Transcripts For BLOOMBERG Market Makers 20240622

Manages 453 billion in assets. It is time for some top stories. In france, is suspect in the foiled attack on a train has been charged with terrorism. The man is a moroccan who has links to radical islam. s lawyer says he only wanted to rob passengers. Some candid comments from president obama about his event. T at as private he said he is figuring out how to deal with the crazies. The white house with person says the president may have been quick with his remarks but we have seen republicans do wildly irresponsible things. Another day and another media viewed for donald trump. This time he got into it with jorge ramos. Ramos stood at a press conference and began asking trump about his immigration proposal. To. You were not called. Sit down. Sit down. Goahead. You have not been called. I have the right to ask a question. Go back to univision. Sit down, please. You were not called. Ramos was later allowed into the press conference. He and trump argued about illegal immigration for about five minutes. Trouble be on Bloomberg Television at 5 00 p. M. Eastern time. Be sure to catch the interview. I will. Hi that ise biden picking up steam. Organization says more than 250,000 people have signed on. In tennis, Serena Williams has been named tops of the u. S. Open. She is trying to become the first woman since 1988 to win all want to major tournaments in the same year. Withs get you started the five things you need to know this morning. Julie hyman is back. Wall street is not ruling out an october rate hike. Our reporting here suggests the odds are going now that the odds of a september rate hike are falling. Julie initially they said that because there is no press conference after the meeting although janet yellen herself as set just because it is not a press conference does not mean that clip ofe have a janet yellen. The reason for the increased volatility is precisely the liquidity bubble that the fed and other central bankers have created. There is a huge pool of liquidity in and out of asset markets and create this volatility. Something besides the Central Banks do not want to create. Erik the point being everybody thought we would get a rate hike of december or december. To your point, janet yellen has said publicly that the fed can move at any time and can choose to hold a press conference. Julie exactly. Just because we do not have a scheduled and she used the word scheduled press conference does not mean we cannot make it but we can have an impromptu press conference. A couple of data points. With track interestrate probability here and right now it is suggested that is a 26 possibility of a september move and a 32 probability of an october move and a 39 probability of a december move. Ready widely dispersed. That number gives changing frequently. Julie another number that changes is the return on the chinese stock market. April of allegations and market malpractice called for efforts. O appear by the Capital Market i love one of the quotes in our themberg stories that Chinese Market wants to be a player and a referee at the same time. How serious are Market Participants taking these in terms ofns5 whether people are to blame for what is going on . Good morning. It is a classic case of the invisible hand of the space meeting the hand of the market. Legal training and foreign ,orces were initially blamed but a widespread investigation has been launched that links the regulated to a big brokerage in china and taiwan business magazine. We will have to see if they pursue the investigation. Erik what is this a if the chinese leadership is beginning to scapegoat . What does that say about its view on market turmoil and perhaps the state of the economy . Illustrates how sensitive the Chinese Government financed the market value to begin with. Companies anget alternative to debt. When it came crashing down, it was all in earnest. It is very chaotic behindthescenes approach. Conflicting forces with some people pushing for reforms and others saying forget reforms and focus on nearterm growth and stability. There is an internal debate inside chinas to machine that shine chinas policy machine. I want to draw your attention to a question i am asking this morning some of it shes asleep that somewhat facetiously. We have seen a sudden reversal in treasuries. Treasuries have strengthened and yields have limited. Them are back below 2 they were back below 2 . You would be amazed at the dispersion of returns among the top u. S. Bond Fund Managers and how well some are doing and how poorly others are doing. Julie one month. We are saying the janus down 3 in one month. Gross called short on chinese equities and expressed that view my doing among other things shorting the s p 500. That trade should be working. It is fairly clear much of other trades are not. Fuss theran by dan suffering my almost 2 in the month. Total return more or less flat run by reader. The winner here that julie cannot say i am terribly surprised. Erik of almost 3. 5 in one. Julie he has not been the bunking in a long time bond king in a long time. It is the past several years. When he first started the line, the amount of capital a attractive in the velocity with which he attracted it was remarkable. He has been doing well. Erik i am not trying to make light of these things. Built must be racking bill must be racking his brain. It judges himself by his performance. Nothing matters to him more than making money for his investors. Right now is not happening. You must be frustrated. Julie the worldss largest oil buyd provider agreed to schlumberger. The greater the worlds First Complete oil drilling and production system. That we interesting have been talking a lot about energy. That has not been a lot of activity. The blue line is the value of the deal and the yellow is the number of transactions. That manyot had thi this year. That has been somewhat surprising given the dire that youf the industry have not seen more Companies Teaming up to deal with the plunging commodities. Erik halliburton is buying baker hughes. This is much smaller. Five, for star wars fans christmas is coming early. Walt disney announced it will rollout merchandising toys one week from today. I cannot wait. It opens in december, but the company is taking its claim on give lists now gift lists now. Whether it will last the stock is another story. Shares of disney are down 18 this month. Will you be buying star wars things for your children . Julie i will certainly be buying tickets to the movie. This the shares rose yesterday while the rest of the market was down. Erik chinese equities have lost half of their value that i thought we were going to break but we are not. Chinese equities have lost half of their value since june. What does that mean for investors and Financial Markets . What does that mean . The chinese cut rates in reserve requirements. That is what we thought investors needed to see. Yet it cannot put a floor under u. S. Stocks yesterday. We see european weakness this morning. I think you have a really interesting juxtaposition of what is going on in the real economy in china and what is going on in stock markets. It is quite tempting to look at the action we had yesterday in terms of cutting reserve requirements for banks and in terms of the Interest Rate cuts and say that has to be directly connected to the stock market. There is a bit of a link there, but that is much more about what is leading to be done in the real economy to make sure it gives that growth coming through rather than specifically trying p or floor under chinese equities. I do not think that is the major factor driving those moves we have seen in china. Erik i understand. What i am asking is i do not presume that the chinese are trying to put a floor under their own stock market or global stock markets. One would have to assume they are acting in an effort to prop up their own economy. What is that say about investor psychology that a chinese rate cut, which is what the world was looking for on monday, could not stem a continued slide in the presence of those assets. Anne i think what you have seen in the last couple of weeks in stock markets is the realization that Monetary Policy globally is notisolation sufficient at the end of the day economic fundamentals and support the earnings that are coming through. Atsee Global Growth is ok 2. 5 percent points. I think this is a natural shift to anmal spirits al overall picture of the economy and Monetary Policy. Not just from china but from others. Qeik is that is the case, if w is not working anymore and i mean working to prop up risk assets, what does that mean to the ecb or the bank of japan . Anne if you take it in that context that we have seen a bit more realism come into the Way Investors are looking at thinking about the stock market, when you look at the correction we have had, we see a lot of corrections that have come into attractive territory in terms of valuation. They look at companies with good dividend prospects that have reasonable market positions and good cash flow. They continue to perform quite well through this market correction. There are is a value emerging. Erik where . Anne i think you can see it in individual companies and quite a lot of different parts of the world. Given the degree of correction we have already seen, this is part of the emerging markets world. Erik celebrity is buying emerging markets . Toe we continue selectively pop on the stocks that you see stocks down at 10 or 12 times multiples. Levels on hold with a that we have seen in 2008. Fundamentals do not support that degree of slowdown in pain in the Financial System and. It doesnt mean you will see a rapid correction. This volatility could go on for a long time. To be a patient longterm investor, it means you can start to look and examine what is out there that potentially becomes more attractive. Erik what are your investors doing . When it seemed quite a fromre of reactions different parts of the client base. Some look and think this is all looking a bit scary and perhaps we want to take a little bit of risk of the table. We are seeing others with the more institutional type of investors have been through 2008 and the asian crisis of 1987 and all of these the market cycles. They know there is always light at the end of the tunnel. If you are careful and patient, you can move in. We have seen a picture of reactions. Erik thank you very much for spending time with us as morning. We will be right back after this short break. Erik coming up on Bloomberg Television, donald trump speaks at 5 00 a. M. Eastern time on Bloomberg Television and bloomberg radio. In colorado today, james ho lmes will be sentenced to life in prison. Jurors rejected his insanity plea. They cannot agree and giving him the death sentence. The pentagon has given oshkosh an almost 7 billion contract to replace the humvee. Oshkosh beat out Lockheed Martin and the maker of the humvee. 55,000 vehicles will be bought by 2040. We are taking a quick break. I will see you on the other side. Julie will come back welcome back. We are looking at oil prices looking at a second straight day of gains potentially. Holding steadily before the crude Inventory Data comes out at 10 30. Wheels declined its peak in june and has did more than 35 . The chief officer strategist at in chicago. And has been a little balance if you look at the long decline oil has had. Is this a dead cat bounce . We will have to see. Oil is very dynamic and very emotional. A lot of this decline can be attributed to the dollar, so we are seeing a bounce in oil because the dollar has backed off some. If the dollar does improve, that can be painful for crude oil again in the shortterm. And the longterm, it is a very crowded market. It has gone down from 65 to 37. A bounce could shake things up. Remember how everyone was positioned in the euro currency. Now you see that snap back. Let us see how that response. In percentage terms, it is way down at 33. That doesnt sound very optimistic in the shorter term. You tend to be a shorterterm guy. Are you taking a shortterm bearish position . Alan in the shortterm you may getting other pressure down. I would look big picture and use options for the longterm positioning, looking at january or march or january of 2017 options. Some of these companies have been brutalized. Chevron is down 45 in the last year. Exxon is down 30 in the last year trades. Le is down 25 just in 2015. Positioning possibly in options for longterm, there should be or could be some recovery. The risk reward is much more on the outside. How much further can we go down . We have below 30, bigger problems than just energy prices. I want to think Lower Energy Prices are the cure for low energy prices. In the long run, it will change in the dynamics will change. It will take time. Time is the cure for all trends. Just like when we were at 150, we are now at 30. Julie for a long time, it seems like it will be a long time. We have not seen any real significant pullback in the recounts in the production. Alan rights. But at some point they will. The consolidation is a good sign. That often happens at the bottom when some companies cannot take it anymore and others look to get value. Julie we shall see. Thank you so much. Appreciate it. Erik time for our top headlines. Speaking of oil, a big deal in the oil services industry. Schlumberger agreed to buy cameron international. This is a transaction valued at almost 15 billion premium. At 50 schlumberger is the Worlds Largest Oil Fields Services provider. The stock split with titan ceo kevin claims control over his sportswear maker under armour. Shareholders filed suit two months ago. Some are saying what members were out of line. And was a victory for uber and lyft. They will drop off and pick up passengers at the airport in los angeles. And also called upon regulators to come up with a method to do background checks on the drivers. Job cuts are on the way. Birdsmpany donates angry plans to cut about a third of his workers. A humorous has been a smash hit. That happened more than 2 billion downloads. Has not been able to duplicate the success of the original games. Those are your top headlines. Durable goods orders and a subset of a capital goods orders coming out well ahead of expectations. Vonnie we talking about july data. It is a 2 . Economists were looking for a decline of. 4 . That is a 2 gain. Number. A great those are meant to last three years or longer. This again of. 6 in exile notation. Taking a look at capital goods orders. A much better number than the. 3 expected. Macroneil of renaissance is head of u. S. Economics there and has some Quick Reaction to these durable goods orders. You sent an email to your clients and some people like myself saying q3 was shaping up well. This goes well for u. S. Economic growth, does it not . Yes. The number was reasonably solid. Core shipments are up now for the last five months. Think what is going on here is while the drop in oil prices has been a drag on mining investment, it has been different to go from 100 to 50 and 50 to 40. The mystic economy is picking up at the end of the day. I think the only risk at this point is the extent which we sort of fall into this market reflexivity trap. Is that at some point, investors are going to focus back on the underlying fundamentals of the u. S. Economy, which are sound. Erik let us talk about Consumer Confidence. Yesterday, with got a really High Consumer confidence rating, the second highest in eight years. Just above 101. How vulnerable is Consumer Confidence to what is going on in the stock market . Neil the report that you surveyed actually also showed it hasnt breakdown of consumer expectations, about equity prices. Generally speaking this year, consumers have been on net getting more bearish on stock prices even as Consumer Confidence has been broadly flat. People talk about the will affect. If you will at Consumer Spending and disposable personal income, is growing right top of each other. The Consumer Spending we have seen is not a function of a wealth effect. It is a function of better breadandbutter in u. S. Households. Most academic literature shows the wall effect is not an immediately. I think there will be confidence in september but i am skeptical impact Consumer Spending. We have been through this before. In 2011 we saw a big correction and equities. I remember we were playing this game about raising our recession probabilities 30 oneweek and 40 next and 50 next week. Auto sales were accelerating and retail sales were stable. Holding was a pointless mistake in hindsight. We have been through this way too many times before to really start fretting about it now. Erik great to have your thoughts and Quick Reaction. A quick check of futures as we had to commercial break also accelerating. Up 2. 3 as we speak. Does it seem like market swings are more exaggerated these days . Might not be your imagination. It may make selloffs more exacerbated. Will bring the details we come back. Erik doesnt feel to you like Financial Markets are more fragile than the used to be . Probably does over the last four days. Has been found at least one Investment Strategy known as risk every. He is your to talk to me about that he is here to talk to me about both. Risk parity is something people are not quite as familiar with. It is a form of Asset Allocation that is based upon equal weightings based on the risk associated with the various different asset classes. Whether it be equities, commodities, currencies. 6040, of weighing them fancy new way is by doing the risks associated with each of those asset classes. Erik this approach is associated with we have our own version. Erik why do you think it is dangerous . I am not saying it is dangerous. If you look at the returns in the wrist parity area, and it is not just risk parity, with they are doing in the annuity space and some of the hedge funds, this is a fine strategy. Thatn show on your chart the size of those three areas have become very large. If we look at the recent history of returns of each of these strategies, and has been fantastic. It has been fantastic. Theres nothing wrong with the strategy as long as the liquidity is there to balance the portfolios as the risk changes in each of the asset classes. Erik broadly speaking, you are trying to sound the alarm over market liquidity. This is what im trying to do is save money for our clients. To make money for our clients, i have to try to figure out where is the puck moving. Where are the events going to cause the greatest amount of any and volatility pain and volatility. What is happening with these find ways of managing money is they depend on a source of liquidity, a supply of liquidity, that has changed was the financial crisis. Volatility time of by the Federal Reserve policy. Most people would ask me what if it is going to raise rates. The Federal Reserve policy of keeping low volatility in the market changed in our opinion when they stopped qeing and growing a Balance Sheet. Expect that given that, the volatility environment would have seen in the past is not going to be the same low volatility. Erik we have seen a lot in equities over the past four days. Why has there not been constant volatility in credit markets. Why are we seeing these in the bond market live up to expectation . Month,ou go back to the credit markets have underperformed treasuries is. I apologize for my colleagues. The fact of the matter is the waiting thehas been waitin robinson sign for a long time now. Now the equity market is catching up in terms of what those warnings are. I am not saying this is horrendous. All we are saying is the volatility will be greater because there is a mismatch in terms of the supply of liquidity relative to this new increased demand for liquidity from all of these different players in the marketplace. Erik i am not suggesting you have been sounding the warning, but i have been hearing the warnings that a sudden increase in volatility, which we have seen on the equity side, at least in the bond market would exacerbate these liquid conditions and cause people to lose a lot of money because bond prices would go down. Why is that not happening . There is a lot of forced selling happening. Whether because of productions or leverage, people are being forced to sell over the last few days. At the very least to list cash. Some of that has to be in bonds in credit. I think that is true. Erik why is that not translating . You might be looking at the five year treasury which is doing well. The credit markets have been selling off. Erik in an orderly fashion. For quite some time. There is no way that firms like ours and others have not lliquid bondan il market. Shame on us if we have not. We have done things going global and including greater levels of diversification and cash management. We can understand that and profit from those liquidity moments. Do not expect the low volatility environment from the past. I was waiting in the other room and i saw some of the bond fund returns. I run the global bond because we had for many reasons but one of the reasons is we have witnessed and researched this expectation for volatility to increase. We have prepared for it as opposed to just understanding what happened over the last post2008 environment. Keep yourself invested in the same way always did things. I think that is a losing strategy today. Erik great having you here. He is the chief Investment Officer for fixedincome at alliancebernstein. Coming up, david will bank of America Merrill lynch said currency devaluation was the start of something much bigger. Erik you are watching market makers. As china lost its economy . Another rate cut failed to reverse the slide in chinese stocks. What else might china do and what does that mean for Global Investors and the fed . Let us put the questions to david. I love having you on the show. I will replay an excerpt from our last interview. Listen in. There is no way this is one and done. There is one thing i am confident that this is just the beginning of something much this will not turn around chinas export process at all. What is more important is we need to recognize they did this today in order to ease their Monetary Policy more aggressive ly erik you are right. China was going to do more and it has done more. It lowered the reserve requirements, all to no effect. David there is a chart that i want to bring up that tells the story about china right now. T is interesting to me erik the blue line is the shanghai composite. David exactly. What is very striking on this chart is you can see despite the fact of the stock market collapse over the past two months, Interest Rates have really gone down. With all of these Interest Rate cuts that have been trying to implement the last two months, the real money market is not come down. The reason they have not come down is because in order to theilize, they are entering market aggressively by selling dollars and taking liquiditys out of the system. This is the ironing. Irony. They have not actually managed to engineer a decline in shortterm Interest Rates. Erik because of policies are at all with themselves. David exactly. The country cannot have a fixed Exchange Rate and have an open capital at the same time. China cannot have their cake and eat it also. For a long time the said china are magicians enable a cap have cat out of the hat. Next couple of weeks china has been availabl pivotall markets. Erik that is the canary in the coal mine. The sevenday repo rate in china. David that is the single most important thing to be watching. I suspect it will come down but not without a further appreciation. If they want to bring down rates to support the stock market, they have to let their currency go. By doing that, that will fuel fears in the market that china is joining the global currency. I want to talk about the u. S. Because the same reason chinese is going down is the same reason u. S. Rates have not been coming down. Yields still trading despite a market correction. Yields have gone over the last three weeks. 20 . He market is pricing with this is telling you is china by intervening in the fx they have had to sell u. S. Treasurys as well. Ysselling u. S. Treasur they are preventing euros from going lower. Action has ahina direct impact on global markets. Is bridgewater right that the likelihood is greater that the fed will ease before a tigit tightens . David i think that is wishful thinking. They are long in u. S. Treasuries and u. S. Stocks. Treasury yields cannot go down and not rally. These guys have been incurring huge losses over the last three or four weeks. That could be another reason we are seeing equity selling from that camp. Erik does the fed move this year and if so which month . David i think september is out of the question. I would say october is perhaps still in play. And if china continues to slow, mt is difficult to see the hiking rates. Much. Thank you so he is the head of global recent Currencies Research at bank of America Merrill lynch. 500. Rop in the s p analysts are coming up with recommendations on individual stocks. Julie has a run down. Julie after this big decline we have seen, lets start with google. They like the new operating structure alphabet. The shares moving about 5 this morning. The top five internet stocks to buy after the selloff, google is one of them. Amazon, facebook, and alibaba are the others. Google is also not very exposed to china. For amazon, the chinese exposure for that company is limited as well. I want to take a look at my bloomberg terminal at google and the drop it has had from the highs. Down 12 three yesterdays selling. This was a record high for the stock. One of the things we noted was the velocity with which we saw. It happened very quickly. As for the amazon shares, the ball back with 14 also from a record high. Wason big mentioned and considered a buy. Those shares moving up with 4 this morning. Getting away from tech stocks, maggie is being updated. It is a globally focused company so you might wonder why this upgrade is coming now. Analysts say demand remains robust in china with concerns being priced in some extent. The upcoming analyst data will be held in october. He expects nike to lay out a strategy to become more currency neutral with respect to sales. Nike shares were rebounding my 3 this morning by 3 this morning. This was a stock trading at a record before the recent pullback. Now it is down 11 off the record high. In all three of these cases, you have stocks trading at records. Some concerns being expressed about valuations at those levels. After the reasonable pullback, analysts are saying come back in. You want to buy the stocks. Erik i like to see that. That is conviction. There is belief in the business model. Is belief in the earnings model these analysts have built. Thenbetter time to come in against the grain of the market right now. Julie it seems to be. Who knows what the grain of the market is at this stage. We will seewhat ends up happening today. It was made yesterday. Erik until the last hour. Thanks very much. When we come back, time for some chicken wings. We talked to the ceo of Buffalo Wild Wings. Erik good morning once again. I am erik schatzker. Stephanie ruhle is off. Let us check at the u. S. Equity index futures. It could be another while day of trading in the stock market. It was overnight in china and yesterday here in new york. Oil has been very much in focus. Still well below 40 a barrel. Up a fraction today. 10 year treasuries are selling off a little bit. The yields backing up to 2. 15 . Lets have a look at the top stories. Corporate spending picking up. In july. R capital rose goods for all durable expected to last three years exceeded all forecasts of economists bloomberg survey. Central bankers will have plenty to talk about in the annual conference. The question is whether the fed officials will get any hints about the timing of an Interest Rate hike. Has his own opinion and he shared it with us. The window was open when you have strong domestic economy, which is still do and a pretty neutral economy and the Financial Markets and good shape. That window is now closed. Erik rates traders are betting the fed will. Shares of Abercrombie Fitch were sorting in premarket 19 . Ng, up as much as deposit a surprise profit of the second quarter. Abercrombie has been retooling its business. Aside hisg was to put rivalry with mcdonalds for a day. It wants to sell a new mcwhopper. A it would be sold for one day at a popup restaurant in atlanta. Mcdonalds calls the offer inspiration for a good cause. Market volatility on monday may have caused panic and worry. Is our next guest to did not flinch. And he remains optimistic. He oversees 12 billion as the cio of fiduciary trust. Why theenc whitey confidence . Supposed to go up to 3. 2 versus 2. 3 . That would be a step in the right direction. We are going to think a Strong Economy will have better Earnings Growth going into here and a stronger earnings will continue to support stronger prices. Erik do you see evidence of that strength in the data thus far . Consumer confidence the highest in eight years. A much better than expected number on durable goods and capital goods orders. New homes sales rose in july. The data suggests going into the Third Quarter things were on pretty rare footing. Julie we would agree that we would agree. The u. S. Economy is beginning to gain a little bit of momentum. It is a byproduct of a relatively strong employment growth we have seen even though wages have not been spectacular. They have been supporting consumption. Erik how do you feel about valuations right now . So much of what we have seen over the past two years in equity market has been multiple expansion as opposed to Earnings Growth. Michael we think they are not stretched to unusual levels. If you look at where multiples would be historically based upon where Interest Rates are right now and inflation is right now, multiples are in that 20 times camp normally. We are a little bit below the average you look at the conditions within the bond market. We are not overly concerned about valuations. They are not cheap, either. They are nowhere near as an expensive as they were in 2009. Erik even after the pullback over the past four days of trading, what would you say is cheap on a valuation basis . Michael energy, obviously. It has been hit for the last several months, but we still think it is a little too early to be establishing overweight positions and energy stocks. We do not see that will be much of a chance of oil getting above that 40 45 a barrel price for the next few months, particularly when i rent will be iranng back with supply will be coming back with supply. With the there are pockets within various sectors that look intriguing. The finance sector looks good. Even tech. It is once again from an earnings perspective projected to have probably the strongest earningspershare growth between now and year end and into next year. Erik did you have a caspers is cash position heading into friday and happy put it into work . Michael we had one that is relatively minor. What we intend to do is raise a little cash given that most of our portfolios are taxable, we are very tax conscious of what we do. We will take losses in some of our energy names. Would put that on the sidelines for 31 days as to not invoke a wash sale rule. What we will do with some of those losses is trimmed our more legacy positions we have had that are not quite as appealing as they have been in the past to introduce new names into the portfolio. Will probably increase our cash and a minor position for the next month or so in the port folios. Erik while you feel comfortable on the basis of the economy, where is your confidence strongest . You talk about energy and a willingness to take losses why assume you are not confident about the prospect there, especially with oil below 40 a barrel. Michael i would say the two sectors would be Consumer Discretionary and Consumer Staples once again. The increase in job beneficial to spending habits going forward. Probably financials once again. They should benefit when we do get an interest in interest an increase in Interest Rates. That should benefit that sector with an increase in the net earnings margins which have been under duress for a long time for the lack of yield available on a global basis. Erik to seeing you this morning good seeing you this morning. Coming up, the ceo who spent 19 years perfecting wings, beer, and sports. Sally smith, the ceo of Buffalo Wild Wings will be here next. For the Third Straight day, the New York Stock Exchange and the cash equities markets which meansrule 48, we may have a slightly delayed open. Interest orderly trading amid Financial Market turbulence. We are seeing futures pointed higher. Day is the Third Straight were we will see rule 48 invoke. Erik thank you very much. Wings, beer, and sports. Such a simple philosophy, but one that has helped Buffalo Wild Wings grow to more than 1100 restaurants today. The ceo behind that growth is sally smith. She has been a boss for 19 years, and she is here now. Let us begin with your expansion plans. Said withoute thought we can vha know about 1700 restaurants domestically and canada in the next 57 years. We will open between 90 to 100 restaurants this year. Erik where internationally is there a market for Buffalo Wild Wings . Sally we are growing significantly in mexico. We will have a dozen restaurants there by the end of this year. We have opened to restaurants in manila and the philippines. Our first restaurant in dubai opened last week. Erik why is it important to continue to buy out your franchisees. Sally it is important to place our capital that way. First right of refusal, and we exercise that. We like the opportunity to continue to grow so there is territory there that will add restaurants. We can probably put through remodelings faster than they can. More introduce continually complicated Technology Solutions to some of the things were trying to do, it is a little liner and less of a sel on the capital spend. Object, money were no abjec would you own all your restaurants . Sally that is a good question. We have some really great franchisees. I would love hate to lose their input. They help us test things. They are in areas that will see new things first. Erik what is the optimal mix with money being no object . We are right now at about 50 . 60 40 either way, i think that is a nice. Wanting to make the Capital Investment is the big key. Erik you have no debt. Sally we do now. However, our cash flow is very strong. That debt will be paid off quickly. Erik this is a question private equity confronts all the time and ceos like yourself need to , but what is to the optimal capital structure for a company like yours . Sally that is what we are looking at right now. Because we generate significant ifunts of cash, we know that we can invested ourselves and continue to add restaurants and bump up our remodel schedule and acquire we can, that is our number one thing. The second thing is to take a look at how we return cash to shareholders. A form of stock repurchase or a dividend policy . We are talking with shareholders to find out what they like. They would like a combination of both. Erik how much debt do they want you to have . Industryey want the average and so you can leverage your Balance Sheet to that. We can take on some debt. Erik you know i am after. I am trying to get a feel of what you think is an appropriate amount of debt relative to the size of your enterprise . Sally we would probably look at the industry average and look at having that name amount of debt on our Balance Sheet. Erik what else might you do with the debt . It is the talk of returning capital to shareholders. Sally that would be the next thing after the ability to grow. How do you return capital shareholders . Erik what are you inclined to do . Sally we are talking with our board right now. I am sure in the next six to nine months we will have some sort of announcement talking about what we will do with the catch we do generate. Erik explained to me some of calculus that goes on in the boardroom and your own head of the value of a share purchase. Sally the general would prefer a Share Repurchase. Erik that is a longterm commitment. Sally it is, but i think you can start with we may start with a Share Repurchase and then introduce a dividend. I do not think the board thinks having these small dividends indicates you have reached your peak. The industry generates and we do generate a tremendous amount of cash so i think we can do both. Erik the stock market has been on a ride the past few days but your stock has not been on as much of a wild ride. Do you find yourself having to do with the ceo of alibaba had to do which is to urge people not to look at the stock price . Seeing a management team. Sally i am blessed with a fabulous Senior Management team. Our stock has historically been very volatile, especially around earnings time. It is not unusual to see our stock up or down a percent or 10 . 8 or we try to focus on our longterm. Longterm,us on the and the stock prices should take care of itself. Your margins have been deteriorating gradually over time. Why . Sally we strive to 20 cash flow from our restaurants. In some years we will hit that, and some years we will not. This year has been difficult. Theyprices are higher than were. Some increasing wage rates. Comp and some of our medical. Erik view feels him of the same pressures like we see in walmart to voluntarily raise wages as opposed to waiting for municipality to do it . Sally it is interesting because other than the interim level position, we are paying more than the minimum wage. Is often the persons first job and you have to get our first job somewhere before you have the second ojob. More than 40 of my workforce is less than the age of 21. There will be continued pressure on wages, and we will address that. Erik thank you very much. She is the ceo of Buffalo Wild Wings. A little early for wings here in new york. Disney is using force to excite sales of its Star Wars Campaign starting as soon as next week. Erik when it is the fed going to raise rates . We spoke to david woo. I think september is out of the question. Never say never but i think october is perhaps still in play. There is no question if china continues to slow, it is difficult to see the fed hiking rates. It is impossible for one to be cutting rates while the other is hiking rates. N the only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Tand thats what were doings to chat xfinity. Rself, we are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Erik here we are on market makers. We are just minutes on the opening bell. A quick look at where futures stand. Point utures up two up 2. 2 . Joe weisenthal is here with three things we need to look at today. The hong kong dollar pay. The has been a lot of aggressive betting that takes everywhere are going to break. Erik talking about saudi arabia. That was the story yesterday. Now people are betting that the hong kong peg will break. Still not huge, but people are betting given what has gone on in china will loosen or break it in some way. Peg does the hong kong break . I dont think so. Only three years ago there were some substantial speculation that the hong kong would break the peg. Erik there was a huge bet on it. Was you came from a decade of asian appreciation and versus the hong kong dollar, every thing was expensive. We are talking amounts of 40 . Some of the asian currencies have weakened by 10 or 20 . , the breakaway peg is the economicse of realignment in the region. That being said, in the long term if the flexibility of the chinese extreme rat exchange rao materialize, hong kong may need to rethink the value of its peg to the dollar. Erik you would not bet on it . Now. Not. The excitement is similar to what we saw with the danish dollar after the swiss depeg in january. Erik october. October is the new september with the market selloff and they said they will not hike up in september. The question is do i hike up in september. More people are talking about october. There is no press conference meeting. The fed has always said every meeting is a light meeting. They will not just hike at a press conference meeting. If you think the economy is getting stronger in justifying a rate hike and the only thing that will slow it down as market volatility, may be september is too soon. Maybe things will have quieted down by october. The that not think people think the end that people think the end of the year liquidity stuff could be a problem. According to futures, there is a greater possibility of a rate hike in october. 34 according to the data that we calculate here, relative to 30 for september 17. What does that tell you . It tells me as many people have been arguing, that is realtime data. So, speak of credibility, even how strongly they have been signaling even more than one rate hike in of the year, december, we are still only barely at 51 . The market does not seem to take at face value by the end of the year. I think the fed has missed its opportunity. They shouldve height a year ago or the first half of this year. Mohammedou share with they have a window and they missed it. Alessio they completely missed it. Now the cycle is more mature. We are nowhere near the cycle but it is getting tired. Financial markets are starting to respond. I think they probably will hike anyway one time by the end of the year. That is what they said. Maybe october, and they call a press conference. Not difficult to do. But if they do not do that, it is done for the year and it will be well into next year. It looks as though we are having a slightly more orderly than the day before. The dow is up 282 points climbing fast enough that i cannot keep track of the numbers. Up one point. What appeared to be in store on the basis of futures is actually playing out in real time now that the nasdaq and the New York Stock Exchange have opened for business. Lets get to number three. China has tried to intervene directly in the market. It had a pboc rate cut here that did not help the stock market. It is now definitely stepping up the blame game. Manipulators,ket underground banks feeling a bubble. Market viaave the pure intimidation and threats. Which i am not terribly optimistic will work, but it is the new front chinese authorities seem to be taking. Thing we can say about china is that everybody has an opinion. Perhaps a guessing game. What is your view . It will be nearly impossible to trade. About market manipulation. Symmetrical. Ly im sure they do investigations, given how young, they will find something that went wrong. They will sell it as, that was the cause on the way up in the way down. The reality is that is not true. Market withpulate a fromtle bit here and there people cheating around the rules. The bottom line is there is an incredible, classic bubble psychology going on in china. We saw that with the record opening of market trading accounts and all of that. That is coming to an end and they will try the blame game while not giving credit to anyone on the way up. It is human nature. In fairness, you hear more about market manipulation and even here, it is not just a china thing. Whenever there are big selloffs anywhere, people are trying to point fingers and do things nefarious. Thank you so much. You can catch Joe Weisenthal at four p. M. This afternoon. Stocks are up at the open yesterday. Lets take to julie hyman. Julie for what it is worth, the s p 500 is having its best single day gain in 2. 5 years. The dow is having at least the best day in three years. As we know, things could change in a moment. Particularly the s p in the downandout falling for the sixth straight session. If this does indeed hold. A lot of investors are holding for some sort of stabilization, a floor to stocks that they were not able to find yesterday. Let take a look at individual movers. Greeted by cameron billion,onal, 4. 8 rising not quite to that price but it is a big premium as the stock is up 45 . Shares are actually down this morning. Not a lot of overlap between the companies according to analysts. We might not see antitrust scrutiny. A huge merger. Abercrombie fitch, were looking at that company this morning. Posted an unexpected profit. Andysts estimated a loss instead, abercrombie had a profit of 12 . Lesstable sales were down than estimated. Finally, the truck maker, and initial contract from the army for its new joint light tactical vehicle, and what is so incredible about this is it is the 99th largest u. S. Government contractor and it beat out the largest. For a david and goliath story here. Though it is allowed to protest this. Well see if that happens. Thank you. , allessio, how difficult is this . Alessio we are looking at volatility which creates incredible we saw in the last fewthe intraday move was in the order of 4 tier that is what you hope to get in a good quarter. They are very difficult to trade. We have been navigating this very well. We have been sitting at the table thinking, it makes sense, what all of our indicators are telling us, sending very mixed signals, and even the fed meeting in september, to wait on the sidelines until then meeting, we think a hike at that point would be a policy mistake. That is why we have to be cautious about not falling into the trap of, things have gone cheap, lets get in, or things have gone expensive, lets change the relative value position here and there. Are two dozen opportunities that i see that are attractive. The rally in the euro that went back to almost 117, and i think it is a great opportunity to and try to test the low of 105 for the other one, it is a little too soon and september is worth waiting for, that is his lightning in highyield investment spreads. Are not close to the end of the cycle for credit. I think the widening of opportunities in a yield, in a world starving for yield, you have got a decent backup in yield. That is closer 2011. Erik in other words, whether the fed hikes are in september or october, it will probably be maybe, though unlikely, 50 basis points, it does not change anything for those investors. Change does not anything for the credit cycle. The yield remains fairly cheap. But you will get more market turmoil. That is why we keep dry and the interests after september. Erik always good to have you here. When we come back, everybody, tightlipped hedge funds. But we managedu to find out how some are doing and we will tie it when we come back. Which hedge funds are getting crushed and which ones arent killing it. Reporting tothe find out. First, it is my understanding, in the midst of a meltdown we not easy. A lot of the hedge funds do not want to know how they are doing. Quite aally tied up for while. Erik for the investors themselves. Right. Aboutvestors concerned day to day performance, these are not the investors investors want in their funds. These are longerterm vehicles is thats adge fund calledstanley report monday a big day for funds in 2010. You are clearly going to take some losses if you are buying into things that are falling. Be great, they may value for the longterm. Hedge funds do not want investors to nitpick. Have nevertheless, you found out how some funds are doing. Yes simone yes. European fun, down quite a bit through earlier in the year, and has come back 9 this month. That loss is about 5 for the year. Erik does any of that have to do with china . Were of hedge funds betting against china, but that was a painful that. And you only started to see that that play out in june and july and of course august. They have this setting on a china disaster scenario. Lost them the money in that time. July and since july, it was up about 60 . And if you are betting on china to start suffering, you have finally been vindicated. A sense ofetting what traders are working for hedge funds that are trading . If you got out of the euro against the dollar, that has been successful. Tack, have been shorting short and health care, youre those money right now, are exciting sectors this year. Erik thank you so much. Here are some of the latest headlines at this hour. Were following breaking new breaking news out of virginia. Two dozen employees, a reporter and photographer, were shot and killed while on air in central virginia. This happened while live on television. In a story onys its website at the incident happened at a shopping enter your police are still searching for the shooter. And under armour vote today. If charter will go forward. Suit he doesfiled month ago to stop the changes, saying the board was out of line when the board had endorsed them. Over, they for Nations Capital city to let uber operate at its airport. Asking regulators to toughen background checks on those drivers as well area those are your top headlines for the time being. Tragedy in virginia. Speculation is swirling this morning. Takeiden may be looking to a step in his career. You cannot run for the white house without the money to do it. Will there be enough left after Hillary Clinton holes in all that money. Erik u. S. Stocks are currently on pace for the best dave the year. Lets check in with julie hyman. Julie we have a little bit of fundamental news that helps drive things today. If it will hold, but lets talk about fundamental stories out there causing stocks to move to we are to talk to about some of the opening bell, including that big oil field. The retailer raising its oil per share. Second quarter, up 7 . We have not seen much like that. The shares are up 14 . Imation oil Services Dealer ement to buy likely following that deal that to companiess look involved in m a, all of them talked about the note that said after the big selloff, who do you want to buy an internet business, in particular, growth that is better than peers and gross gross adjusted valuations. Priceline, alle, of these are rebounding along with the rest of the market. Amazon and google are the last two amazon an hourly baba. Alibaba not bouncing by much at. Ll we are seeing a broadbased at this time yesterday. Erik one curious observation i would like to make, it has been a wild five days for Financial Markets. There is a lot of trading right now in the s p 500. The amount of trading is up almost 7 on the fiveday average. Curiously, it is down 18 for the nasdaq, something to keep an eye on . Overall, selling volume was much higher than volume was yesterday when we tarted to see some buying. Thank you very much. Cash will be the one thing that makes or breaks the potential president ial run by Vice President joe biden. Can he raise cash . Phil mattingly has an on the phone crunching the numbers to see what, if any, path widen have to compete. Lets start with the obvious question. So many big democratic donors have already lined up behind Hillary Clinton. Are there enough left for biden to get a president ial run off the ground, should he want to . There are and i think we got a taste of it yesterday when jim chanos came out publicly and said not only would he donate to a Biden Campaign if one existed, but he would help raise money to one thing he did not say, he was not going to sing single hanley drop millions into a super pac. That, joe biden has some problems more historic than anything else. Whenmes from a small state he is running for senate. If you look back at his 2008 campaign for president , he raised about 11. 3 million. Compare that to a Hillary Clinton and Bernie Sanders did in the first quarter. Bernie sanders, 15 million. There is some weakness and that is a concern in most people in bidens orbit. Good news to look at it i crunched the numbers of the 248 from the obama 2012 campaign that brought in more than 500,000. That is a select group more than 50 have not given to Hillary Clinton so far. There is money, it is out there, and it is a big question of whether or not joe biden can go get it and whether those noncommittal people are biding their time. Trumpi want to move on to. Unavoidably, perhaps, because he is who he is. He is leading the polls for the republican nomination. Yesterday, more laid out between jorge ramos, the dean of Latin American Television journalist in this country, news journalists, that is. Ofare showing some footage ramos wassation where kicked out of the press Conference Trump was holding him and let back in. They had an argument about immigration. Chump statements and now has open sparring with people like rameaus, what kind of position does that put him in with latino voters . Heres what i proposed as i was watching this happened does this hurt him at all in the primary . The answer and what the answer was no. With hispanic him voters . I do not only could go any lower. The latest poll looking at pelican candidates had him at 14 favorability. He was not going to do much there to begin with. This underscores a big concern with the Republican Party in voters. Hispanic mitt romney pulled in 20 of the hispanic vote in 2012. Estimates for 2016 that they would need to win a general election campaign, 40 . All this does is damage those efforts to reconnect with that community. Erik thank you. You know trump and immigration will be at the top of the agenda when with all due respect speaks with chuck today. The interviews coming on Bloomberg Television at 5 00 p. M. Join us tomorrow for more market makers. We will talk to the chief economist, talking about the fed. Im alex trebek. If youre age 50 to 85, please listen carefully. The lock i want to talk to you about isnt the one on your door. Its a rate lock for your Life Insurance that guarantees your rate can never go up at any time, for any reason. Many policies dont have one but you can get a lifetime rate lock through the Colonial Penn program. This plan was designed for people on a fixed income with Coverage Options for just 9. 95 a month. Thats less than 35 cents a day. Your rate is locked in for life and coverage can never be cancelled. Your acceptance is guaranteed. You cannot be turned down because of your health. Call for your information kit and gift. Both are free, with no obligation. Good morning, everybody. It is technical 10 00 a. M. In new york city. Welcome to the bloomberg market day. Markets are surging higher at the open. Can a rally hold . Markets seem to have little impact overnight. Speaking of china, new concerns over a slowdown, keeping downward pressure on oil prices this morning. For wars fans, get ready friday. A retail extravaganza. Kicking off the release of the fourth. Bolivia good morning, everybody. I am olivia sterns. Is, can the rally hold . Surging more than 300 points right now. The price of crude right now, still