Transcripts For BLOOMBERG Whatd You Miss 20170919

From michael , President Trumpss personal lawyer in an open session. This after the panel probes russian meddling in the 2016 election canceled a closeddoor meeting today. Many members were disappointed he released his written statement to reporters before meeting with Committee Staff and as a result, it move forward with todayss interview and will schedule an appearance. The United Nations Migration Agency more than half of them children, have fled from myanmar for less than a month. A Spokesman Says an estimated 20,000 people are going across the border into bangladesh every day. The migration comes after a security crackdown allegedly targeting the muslim minority. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. The mess can peso in focus. Joe the question is what did you miss . President trump wasted no words as he rallied with his rhetoric. One hast trump no shown more contempt for other nations and the wellbeing of their own people than the depraved regime in north korea. Trying again to eliminate the Affordable Care act. The Senate Republicans have enough momentum to repeal obamacare in 12 days . And why you ks foreign secretary might not be in his post by the end of the week. Breaking news, President Trump has warned saudi arabia on qatar on a military move. Let me give you context. According to titos people familiar with the intervention, this is in the early stage of the dispute. It has been going on for around three months. Donald trump allegedly intervened to one both the military not to take action. We are getting headlines saying the saudis say military action versus the qataris was never actually and sit considered. This is a story we are getting headlines on now. If we get any update on this, we will bring them to you. Fed officials meet ahead of the rate can one question is with a healthy economy, why hasnt inflation picked up a miss a big drop in unemployment . Our next guests say it is because economic ins are due to productivity gains. Bloomberg view columnist and a Portfolio Manager for new river. Great to have you here. Sorry about the introduction. I messed it up. Im getting excited about saudi arabia. Productivity is here. Why arent we talking about it enough . We have been focused on a shortfall in inflation and Economic Growth and it has been frustrating to a lot of people. In the Second Quarter of the year, we saw 3 of real gdp growth but we saw a downtick in inflation and there are transitory factors why that was the case, because we are so anchored to this low inflation story, i think there has been a focus on that. Joe the official statistics do not actually support your thesis. If you look at the governmentss measure of productivity, it does not say there is much. You are saying essentially you can back into a productivity increase simply by looking at the robust growth and mediocre inflation and say the only way to reconcile the two things is that the economy must be getting more productive. Exactly. If you think the economy is more residual than an independent verio variable, it is the obvious reason for what is going on. Do you think productivity stats are busted . People say this, they cannot cap technological gains, the structural ways the economy has changed and it is not something we can measure. I think those are pretty accurate. If you look at the general path of profitability and wage growth and gdp growth in the past years, you can get there were you have a slow but steady real gdp growth story. Very stagnant with inflation. Were at full employment and we can finally see productivity. Bloomberg,ere on my the productivity according to the bls. You can come inside and see what we are looking at here over the last four or five years. Obviously, it has been highlighted in quarters. We are at 1. 5 . There is always the question about whether we are measuring productivity the right way and whether it captures all the efficiencies we have created to technological innovation. You can nitpick a lot of these things, like inflation, a weakness due to mobile Cell Phone Services that if you look at unlimited data plans, some have fully test limited, others have four gates. And i dont think we should get too caught up in the leads with how these work. When we look at the kinds of jobs created in the waiting given to Knowledge Base and productivity increasing, manufacturing, and the sectors like retail, the waiting weightingit indicates it. A downtick due to amazon and other factors. If you look at the composition of job growth, we are seeing that as well. We have the fed decision. Productivity aside, the question is why havent we seen any of the official inflation measures pick up along with the Economic Growth, and a common answer you here is the phillips curve, the idea that there is a relationship between inflation, that model is busted. Do you think the model is tested or is there something that has to be . You could argue you see more of the global output gap in europe and the u. S. On. T of factors are going i believe in the core relationship that as unemployment falls and we get closer to full employment, you will see real wage growth. A lot of things going on but capturing a share of economic out that, it does not improve as unemployment falls. At some point, wages will pick up and there will be a point where it does filter in. We are just seeing it lagging because of productivity gains and the way that the companies are forced to integrate . The economy left to its own devices, we will see that here it economics do work eventually. And you are sticking with us. About thee will talk amazon hunt for a new headquarters and what that means for american cities. Gun makers. On gun stocks rising on a report from reuters following a tweet, just in, Trump Administration preparing to ease rules for the sale of guns, crediting that information to u. S. Officials. We are seeing gunmakers move higher as a result of this headline. From new york, this is bloomberg. Just how much power one megacompany can wield. 50,000 will pay jobs. The bloombergis view columnist and manager for new river investments. He sits on a Planning Commission of brookhaven, george appeared full could full disclosure, you do not think of when it will be one of the finalists . We are one of the finalists. Those are well known. Here we have a list of what you regard as the five cities in north america with the best shot. Washington dc, boston, and toronto. What do these cities have them, that satisfies what amazon is looking for an your mind . Having talent is that number one and there variable they are looking for. Highways and universities and things like that. On the talenthigh scaling d. C. And boston and toronto or better on the affordability scale it dallas and atlanta. We do not know what amazon is optimizing for. Yesterday, we spoke to the philadelphia mayor and i said to him, is it right that you are offering thrown all these tax incentives at individual Companies Like amazon when your own Domestic Companies in the tough or state, it is a message to sell. This is what he had to say. We have gotten criticism about Corporate Tax rates, like this is too big of a deal and too many jobs and too great of a company for us not to go after it and we would love to have it here. We have a lot of folks who would use the work and a lot of i. T. Startups in Tech Companies that have come in recently. When you think it is a company like this where so many jobs are on offer an investment ofential, it obliterates any those concerns. One of the people have to be concerned about is displacement. 50,000 jobs direct plus 50,000 support, it will cause displacement. Who is likely to be displaced . This is one area where i think boston should not want amazon. Gradread and butter is students and things like that. A bunch of College Students could kill that in boston. Classy might be biased but he was making a strong argument for the city and philadelphia. How do you assess assess their chances . They are a strong candidate. I would wonder why are they better than d. C. Or boston or new york or toronto. If youre going with a labor force, it would hard to it would be hard to see why they are number one over them. The fact that amazon is expanding and building other headquarters, going past the west coast in general. Do you have a theory where you talk about the insulation part of the phase of technology and then there is a deployment phase. A deploymentng phase. How does it differ . It is where the key things are happening hit everyone has to go to one or two places where the action is happening. At some point, you get to a consolidation phase. The winner in terms of companies become more focused on cost and maybe your growth is constrained in the core areas and they have to go elsewhere for a variety of reasons. It seems like we are getting can nowd they Companies Think in terms of longerterm. , perhapsre going here you suggested that would eventually help with the redistribution of income and attacking the inequality situation. Do you think that is the truth . Politically, whatever the winning state is, immediately, they will become much more proglobalization, and it will change the politics in a state like that. Housing ultimately has a big effect here. Economics are eventually supposed to work. They cheap housing advantage the rest of the country has should start to outweigh some of these costs and look appealing. Is the factort behind amazons move. Ivanka lannett is the future of the south. Theyll have the benefits have had historically a may have to figure out what to do like philadelphia new jersey is now. You said it could change pollack the politics. What do you mean . You are seeing in georgia, a more trump saturday already said he really wants to win amazon. I think you will see as we do these races that the political message will change to be appealing to amazon. No matter what side of the fence you are on. Columnist,g view visiting us in new york, thank you. Time for a look at some of the biggest business stories in the news right now. Lackingl gain, performance. The companys chief executive blaming deep structural problems that would take years to turn around. 20 large endowments reported. Over three ceos is in over four years. Sprint and tmobile, a possible merger. The Wireless Company their parent would have control. They started discussions last month after negotiating with comcast and Charter Communications expired. That is your Bloomberg Business flash. Scarlet it is time now for the stock of the hour. Downright 2 at the open at least. To talk about what is behind the move is abigail doolittle. That is a decent range of trading. Ikea is one of the more wellknown names out there. I did speak to analysts out there and he liked the story a lot longterm but over the short term, he thinks there are serious headwinds. It sounds it relative to athletic leisure wear, it looks like july and august, fell into it. If you are to look at nike at the end of june, the quarter is fine and they put up a Strong Quarter back in june but he is nervous that they will be reporting next tuesday that it could show some sort of weakness relative to what we have seen for the other names. He thinks over the longterm, they work out these problems. But nearterm, headwinds. Long story short, people stopped wearing buying yoga wear. The concern with nike is we see adidas with a lot of momentum. The question is is this a structural change readiness will get a lot cooler, or adidas has the hotline now but fashion is fickle and then they will fade again . Only time will tell on this. Some of the Marquee Brands have grabbed the attention of consumers that we are seeing a downtrend overall 4s let it where an athletic products. There was another ground downgrade today of under armour. A lot of pounds including valuation relative to the stock, and performance brands are coming out of trend. On undera survey armour and nike and these other companies saying the under armour brand is not as attractive to consumers anymore. If we take a look at the chart, we will see a little bit of something around branding. It is interesting you are bringing up adidas. And is a year to date chart in blue, we have nike up about 6 . Look at lululemon down 9 and under armour down 42 , the worst year since 2008, the point to be made on nike is one reason it is up according to some analysts i have talked about is the strong branding. Holding at nike relative to the online competition is the fact that nike has the strong brand. The underlying foundation is strong. Yes. If you look at under armour, still at its lows on the downgrade but nike has recovered. What gives on that . Have you found out what is driving that . It probably has to with the true neutral rating. Sometimes, analysts put out the neutral rating but plus, he took down the numbers above consensus. 19, andfor fiscal year his number is 184. He is still a little above. Ands a neutral rating longterm, he will become more positive. Thank you. If you have a bloomberg terminal and jealous showing us tv on his, you can watch us online. , youan see on the right can interact with joe. Joe that is a lululemon chart. Rewatch the last clip over and over and overrewatch the last cd over and over again. Julia lets take a deep dive into the bloomberg. You can find a function at the bottom of the screen. Quiz for you. Given everything going on in the region with north korea, he called kim jongil and rocket man today, who would you say is the most credit risk here, south korea or china, if you had to guess . A good point, because obviously with all the issues emerging economy versus developing. Nice. I wanted to show you do you agree question mark look at my chart at my chart is not their area. The big reveal. Suggesting,rightly we are taking it back to not just generate this year, but the blue line shows you chinas fiveyear scarlet was saying rightly compared to south korea, tracking forward with everything we have got going on, there is great optimism about what is going on with china. We see reserves, sovereign debt as well. We have seen the spread come down and down and down and what we have got going on again with south korea and some tensions between north and south korea, the raising concerns there, back to what we saw at the middle of august, you see them slick slip and we have seen south wider spread been china. One of our wiseman here at bloomberg saying it will only look stretched in the basis point area. Yes, koreas credit default swaps have spread, but they have been spiking. It shows they have gradually lifted up, let it is not like the trade any like that they are rising a lot slower more slowly. We like to go back to that idea. Everyone thinks it will be super stable through october. Joe here is the thing i never knew existed. A famous survey called the zoo survey, ew survey, they asked a bunch of economists in germany how they think stuff is going but they also asked the people in germany how they think other people in countries are doing. It is a great way to see how the world looks from a german perspective. Line is really ugly and it punches last summer right around june of 2016. That is the u. K. The you cannot looking very impressive. On the flipside, check out the blue line surging. Really increasing perceptions of how france is doing. Nicely. Omy is doing u. K. Is doing great. France is seen as a basket case, looking pretty good. Not doings rating is so great. Scarlet less than four minutes to go before the close. Record high for the major indexes. This is bloomberg. Major u. S. Stocks closed aforetime highs in the dollar falling after President Trumps speech to the u. S. And the Federal Reserve kicking off its twoday policy meeting. [applause] i am julia chatterley. Scarlet i am scarlet fu. Joe and i am joe weisenthal. We want to welcome you to our closing bell coverage. Begin scarlet lets begin with our market minutes preto rally continues unabated and the dow continuing. Ts winning shrinks streak the s p 500 adding 1 . Treasuries edged lower and this is even as donald trump gave a speech to the United Nations that sounded fairly aggressive. Once again, basically no action in headline equities. Scarlet and the Federal Reserve began a meeting in which it will likely deserve to reduce its Balance Sheet. Aside from record highs and the major indexes come we got a big pop in the gun makers the final half hour of trading following reutersreport from which cited official saying the Trump Administration is preparing to ease rules for to sell smallkers arms including assault rifles and ammunition overseas. Doubledigit gains for those gunmakers. Molina healthcare off by almost 6 . Obamacare back into circulating once again because a bill is making its way through the senate and they are thinking they could potentially get enough votes to pass it before the end of the month when the vote expires according to the senate parliamentarian. A click note on sprint up by almost 7 . A lot of chatter about a deal between sprint and tmobile. They have agreed Georgia Telecom would have control in accommodation of the two companies according to a person with knowledge of the matter. Joe lets take a look at what is going on with government bonds around the world and the answer is not much. Twoyear yields unchanged. 10year yields up slightly ahead of the fed decision. Germany not moving and the u. K. Yields continuing to rise. Last week we were talking about amid more hawkish noises coming out of the bank of england. Very much the story in currency land. We solve the dollar opposite today, pretty much at net flat conflicting drivers. The Balance Sheet reduction expected to be announced, but we could see pressure after that u. N. Speech as i mentioned briefly earlier and joe mentioned, the pound rising from session lows. Further brexit reports noise, euro falling back slightly and rebounding after a report the ecb remains divided on next policy steps. The one i want to point out to you actually in my terminal here i will pluck this chart, pull up this chart. The biggest weekly decline since early march last year and youve got a whole host of investors, all managers, strategists see opportunity to act for holdings, the reasoning, Global Growth is healthy. China is stable we were just mentioning earlier and that is even as Interest Rates tick up in europe and the United States. Its a pretty nice run on that index, i have to say. Joe on commodities, lets take a look at oil and gold. Oil slipping a little bit, but not that much ahead of some Inventory Data expected to show perhaps a little bit of a rise and gold futures up modestly. Just so much black of action is lack of action ahead of that fed decision tomorrow. Scarlet President Trump making quite the debut at the United Nations giving a blunt speech in which he did announced kim jongun as a rocket man and threatened the nation with annihilation. President trump the united strength United States has great strength and forces, we will have no choice but to totally destroy north korea. Scarlet here to talk more about annunciations marty shanker. Do you recall the last time a u. S. President gave a speech like that in tone . Marty i cannot recall it and it was striking for its tone on north korea and iran and north korea, for that matter. At the same time he tried to have empathy for the people who live in those countries and try to take a centrist approach to Foreign Policy of the same time making it clear he is ready to take military action if needed. Julia we were saying earlier on Bloomberg Markets about the critics here, this is an toellent not a path diplomacy. In for the previous president s, we have seen appeasement doesnt work. What is the right path to trend here . Is a warning like this the right one . Marty it is a copout to say, but time will tell. It is true past administrations have tried to appease the north koreans and they have violated agreements we have made and now donald trump is taking a different approach. Will it work . No one really knows. That is what is concerning to the world although investors do not seem that concerned. Of the same from him. Marty more of the same, but it is unpredictable and we have heard from people in the region are much more nervous than they are here. Scarlet my question is does this different approach repel or rally World Leaders . Only onee question is world leader that matters and that is kim and what he decides to do in response to this. Julia and china and russia on sanctions. Marty right. Joe lets talk about domestic politics. A week or two ago people would of said health care is dead. September was supposed to be about the debt ceiling and taxes on budgets and now it looks like the republicans have a real shot. Its unclear if they will get the 50 votes, but it is a chance. How does it how did this happen that it seems to have risen from the graham quest from the grave . Isty Lindsey Graham persuasive. They would love to get this accomplished. Deadline ofer the reconciliation. They only need 50 votes if they get this done by the end of the month. There is 11 days left. The house promised they will pass whatever the senate sends them even though there is no score and nobody really knows what it will cost. Republicans want to deliver a victory not just for the American People, but for donald trump. Of the have these lists key senators in play, collins, murkowski, mccann mccain, rand paul wont vote for it but its the same characters we have in the iterations of the bill it always comes down to the same few. Marty the nation is divided and that is a reflection of the closeness of this question. Its the same 4 senators and what their governors think is critically important. Scarlet its why mccain is interesting. Marty mccain is very interesting. The governor of arizona said he supports this bill, but john mccain is Still Holding out. I think he loved the idea of being the deciding vote last time and i think he would relish being that again. He is not running for reelection so he does not have to worry about that . Marty that is correct. Julia you just said they are going for a victory for the gop. Will this be perceived as a victory for the American People depending on the contents of this bill that we do not even really know . You said we dont even know, we dont even have a cbo score. We will get a big, angry headline from the cbo saying this is much worse, but we passed it. Is a gamble. Gramcassidy and it becomes law of the land and the cbo score comes in and millions more loose coverage, democrats will lay that right of the gops feet at the midterms. Julia senator graham said he had newfound respect for President Trumps tenacity on this debate. What happened there and the second question completely different topic, tax. More details on tax according to senator bob corker . Marty it is a fascinating process. Donald trump campaigned on fiscal responsibility and now we are allowing for a trillion and a half relief over 10 years and donald trump apparently is going to support it. Joe one last thing that confounds me about this health care bill. It takes money that is allocated to states that have done the Medicaid Expansion and it allocates them across all the states. New york, california, texas, other new york, california they are losers and texas and other Southern States that took it are winners. Marty you can be sure that no one from california or new york is going to vote for this. They have democratic senators. Is thattical calculus obamacare is so unpopular as a concept even though the polls say its now more popular, that somehow this will be an acceptable vote for these senators and in 18 months we will find out. Julia politicians are going for here, not that we said that. Thank you so much, marty shanker. Coming up, lessons in the lyrical survivor. Seemsrkels inevitable during the migration crisis. Ae leader is poised to take full term. What to look for headed into sundays election next, from new york, this is bloomberg. Mark its time for first word news. A powerful 7. 2 magnitude earthquake that struck near mexico city caused thousands of people to flee the homes and businesses. It was the second major earthquake in that nation this month and struck 32 years to the day after a magnitude 8 quake killed thousands in the capital. Issident Enrique Pena Nieto returning to mexico city. An official says at least two people have been confirmed killed this afternoon. Claimed itsria has first victim. Officials are reporting one death on the French Island of water loop guadalupe. The National Hurricane center estimates maria will strike the u. S. And British Virgin islands and puerto rico on wednesday. Theis debut speech at United Nations general assembly, President Trump did not mince words when it came to north korea. Man isnt trump rocket on a Suicide Mission for himself and for his regime. The United States is ready, willing, and able, but hopefully, this will not be necessary. Mark President Trump there derisively referring to kim jongun. The president told the assembly it was far past time for the nations of the world to confront kim jongun. And said cams kims reckless pursuit of Nuclear Weapons is a threat to the entire world. Although commanders are responsible for two ship collisions, the spike in Naval Operations combined with budget shortfalls and uncertainties made it difficult to do immediate training and maintenance. The chief of Naval Operations testified today before the Senate Armed Services committee. Our first molecule of effort, our first team must go to safety, safety is first. No matter what the situation, those charged with command must achieve and maintain a standard that ensures their teams are trained and ready to safely and effectively conduct a signed operations. 17 sailors were killed in two ship collisions in the pacific and separate months, leading to the firing of 6 senior navy officers. Global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Scarlet thank you very much. We have breaking news on fedex, reporting fiscal firstquarter of 2. 51. St at eps analysts were looking for an adjusted eps of three dollars. We have the revenue print, 15. 3 billion for the period. The initial reaction in the market is for a drop in fedex shares about three and a half percent to that miss on the bottom line. Thesel dig through numbers. 15. 3 billion in revenue, that is pretty much in line with what analysts had been anticipating. Party,Angela Merkels the cdu, is the front runner ahead of the vote in europes largest economy. She campaigned on political centrism and joining us is andy schick. Always great to have you on. He question nina schick what kind of coalition is going to fall and ive been a bit confused because the secondLargest Party, the social democrats headed by Martin Schulz is seemingly confusing everybody by laying out a whole road of red lines about how he will not join merkel and offering her the vice chancellor if he wins. Will they form a coalition or will they . Nina that is the question on everyoness list. I think this has been part of the most boring election ever when you consider some of the political in the other european countries. The foregone conclusion that merkel will win is done, its a safe conclusion. The next question is will she got who will she go to coalition with question mark for two of three of her terms, she has been in coalition with the centerleft. What we have seen with them is their support base has diminished and thats because they have often been in a grand coalition, which is the way german politics works. How can you be the credible voice of opposition if you are in the governing coalition . For the spd because it looks they are going to perform abominably on sunday, it wont be their first preference to go into coalition, but if the numbers dont add up, there might be no other choice than to go into coalition with them for the third time in her 4 terms as chancellor. Joe what does the term Jamaica Coalition refer to . At then germany we look coalitions based on the colors of the party. The Jamaica Coalition would be a constellation when merkels which is black, goes in with the liberal, yellow, and potentially the green to prop them up if that is the only constellation to that brings majority and that seems to be her preferred option rather than going into a grand coalition with the spd. Joe there is no tension about the idea that she will be the next chancellor, but some of the more radical parties on the left and the right are pulling pretty good polling pretty good going on to into sundays vote. The antie u and antirefugee up t i the far left party is at 11 cking. Up. Refugee party is ticking up and the far left party up 11 . Nina you have the Eastern European socialist state still alive and going. They have been in parliament for a number of years. What i think will be the main headline story is the far right populist antiimmigrant party will also win seats in the bundestag. You need 5 of the votes to get into the bundestag. Given that nobody is going to be shocked that merkel won, the headlines will be how did this far right party returned to the bundestag . They have been pushed by the refugee crisis and a lot of their criticism against merkel was precisely in 2015 at the height of the migrant crisis that she essentially allowed refugees to come to the country. That is the primary issue on which they campaign. Scarlet its quite striking because you talk about how this will be the most boring election in europe. What happened in germany that made Angela Merkel being vulnerable on immigration and migration issues being inevitably the winner in sundays election . I guess there has been a shift in the mood. My question is if there is some kind of incident like a terrorist attack, would that change things completely . Nina i dont think so because if you look at all the mainstream parties, apart from other partieshe were broadly in line with Angela Merkels refugee policy. The loudest voices of criticism we heard were from her own barbarian coalition partners, they were quite critical. Nobody else opposed or had a different immigration policy. When merkel after 2015 started to pass some stringent laws through the bundestag to get control of the situation, the public was calmed that the government had this under control and i think the primary driving factor is that germans look at the world around them and they look at the United States and they are very antitrump and we they look at the United Kingdom with brexit and see this as a challenge to the geopolitical environment so they want continuity. They feel that chancellor is the only capable leader they have and what feels like an increasingly difficult world. Scarlet nina schick, you will stick around and we will have more after this. This is bloomberg. Julia we are back. We have nina schick, the executive director you started a conversation before the break about a foregone conclusion in the german election. Is there any risk of a surprise here . Nina i really dont think so. I really dont think so. I dont think there will be a tender hooks moment. A fews she will veer Percentage Points less well than expected and maybe even more. The fact that she is leading over 12 in the polls means that it is an inevitability she will have the Largest Party in the bundestag. There is no macron moment or trump moment. Scarlet we want to get your take on what is going on in the u. K. . Lots of backandforth between Boris Johnson and theresa may when it comes to brexit. A hard right wing populist bunch and a leftwing populist bunch you are going to do our country some damage. Thelet do some damage to country. What do you think is behind what Boris Johnson did. What is he trying to achieve in coming out with his stance on brexit lets not his area . Nina really its a disaster because the public voted to leave the e. U. , but what they did not vote on is what kind of brexit deal they wonder what kind of future relationship they want with the e. U. Boris johnson was one of the leading lights of the leave campaign in and because of tory party politics, he was assigned to the role of foreign minister when he didnt have anything to do with brexit negotiations and he felt that there has been a lot of negativity and the brexit talks havent been doing too well. It was his opportunity to put his head above the parapet and perhaps boost optimism back into debate. Into the when he made that interjection, he didnt actually say anything that will carry any use to the negotiations. Instead what happened is that the internal war within the cabinet and the conservative party has been revealed. That is all well and good, but lets not forget that the clock is ticking and that you is waiting for clear direction from the u. K. As to what they want. Fundamental questions as to whether there will be a Transition Area period and what the future trading relationship will be like and those have not been answered and cannot be answered because there is no unity at the top of the conservative party. Julia there is evidence that should just theresa will go will go forresa may a soft brexit. Do you think there will be political blowback and does he have the support within the party cap asked her stash to ask her to ask her . Nina i would argue that what she has pushed is a hard brexit. Principally, theresa may does not they want to be able to negotiate their own ftas. What we are arguing about now is what is the trenches very period Transition Area period and what is it look like . What is clear is simply you cannot within the short timeframe allotted negotiation a new fta with the e. U. Most politicians have come around to the idea that we need a transitional gap and boris is contesting that. , thank you sohick much. Up next we will be talking about how to integrate environmental issues. Mark its time for first word news. At least two people are confirmed dead after a powerful 7. 2 magnitude earthquake struck near mexico city. It toppled buildings and caused thousands of people to flee homes and businesses. It was mexicos second major earthquake this month and struck 32 years to the day after a magnitude 8 killed thousands in the mexican capital. Nieto is enrique pena returning to mexico city after attending the session of the u. N. General assembly here in new york. Hurricane irma caused as much as 65 billion in Property Damage mostly from flood waters according to a limitary estimate from core logic, which says little of the damage is covered by insurance. The Real Estate Research company says an estimated 80 of flood damage was to home without homes without flood insurance. Wind damage to homes, which is typically covered by private inurers, caused 15 billion damage. A chief sponsor of the republican bill to dismantle obamacare says he is never never felt better about where we are at, but stopped short of predicting they have the votes to pass the measure. Lindsey graham senator Lindsey Graham spoke to reporters at a closeddoor luncheon where governor Vice President pence joined for the measure. The Senate Foreign Relations Committee today held a confirmation hearing for jon huntsman, President Trumps nominee to be ambassador to russia. He took a firm stance against russia for its interference in the 2016 u. S. President ial election. There is no question underline no question that the russian government interfered in the u. S. Election last year and moscow continues to metal in the democratic mettle in the democratic processes of our friends and allies. Mark calling the former ambassador to singapore in china highly qualified for the job. Global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Scarlet we have breaking news from the Senate Intelligence Committee Chairman richard burr. He says there will be a Facebook Public hearing that will happen its just a matter of when and the scope of the hearing. He is commenting there will be a Facebook Public hearing. Remember he urged for a full accounting from facebook and other social Media Companies about any foreign money being used to manipulate the 2016 election. Facebook said they found money from ad spending connect potentially connected to fake accounts from russia. Joe we want to talk about earnings that came out after the bell. Q3be slipping by 2 , but estimates of 1. 10, beating the range. Revenue of 2. 84 billion ahead of estimates of 1. 82 billion dollars, up 350 over the last five years on an incredible run for the software maker. A little bit of a breather after hours on those results. Joe that that julia bed, bath, and beyond earnings missing the lowest analyst estimate for their earnings, secondquarter earnings per share at . 67 some of the estimate at 95. Of the range going up to . 99. The good news is there comparable sales is expected to be down 0. 6 actually came salesith secondquarter coming in at 2. 94 billion. Italy comparable sales number the comparable Sales Numbers the Short Interest out there in that, bath, and beyond bed, bath, and bears chart just shy of the equity flows, the Short Interest in this shock and you can stock and you can see the blue line showing the share shortdeclining as investors are increasing, some challenges there. Not the only retailer facing issues right now. Whatd you miss . Investors say they need more measurability and pretty stability around environmental, social, strategies. Our next guest focuses on Sustainable Finance and aims for positive societal impact at scale. Joining us is erika karp, the founder and ceo of Cornerstone Capital and a former wall Street Research chief. Great to have you on the show. I want to start by asking you when you go into companies advising them on what they need to do, do they say here is what we need or do you say let me tell you what you need to do here and they just go ok, we will do it . The companies to some degree know what they need. They know what is most material in these factors. Governance is always first. They know what they need and then they think about their own objectives, the mission, the vision, the strategy and try to optimize behaviors as they execute. Scarlet do they do as little julia do they do as little as they can get away with . When it actually comes down to it, there profit is maximizing and that is what counts . Erika there are no generalizations. Some do it in a way that is greenwashing but some do it deep sense of longterm thinking. You really have to figure out the new wants as a result new wants deep nuance as it relao companies that are deeply responsible. Joe it seems like a lot of the debates in this space are they greenwashing, is this good for the bottom line . Is it just all a pr stunt . Theres a lot of discussion that it would probably be the same in 0 years. What are the new areas corporate chiefs are interested in . Erika the biggest deal i think is the sense of transparency, disclosure, accountability, incentive is asian, those are iotnbiggest incentivizas there is a company about ceos articulating what they want to do and what they can do and thats what we are looking for and we have standards for disclosure of the most important data and that will be important for innovation and consistency and investing. Scarlet when i talked to chris aleman, or vicki faller with the new york state retirement fund, they talk about esg a lot and they bring up how this is the driving mission for them. Are they in the minority when it comes to Pension Funds . Erika they are among the most progressive. This is true. It has not become mainstream for the investment committees. Scarlet why not . Erika theres a belief that if you are looking at environmental, social, and governance factors, that you are giving up competitive returns. That belief is wrong. The idea of looking at esg is consistent with fiduciary duty. We need investment committees to come along. Joe tobacco stocks are some of the most can shorten eric extraordinary consistent gainers excludesume any will those until recently gun stocks have done incredibly well. You think of these areas that an portfolio would exclude anything about the bestperforming sectors and subsectors on the markets. Julia investors care about dividends. Dividendsy care about and cash over cash returns. The reality is there is a lot of , so youn sustainability have to go beyond value judgments and towards pragmatism and enhanced analytics when we do the investing. The idea of kind of ideological device and politicized conversations, we need to get past that and talk about transparency and then we need to dock about longterm issues. The reality is if we destroy the environment and dont respect human capital, we will have a big problem with Financial Capital in the long run. Julia harrison paris accord, that is a headline grabber. I believe in the environment and i think we should protect it and you make a headline statement there, how do you go after it and say this guy is serious versus this guy is greenwashing . Erika i think the corporate sector is way ahead of the Public Sector in terms of moving forward. We need to know the alternative energies and economics associated with that are in really good shape, notwithstanding the missteps administrations might do. In terms of the ceos, when we try to look at what is real, we try to look at consistency, so we want to look at is he saying one thing and doing another and its not that hard to suss that out. We need boards of directors that are driving performance to think about the longterm. Scarlet thank you so much for enlightening our day. Erika karp, ceo and founder of now 42tone there are dead following the 7. 2 earthquake in mexico city. We will keep you posted it on any further developments. Julia we will get an update, stay with us for that. From new york, this is bloomberg. Julia whatd you miss . As we have been describing, a major earthquake sweeping across mexico city. Adam, thank you for joining us. Describe what you saw, what you have seen so far today and how Emergency Services are responding. Adam thanks for having me on. I hope you can hear me ok. Weeks awayare two since the big earthquake in a momentty, so theres of irony in that this morning we had a mock evacuation from the building and then an hour later there was this massive quake. The office of bloomberg is across the street from a marriott hotel. Its about 10 to 15 stories high and from where i was crouched i could see the entire hotel shifting with the quake and after the quake just plumes of dust and smoke throughout the city. Eerie andtty yuri scary situation. Not a lot of places with electricity. Lots of smells of natural gas seeping into the streets. Its a rough scene right now. We are just showing you live images not live images, i apologize, people in the streets, injured in there and being treated on the side of the road. Joe does mexico have an advanced Warning System for earthquakes that allows people to perhaps get out of buildings before the worst of the damage . Adam yes, they do. Thats a good question. Here in mexico city there is something called a seismic alarm that goes off about a minute before the earthquake, which was actually the alarm we heard this morning when we did the evacuation, the preliminary evacuation, it turned out to be. For this quake actually in the offices of bloomberg, we did not hear the alarm. It started to slowly shake and we looked around and it with much more force. There is a seismic alarm that goes off in mexico city. It doesnt go off in other parts of the country, which was part of the issue with the earthquake two weeks ago. Today, thely, seismic alarm at least where we were were in the financial district was not heard and i have heard other people on the street saying the same thing, they didnt hear it or some heard at late and it really only gives you a minute to evacuate. Grim. T its pretty we are looking at the pictures. Haveding to televisa, 42 died in the quake. Any sense how long it will take before they get a sense of the injuries out there . I guess i am here outside and i have not seen a number, so it is frightening and unfortunately, unsurprising given that i am walking through the streets and theres just damage to buildings in the neighborhood where i live. Throughout this downtown area of mexico city there are lots of noldings collapsed and still electricity and no real cell service. In terms of when mexico city can start to put itself back together after this, it looks preliminary my preliminary hypothesis would be that it is going to be a long cleanup effort because it is a scene of a lot of destruction right now. Julia we can see, adam, great to have you on. Stay safe and we will bring you any further headlines on that story. Returnedthe president to mexico to attend to the situation and the military has arrived in the area of the capital to monitor the situation. Coming up, the Federal Reserve is about to embark on a great unwinding. We have three charts on the terminal you need to know to navigate these uncharted waters. This is bloomberg. As we have been reporting, the twoday Federal Reserve meeting begins today in washington. Most of the attention will be on the Central Banks plan to shrink or begin shrinking be Balance Sheet. That is expected to be announced tomorrow. To get us primed for the big announcement is our economy reporter matt basel are. Matt boesler. Great to see you play when it comes to the rate hikes we have seen, what amazed people is financial conditions remain loose. Matt this is one of the big reasons the fed is still talking about potentially raising rates another time this year despite the fact that inflation has not picked up a lot. You look at financial conditions versus say, the Unemployment Rate, you can see we had a tightening and financial conditions last year and a year before and that led to a slowdown in the improvement theimprovement is thatsachs index amber lynam and echoes up, financial conditions are easier. The blue line is the yearoveryear in the Unemployment Rate and that is upside down. When it goes up, Unemployment Rate is falling faster. This would seem to imply that there is Downside Risk to the Unemployment Rate and the Unemployment Rate could fall faster than it has been falling due to the improvement in financial conditions and that is something weighing on people like bill dudley who would like to see more rate increases. Joe isnt falling unemployment good . Matt falling on up limit is a great thing, but they think the natural rate of unemployment is already higher than where it is now a net present a risk in their mind that potentially we could see an upside surprise in inflation. Joe i could get really cynical about why the new york fed is nervous about too low unemployment, but i will it that pass. Julia they see a free hike, thats the matt it speaks to the idea you need to be preemptive and forwardlooking because Monetary Policy works with long and variable lags. Julia what about inflation then . Bring inflation into the story because what we saw in the last inflation meeting in particular was a little bit of surprise on the top side and we are starting to see the factors like shelter feeding into the numbers. Matt exactly. There are really two stories in inflation at the moment. Basically what you have is you have shelter inflation, which is the major component, and then you have everything off else and there have been oneoff transitory factors suppressing that Everything Else category like cell phones, prescription drugs. The amber line shows the other factors have depressed the core inflation rate by about 40 basis points this year. Whats really important is the shelter inflation component has dropped i 13 basis point and that has been kind of lost in the noise about all these oneoff transitory factors. Even if all those transitory factors in other categories bounce back up and the 40 basis points are higher when this falls out, if shelter inflation doesnt also reaccelerate, you are going to have an inflation rate below the 2 target the fed set and this is exactly why you have policymakers like turley evans worried that maybe trend inflation has fallen both below 2 and once we see these transitory factors reverse we still will not get all the way there. Joe another big question for the economy and the fed and everything is the phillips curve. What are the models that we moved to anticipate inflation and are they totally busted . You have a chart here you are looking at that ties shelter inflation to unemployment. What are we looking at here . Matt if you look at inflation data, its really hard to find that phillips curve relationship. One place you see it is if you hone in on the shelter component and the rental inflation component and theres a very Good Relationship between Unemployment Rate, the amber line and it flipped upside down again versus rental inflation. You can see we have had a decline in the Unemployment Rate, but rental inflation has flatlined. To stick to the phillips curve narrative, really what you have to do you have to look at rental inflation and have a view on where thats going to go. There are some split opinions about whether or not we can expect that to continue accelerating or not given all the for example, supplying we have coming online after the multifamily housing boom of the last few years. This is really going to be key when you are talking about that shelter inflation component that has come down the lid a little bit. If the phillips curve is going to reassert itself, this is where you see it show up. Its really sort of the underpinning of the u. S. Economy at least in these data. Scarlet is there going to be a surprise when it comes to Balance Sheet reduction . Thats the key action that will be taken tomorrow. These other issues are things the officials are looking at carefully, but we do not expect to see a decision mays based on that. Matt there has been this building consensus over the past 6 months because they have been talking about getting the Balance Sheet process started and the markets have not reacted. This has led to the view that the Balance Sheet, the qe programs they did during the crisis were may be more about signaling the path of the Interest Rate and not so much about the bond purchases themselves and the fact the fed divorced the Balance Sheet process with anything to do from Interest Rates because they are operating two Different Things at the same time, one does not imply the other and that leads to more confidence they can do this Balance Sheet thing and it will not have an impact on the economy and if financial conditions start to tighten, the fed can always reduce its outlook for the rate path to offset it and thats why theres less concerned about the Balance Sheet then there was a year ago. Julia what about for a final hike in this year . Question is the open and we have seen the market starting to price inch higher as far as probability is concerned. Do you think the fed looks at the bank of england and the bank of canada that are talking about raising rates or raising rates in the case of canada . We are not the only one hiking rates at this stage. Matt i think it is the fed looking at other Central Banks and the fed and other Central Banks looking at the improving global backdrop so they are all kind of in this same mind where they say we can raise rates because financial conditions are getting easier, not tightening. That kind of give kind of gives us free hikes and that is playing across the board. With histt boesler chart as usual. From new york, this is bloomberg. In each with a u. N. General assembly, President Trump didnt mince words when it came to north korea. Trump the United States has great patience, but it did is forced to defend itself are its allies, we will have no choice but to totally destroy north korea. Reporter the president told and his pursuit of Nuclear Weapons poses a threat to the world. Hurricane irma caused up to 65 billion in Property Damage. Damagemated 80 of flood was to homes without flood insurance. Meanwhile, Officials Say one person has died on guadalupe after being hit by a falling tree. It is the first death attributed to hurricane maria. People are missing after their being boat sank. About 40 of the island is without power. At least 42 people are dead af