a four-year low.
-- 2012, it is now at a four-year low.
It might mean less inflation in food products that use corn.
Take your pick.
This is right up your alley.
Subsidies for corn producers that create ethanol, more inefficiency out of washington?
This is -- corn in particular, but agricultural subsidies generally, are one of the more controversial parts of the budget for years.
It is called crony capitalism now.
Groups on the left are saying we have to get rid of this.
Didn't the farm bill change that a little bit?
Enough is a relative term.
Adam was right in the way he asked the question.
You have subsidies going in for ethanol that encouraged people to start raising corn in areas and on land that was never fellow before and they overproduced, so you ended up with a glut.
We could have predicted this two years ago when corn prices were four dollars per yeaear.
Part of the farm bill that subsidizes corn production for ethanol -- food stamps.
You have to give the city guy something if you are going to give the country does something.
-- country guy something.
The farm bill was conceived to get voters in the urban areas with the food stamps.
To all of our viewers, is it a legit program?
For those folks who cannot afford to feed themselves or cannot afford to feed themselves all the time, it is helping literally millions of people.
Are there changes in the program that probably help you?
It has actually done remarkable work.
Poverty is an issue in the country.
There was no way around it.
run us through quickly.
The number three photo.
Texas governor rick perry, the republican presidential election in 2016, he was booked on political corruption charges.
He insisted that the indictment is on -- unjustified.
I think the smirk, the smug, the hair part says it all.
And gets them noticed in a certain field.
Yes, it does.
He effectively was asking for someone to resign from the anticorruption -- i don't know how to phrase it -- the group investigating anticorruption.
Some would say it is a ridiculous indictment.
Now he is acting like a victim and it is benefiting him politically.
Investigating misappropriation of campaign funds.
Chinese beachgoers wearing bodysuits.
This is a little bit weird.
And protective head masks.
[laughter] they prevent you from getting sunburned.
If it were exceptional -- acceptable in the united states, i would totally do this.
You don't want to much sun on your face.
You want to keep your skin white.
But i am asian.
Sunblock is still not good enough.
Wrinkles are not good.
This is my favorite.
Workers cleaning big ben, the eastern facing face, in london.
How cool is that?
You want him to stand on the hand.
"mary poppins." ? the birds ? sing it, tom.
"mary poppins" is the best movie because it is the longest one where you can sleep while the kids watch.
[laughter] the bank scene with dick van dyke.
Dick van dyke is a genius.
Speaking of europe, european economies report stalling growth.
What this means for the united states.
The impact on the u.s. financial markets.
This is "bloomberg surveillance." bloomberg television.
? an important interview this morning.
On bloomberg television.
Yes, of wisconsin.
But much more, of the republican party.
Look for paul ryan this morning on "market makers." this is "bloomberg surveillance." i'm scarlet fu with tom keene and adam johnson.
Let's get you company news from the files of "bloomberg west." steve ballmer quitting the board after microsoft's ceo.
He is still the top individual shareholder.
The techcrunch blog is trying to raise money.
Spacex is trying to deliver cargo to the international space station.
Some privacy watchdogs are worried about new plants from google.
Reports say it would let kids from under age 13 have google and youtube accounts -- gmail and youtube accounts.
That is the latest headlines.
I wasn't aware there were restrictions.
I would say advertisers targeting young kids is the least of the worries out there about having young kids online.
It gets a lot worse than advertising.
Talk about getting worse come a we have a little debate that is getting hotter.
-- talk about getting worse, we have a little debate that is getting hotter.
David is our guest host, along with stan.
Why is the 10-year yielding?
If you look at rates in the u.s., we have never seen those levels period.
I would argue that it is about secular stagnation fears.
It is unclear for the market to judge what the economy can grow in the future based on the last few years.
What do you say to the argument that what is happening in europe, slowing growth in europe, negative gdp, is translating and pulling us down?
I think that is what is happening.
For the dollar to rally, we need for investors -- foreign investors.
Until last month, foreign investors were selling u.s. assets.
Finally, u.s. -- european investors are trying to buy european -- u.s. bonds.
This is actually a very important turn.
Now that european investors are buying u.s. bonds, it is pushing up the dollar and with the dollar going up, the u.s. is going to be better in europe.
You have a cautious view moving more optimistic.
Deutsche bank is extremely optimistic.
All of that is against bill gross, with a very cautious assessment.
Our viewers and listeners heads are spinning.
Why is this a debate between you and bill gross?
Would bill gross is talking about our super long-term concerns about slowing productivity growth, slowing labor force growth.
Honestly, i think the u.s. economy has not really been given a fair chance to show what it can do.
Think about it.
The first quarter where we hit was during the worst winter in 50 years.
Europe was about to collapse as a continent.
Unless you think these are going to become a part of everyday life for the rest of eternity, i think we should judge with the economy will do in the future not based on those things.
Is the run rate for our economy about 3.2%? we have two lower are her eisen's? i think -- do we have to lower our horizons?
I think 3% is reasonable.
We are reaching energy independence.
Energy has been a huge drive for the u.s. economy for the last 10 years.
Oil prices skyrocket and we lose in the economy.
This time, the u.s. economy is doing well.
Oil has gone from the most volatile asset class to the least volatile in the world because it increases the u.s. move toward energy independence.
It is certainly a tailwind for the u.s. economy, but a headwind for europe.
Now that we have seen europe's style outcome will governments and bark on spending -- and bark on spending or austerity?
What will that -- what effect will that have on the u.s.? what is very interesting is that in this whole thinking about what the ecb should be doing or not, the markets are reaching a conclusion that it is not going to be very effective.
The reason is that unless the u.s. -- when the fed does qe, they reduce the corporate borrowing.
In europe, corporate bar words are much more dependent on banks.
Meanwhile, president obama's approval rating is at an all-time low.
The powers that be cannot get a thing done.
There are a lot of folks is that -- on wall street say that this could be good rather than bad.
It is the one constant.
Stamp, thank you so much.
Let me do a forex report.
It is quiet.
It is a quiet foreign exchange.
Stronger, stronger, stronger dollar.
Sterling well under that 1.70 level.
Weaker euro, weaker yen.
Affected much more by the unrest in eastern europe in.
We will keep the conversation going in the next hour of "bloomberg surveillance." ? x kurdish ministers rejoined a new iraq government.
A temporary cease-fire in gaza fails.
70 rockets hit israel.
60 targets are struck in gaza.
The traveling elite go to jackson hole.
Paul ryan is in search of a way forward for his republican america.
I'm tom keene.
Joining me is scarlet fu and adam johnson to get you smarter on the american economy.
Our guest this morning ward mccarthy, chief financial economist at jefferies as well.
Overnight, we learn that japan exports rose more than forecast in july.
Obviously, they are a big exporter, so if they are exporting more, that means we are buying more.
Meanwhile, at the bank of england, the officials are split as to members want to increase fees as they think it reflects the health of their economy.
We have a gain of 1.4%, which is a reversal from the prior weeks dropped.
This is what it does.
It is a volatile number.
It is begin yang.
Listen to you.
I it is that yen yang.
-- it is the yin yang.
Listen to you.
Staples as reported morning's about an hour -- reported earnings about hour ago.
A little better than estimates.
Target and hewlett-packard later today.
What are the company news items we have today?
We will start with a billion-dollar forecasting harbor -- error that has caused -- a billion-dollar forecasting error that cost the ceo his job.
Planning a record mining industry spin off, the resource giant will separate aluminum, coal, and assets.
It will be valued at about $15 billion after it begins trading next year.
And international customers of overstock it a new way to pay, bitcoin.
The new online retailer will start accepting the virtual currency next month.
It is the most unusual wednesday morning.
Within our summer of presidential discontent, israel and thomas -- hamas attack again . and then there is a rock.
And the attorney general will travel to ferguson, missouri.
-- and then there is a rock -- you -- iraq.
Is the u.s. in greater support of the kurds in iraq or in support of the shia in baghdad?
The u.s. uses -- is in support of the shia and sunnis coming together.
It is an interesting thing, tom.
You have hit on a key point here.
The idea that massoud barzani after a couple of months ago saying that it is time for the kurds to break off and do their own thing, it is a huge deal.
It underscores the diplomatic efforts behind what the americans are doing.
And getting prime minister maliki to step down and now getting the kurds to come in and say they will rejoin the government.
That is a huge step forward.
Is there any indication that mr.
Out of body will be different?
Missed -- mr.
Al-abadi will be different?
Option -- cautious optimism.
He has been a member of parliament for a while.
He came back in 2003 and has been going through this whole process.
But they feel like in conversation he's been saying the right things, and that is so them gordon.
Within the summer of discontent, has phil mattingly aged?
He never ages.
What influence, if any, does the u.s. have on abadi right now?
Secretary kerry was a key player in helping to select your al-maliki -- to select malik hi and now a key player in helping him to decide to step down.
There is strong pushback with the idea that they were the ones to try and take down maliki.
Have you seen the pivot in terms of how the president is dealing with iraq echo what is your -- with a riraq?
When it comes to a situation that is changing as quickly as it is in iraq, the president has to step forward.
We have yet to speak of ukraine this morning.
It's essentially open warfare in four cities in eastern ukraine.
He said even on the radar of the united states this august?
-- is that even on the radar of the united states this august?
Somebody made the point yesterday, it was just last month that a commercial airliner was shot down over ukraine and it's as if it never happened.
There are other interesting things.
You read it over and over again when you look at markets across the world that geopolitical tensions are easing in ukraine.
It's not true.
The u.s. is aware of what is going on, but there are a lot of other things going on.
Is there republican foreign-policy?
There is an interparty struggle over what the foreign policy would be.
What you're seeing now in iraq is pushing the idea of -- of that isolationist policies were starting to creep into the republican ideology and they are being pushed away now.
Rand paul was never an isolationist, but identified with having less of a role abroad.
I think he's beginning to slide away from that.
I would say paul ryan is very much along the track of the republican ideology that you and i identify as usually being bears.
Ward mccarthy, our guest host for the hour.
Make sense of the cacophony of noise in geopolitics of the moment versus the u.s. economy that at least this past quarter has grown at 4%. but the u.s. economy continues to generate critical mass.
-- the u.s. economy continues to generate critical mass.
He continues to move along the path of normalcy.
It's not there yet.
It will probably takes -- will take about one or two years before we are where we want to be.
You got so lucky not to go to jackson hole.
Congratulations on that.
You have a fabulous chart here we can explain for television.
It's i -- it kind of sums up why jackson hole is important to americans, because real things get done.
In 2010 they were focus on macroeconomic challenges, the decade ahead.
And in 2012, qe3 resulted.
2013, tapering resulted not long afterwards.
What do you think will happen this year?
Janet yellen will use this as a forum to explain why she thinks we should look at the labor markets and -- labor market is a different way than we have historically.
Is she correct?
Until we get back to being normal.
The whole issue is that maybe some of the headline numbers suggest the labor market is doing fairly well.
When you look beneath the service, you see a lot of problems.
You have done looking beneath the surface for years at jefferies.
When you look beneath the service, what do you see about a rate increase now?
I think they're being too anxious.
When you look at monetary policy from the standpoint of risk -- and there's always the risk of making mistake -- if the fed wait too long and it allows the economy to overheat on inflation, they don't want to do with that.
If they plug the -- it's a pull the plug too soon and send the economy back into a swoon, that is bad as well.
It is asymmetric.
The risk of sending us back down is worse than overheating the economy.
I think that is right.
Going back to paul volcker, he goes -- he had a monumental problem in the 70's and 80's and dealt with that through policy.
Ben bernanke dealt with a problem with an overdose of accommodative policy.
Let me do a quick data check here.
Good news for housing.
Home depot's and those top earnings estimates.
? good morning, everyone.
I'm tom keene and with me is scarlet fu and adam johnson.
We have the battle, fisher versus fisher.
Stanley fischer is defending low rates for longer.
Dallas fed president says take away the punch bowl.
Ward mccarthy, he lives for debates like this.
We have all become a bunch of fed geeks, i admit.
Who is right?
I think stanley fischer is right and the fed will keep rates lower for longer.
I think they will start raising rates at the beginning of next year.
Some of the hawkish presidents want to pull that forward.
I think it's probably going to happen later, because it's going to take that long for the fed to a comp was what they want to accomplish before they are raising rates.
-- to accomplish what they want to accomplish before they are raising rates.
But it's important to keep it open debate in terms of what policy should be, and also keeping the markets on their toes.
There has been some complacency in the market with what monetary policy is and what it's going to be.
What about the argument that if the fed wait too long there will be a setback and then they have to play catch-up?
If you recall the favorite forecast in 2009, it was that we were going to be in recovery.
The fact of the matter is, the collective damage both to the rancho markets and to the economy -- the financial markets and to the economy because of the recession takes a long time to heal.
We are healing and the rate of healing has been accelerating somewhat, but we still have a ways to go.
That is the issue, right?
It is although people -- all of the people who want to work part time -- you want to work full-time, but are working part-time.
Is yellen right that the fed can address labor market?
Is there any evidence that monetary policy makers can adjust and adapt labor?
Well, i think the answer is, the only thing the fed can do is buy time.
Really, this should be a labor policy, but fiscal policy just does not work these days.
All yellen and the fed can do is buy time to give people time to get back into the labor market.
Coming up, we will talk about that issue of the summer, which is a lack of wage growth.
Futures are mixed right now.
Scarlet flat on futures.
We are also seeing some premarket action here.
Lowe's shares are down 3% after reporting earnings.
They beat analyst estimates, but the forecast for the rest of the year is not so good.
? . . good morning, everyone.
Well-timed, a conversation with paul ryan come out with a new book.
His mandate for republicans and for america.
Look for that, and john halperin as well.
With me as always, scarlet fu and adam johnson.
And our guest host this hour to give you perspective on the american economy, ward mccarthy of jefferies as well.
Ferguson, missouri is calm now after another night of protests and the killing of up -- over the killing of a black teenager by police.
Police made 47 arrests overnight and seized several handguns.
Attorney general eric holder will be visiting ferguson later today.
In the u.s. just once again bombed site overnight at the strategic jam -- dam overnight.
Islamic militants a they murdered an american journalist to avenge those airstrikes.
In the u.s. troops have the upper hand in u.s. cities were pro-russian soldiers are hold up.
The government also seized talks for police.
Those are the top headlines.
It is a big day for retailers.
Adam, you were telling us about the retailers reporting earnings.
The stocks are trading lower in the premarket for lowe's after the company cut its full-year sales forecast.
Joining us now on the phone is retail analyst david strasser of jenny, montgomery, -- jenny mungo murray scott.
-- janney montgomery scott.
Are the troubles you need to lowe's, or a sign of its core customer?
I would argue it's a little bit of both.
First, they have underperformed the industry for the better part of two years right now.
Additionally, q2 was a great quarter for the home improvement industry.
A lot of that had to do with the great weather, a seasonal shift from q1 to q2. when you take the first half to gather, home depot was generally in-line and lowe's was below plan.
As we get deeper into what has been a downturn into housing, i think it's going to be more impactful as we go through the year and we get through that spending related to last year's trend.
I'm stunned by one statistics command that is, that home depot has been lowe's on sales growth for 30 consecutive quarters.
That is hard to fathom.
What is home depot doing right that lowe's cannot seem to figure out?
We talked about this a lot in a lot of reports.
The real estate they've added in the past seven to nine years since the last peak in 2005-06 has generally underperformed.
They open a lot of markets on the outskirts anticipating the building boom to continue, which has not happened.
A lot of their newer stores, which amount to about a 50% increase, roughly 600 stores on a 1200 sorbets -- store base, have not performed that well.
At the same time, home depot has really gotten their act together over the last seven or eight years and reacceleration of their relationship, or fine tune relationship with the customer.
David, i want to congratulate you as i did on bloomberg radio yesterday on coming out and saying right up top you are wrong.
That was what -- that was refreshing, to say the least.
Are you going to become a bull on home depot?
I downgraded both of these stocks something like 18 to 24 months ago.
I have always been down on home depot because of how strong the operation of the company was.
I have a tough time getting bullish run housing stocks -- around housing stocks when militantly close to peak multiples on what i think are becoming peak sales and earnings.
I struggle to do it.
But can home depot deploy more cash to shareholders?
They have massive free cash flow.
They do, and that has been great.
But it 20 times earnings doing a $7 billion buyback, that is great.
It just seems tough.
What has happened is that the world has forgotten that these are cyclical businesses.
Give us a look ahead to target.
I know that you recently wrote a note about targets canadian operations.
That was a big mess for the company.
And it remains somewhat of a mess.
Although i think they are getting better.
They have made a lot of mistakes there and they understand the mistakes they've made and are in the process of fixing that.
I don't think they get the returns that they were hoping for, but i think business will get better.
Recently, they said they would open more stores till midnight.
I look at that as sg na and maybe they cut.
The same thing happened with walmart and now they are adding hours back.
Forget about the financial stuff.
When stores a they will be open until 2:00 a.m. and midnight, that is desperation, isn't it?
It is somewhat desperation, but also a reaction of what is happening in the world of e-commerce.
People are being forced to react to what is happening in e-commerce in a substantial way at this point.
The gross margins are the biggest contention at lowe's. in the long run, they could potentially go lower.
We lower them in june and we lower them again command our issue is gross margin.
Gross margin is what we will be looking for when target reports earnings this morning.
David strasser, thank you so much.
20 times earnings, but who cares, the stock is like moonshine.
The question of the day, how was the fed helping or hurting your personal finances?
Not the big stuff we talk about, but your personal finances.
? this is bloomberg surveillance.
I'm scarlet fu with tom keene and adam johnson.
Let's get you some company news.
So much for investor fears that the apple -- that apple was running dry.
The stock is up 25% this year and analysts expect sales of the new iphones to set records.
They are due out later this year.
Coming to a grocery store near you, mcdonald's coffee.
The fast food train -- chain will sell kraft coffee.
And hoover has hired a former top adviser to president obama.
David plus -- david aloof will help them overcome regulatory hurdles.
It is about communications, policy, branding, and strategy.
And weaving that together to tell a story in the cities that we are going to, to get the data out about all the good we are doing, about how safe the rights are, about the tens of thousands of jobs we are creating every month.
And about creating economic opportunity for drivers, and making sure we represent the progress that uber represents.
That is this morning company news.
Good morning, everyone.
This matters to our guest host, ward mccarthy from jeffries.
He has come far and -- gone far and wide for his detailed study of the economy.
Yesterday the lack of wage growth.
It is the conundrum that janet yellen, economist, and for that matter politicians, face.
America has no wage gains as the elite meet to greet in jackson hole.
This is front and center, isn't it?
Yes, it is.
The average earnings are only rising at about 2% year-over-year.
And that is the low range.
It is -- and that is the average.
The low range is 1.4% up to 4%. income is at historically low levels.
Why is that?
We have gone through a time when we have had a lot of surplus label -- labor and a lot of people unemployed.
As a consequence in determining what wages are, it has all been on the employer's side.
They have little incentive to raise wages.
Is there a wage maker that can shift that, economist that can shift that?
We have pretty muscular payroll growth.
I think we will continue to's see payroll growth.
I think we will be absorbing surplus labor faster.
And for the geeks like you and alan krueger and others, jackson hole is the -- has the idea, wage growth goes to those that are employed.
Can they give them an ok wage, my -- and minimum wage, or a better wage?
The best way to deal with it would be through labor policies, but we don't have that.
What the fed is trying to do is to buy time to allow these people to get back in.
When you look at the historical data, it looks to me that wage growth is related more to long-term unemployed and then to short-term and appointment -- short-term unemployment, which indicates to me the fed is doing right thing.
What would make you lean forward on the best labor economists in the world?
What do you need to hear from jackson hole?
I think what we need to hear is exactly what is the driving force.
That is why the title of the jackson hole symposium is about labor dynamics.
I think that is what we will hear from the alan krueger's and the janet yellen's of this world who see things quite different late.
In the end, this will be an opportunity for janet yellen to explain what she's doing in the labor market and for the fed to raise rates.
Ward mccarthy with jeffries.
There is not a lot of economic data this morning.
We have a lot of weekly mortgage apps, which does not really move the market.
But the fomc is coming out this afternoon and ahead of that, we have the dollar strengthening to an 11 month high versus the euro.
The stronger high has been consistent in the past couple of days.
We have a call that says if you want to play strengthen the fundamentals of the economy right now, you've got to buy the dollar.
The fed can force rates low, but you cannot force the dollar low.
That is were you see the movement.
An 11 month high on the dollar?
Fax an 11 month high, yes.
-- an 11 month high, yes.
This morning, futures are indicating a lower open, perhaps a little pullback.
But they are little economic -- there is little economic change at the moment.
I'm adam johnson with tom keene and scarlet fu.
Our guest host for the hour is ward mccarthy.
He is the chief financial become a -- chief financial economist at jefferies & company.
You have the headlines.
Liberia's president has ordered troops to quantify large section of the capital after the ebola virus has killed at least 24 in the country and more than twice that much are infected.
Israeli and palestinian leaders walked out of talks in egypt.
And supporters cheered -- cheered the texas governor yesterday as he was booked at the courthouse.
Those are your top headlines this morning.
Economist joseph stiglitz is in germany for a meeting of nobel laureates.
He spoke with our jonathan ferro about the recovery in the u.s. and europe.
Monetary policy cannot be a substitute for these other policies.
We tried it in the united states.
Monetary policy helped, but the u.s. economy is still weak.
It's stronger than europe, but still, nobody would describe the u.s. as in a good position.
In other words, the fed can only do so much.
Ward mccarthy, are you in agreement with the nobel laureate?
I think the fed can only do so much and it is doing what it can do.
It helps a lot if the really dark days, but at the same time, we would be in a lot better shape if we had a coherent fiscal policy, which unfortunately we don't. that means the fed is carrying the ball on both sides.
As we were talking about it earlier, some of the issues in the labor market really are structural in nature and could best be addressed with some type of retraining programs, but that falls under the fiscal 10. -- the fiscal tent.
That would require government.
You want to much.
[laughter] it is an example of where the fed could do something for people.
With the fed is doing is trying to buy time to allow people to maybe retrain themselves, or to allow the labor market to improve to the point where skills are maybe not quite up to where employers would want, but they would still hire them and train them.
This is an elected -- an election year, so we do not expect a lot from elected officials.
But next year, how do you begin to forecast that in?
Or do you just not?
It is hard to see anything coming out of washington almost regardless of when the elections are.
Unfortunately, we need more people in the middle in washington.
They are really extremists who are happy to stand on the opposite side of the room and yell at each other rather than get together and try to work something out.
Unfortunately, doesn't look like it's going to change anytime soon.
In jackson hole, we have fed officials meeting.
Meanwhile, they are doing the same in europe.
Here's what mr.
Stiglitz, nobel laureate, economist, joseph stiglitz, specifically had to say about monetary policy in europe will stop -- in europe.
The reality is, when you're at about 5% of a larger political entity, your voice isn't heard, just like in the eu . yes, it's nice that greece gets a vote.
But do you think that greece is actually driving the policies of the ecb?
That if voice is very important?
-- that it's voice is very important?
The reality is that the voices of the larger countries are heard much more strongly.
What is driving policy in the eu?
In the eu, they are in a worse state than we are in the u.s., frankly.
They need to get their act together and get some type of fiscal policy that is similar to what the u.s. did in the early days.
In the early days of the u.s., we were under the articles of confederation.
There was no way for the government to raise finances.
That is what is happening in europe now.
They need to change that.
Ward mccarthy, economist at jefferies with us for the hour.
That brings us to the twitter question of the day.
We want to ring you back to the united states with jackson hole beginning.
It said policy helping you or hurting you?
-- is fed policy helping you or hurting you?
? good morning, everyone, bloomberg surveillance.
Coming up, scott stringer.
Lots to talk about within the activity of new york city finance.
It's a must listen for anyone in wall street.
Coming up on "in the loop" on bloomberg television.
I'm tom keene and with me is adam johnson and scarlet fu.
This is adam pozen writing.
pozen is active with the bank of england.
There is adam pozen.
This morning with me, ward mccarthy of jefferies.
Again, what can economist actually do when they affect policy?
The issue is, we are in an environment where the effectiveness of movement and interest rate is pretty much gone.
What the central banks have started to resort to is the use of the balance sheet, and one of the concerns is the expansion of the balance sheet causes some financial instability.
Some of the more hawkish members of the fed are concerned that the combination of lower rates and expanding balance sheet is going to cause this.
He is a pragmatic guide.
How can janet yellen be both pragmatic with critics on both the hawkish and the dovish side?
I think she is being pragmatic.
She is dealing with the most important issue we are faced with, and that is, to get the economy back to normal and the labor market back to normal.
She is concerned about the potential for financial instability, but over time we have learned that the financial markets have learned to live with this combination of low rates and expanding balance sheets.
There is a history of the jackson hole symposium paving the way for the changes in policy in the months following.
Was that always changing, or did that happen accidentally because of the financial crisis?
I think it really was a consequence of the financial crisis.
The fed has not changed policy after every jackson hole.
I strongly agree with this.
I was there and i cannot convey enough the sweat.
August of 2007, and then two or three weeks later you see guys 50, 60 feet from you and they are glued to their cell phones.
The sweat in 2007 august.
And in 2008 august, lehman.
The monkey on the shoulder.
We were asking questions like him are going back down?
That is a great question, scarlet, because there was real sweat in 2007. i think it's very important, the thinking that is getting done, especially at the symposium.
Janet yellen's approach to the labor market is a change from what the fed has done before.
She wants to use this platform to explain her thinking.
Word mccarthy is our guest host for the hour of jefferies.
? tomorrow on retail, he's truly the inventor of exclusives.
Stephen side of -- stephen sado ve will be on to talk about what scarlet fu needs to buy next.
With me, the always well coiffed scarlet fu, and adam johnson.
Steve ballmer has quit microsoft board.
It comes eight months after his departure sco pulls him he was the -- he was connected -- after his departure as ceo.
A large secondary investment of about 200 million dollars for spacex.
It's a private -- the first private rocket maker to deliver international cargo to the space age and.
And some privacy watchdogs have set their sights on google.
Among the list of concerns, allowing advertisers to target children.
Our mark halperin will interview paul ryan in the 10:00 hour this morning.
The way forward might be to read ryan.
Mark halperin is the director of politics.
I love chapter six of "the way forward." simpler, smaller, smarter.
That is a republican plea, and the?
Paul ryan is one of the leaders of the republican party.
This is a real book in terms of most campaign books.
This is not just a biography.
This is what he thinks is the past -- the path forward.
How is it different from hope and audacity?
Ryan has a very fundamental view of what the country should do.
It's a pretty orthodox view.
The ideas are not random.
His mentor was jack cap, the former nfl quarterback -- jack kemp, the former nfl quarterback and vice presidential nominee.
He would like lower taxes, less government, get rid of obamacare, reform education.
All of these things are up for debate.
What makes him different are some of the -- from some of the other republicans and conservatives is that he wants a fight.
He is not trying -- yes not shied away from saying that we will change social security.
kamp, how does he avoid the failure of jack cap -- jack kemp?
How does he not mess up the way the bills quarterback did?
Jack kemp was successful at reforming taxes in the reagan era.
He was also successful at rebranding his republican party.
The republican party has a brand problem now, which almost needs to be greg it first before you can have a battle of ideas.
A kid from ohio get a degree from harvard in economics.
He's a legitimate or read lieutenant colonel.
He goes up to alaska in anchorage and has become the hope and prayer of the sarah palin wing.
Tell us about dan sullivan.
Dan sullivan last night has won this three-way primary.
He is now the republican choice to face off in one of the most popular senate races in the country.
Sullivan was able to unite the karl rove wing of the party.
But also a fair amount of tea party support.
He is the strongest candidate.
Congrats try to stop him from being the nominee.
He spent millions to stop him.
He has won the nomination now.
What is the democratic answer to the sullivan wing echo -- sullivan wing?
They are trying to identify him as someone who is tied to the replica party on social issues.
They are not happy.
This is the toughest person they can face.
The dirty little secret in the senate race is democrats are stronger in all of these were public and races than relevant thought they would be right now -- stronger in all of these races than the republicans thought they would be right now.
They are effectively not supporting women's rights, immigrants, and gay rights.
Those are issues where democrats used to be in some places, like gay rights on the defensive, and our publicans are on the defensive.