Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240714

To lift the company there. In the markets, heres were reset. The action is really in the bond market, cable rate. Everything else is doing a whole lot of nothing. 1 ,cable rate down 7 10 of unwinding any of those maybe we wont have a hard brexit trades over the last what he four hours. The bond market the last 24 hours. The bond market in italy he really hitting a low. Basically, you left, you came back, and it is exactly the same. David except there were tweets from the president about maybe raising some tariffs on china. Alix but in terms of the market action, it is more like bonds are at record low. Shocker. Time to bring you todays market moving news from all around the world. Joining us from london is bloombergs emma chandra, from rome is, taddeo, and on the ,hone rome is maria tadeo is the phone is ma michael khyber. Es you cape from minister heres you cape Prime Minister u. K. Johnson heres Prime Minister Boris Johnson. Pm johnson we will be leaving the eu on october 31. Emma weve just heard his plan to have the queen suspend parliament shortly after he returns from its summer recess shortly after they return from its summer recess. From octoberspend 12 until october 14, and as you heard in that soundbite, Boris Johnson presenting this as a way for a new government to have the in theeopened parliament runup to the deadline to brexit , which is october 31. It means that those mps in the British Parliament who oppose a no deal brexit would have less time to try and block that through legislative means should it look like the British Government is headed towards a no deal brexit. David you say it is a side effect, but is there any doubt in anyones mind that that is the actual intent here . He wants parliament out of the way so they cant stop him going out with no deal. Emma if you look at the markets, the markets seem to think this is exactly what he is trying to do. You mentioned that drop in the pound, falling as 1 against the dollar earlier in the session, the most in a month. Thoughling below 1. 21 , the which we had seen at the beginning of august. Nevertheless, the markets seeing this as a way we are heading straight towards a no deal certainly those mps within the u. K. Who are either of the conservative party, the labour party, and the other opposition parties who want a no deal brexit, say this is a deliberate attempt to prevent mps from having their say in the legislative process. David for some more government uncertainty in europe, lets go to maria tadeo in rome. They are trying to put together a government . Maria thats right. After three weeks of a lot of confusion in this country, it does seem that the two main parties involved in what would be a new coalition are now moving closer to getting this deal done. Youre looking at the same Prime Minister, giuseppe conte, stays in office. Politicalrity of two parties and no early election. The other big loser of this deal, which is not yet confirmed, we are getting sources tell us that it could happen today, is matteo salvini. He was the man who triggered this election, polling close to 40 , and it does look like hes going home and the handed now going home emptyhanded now. Alix btps at a record low, just over 1 . In puerto rico, Tropical Storm dorian will likely wash over puerto rico today and could flood low level areas. Joining us from puerto rico is jim berg is bloombergs michael khyber. Michael it just started raining a bit this morning, and from what im seeing from the local news, the storm has shifted somewhat, and it is now more focusing towards these two islands off of the east of puerto rico. David puerto rico has had a lot of problems with storm damage. Ag storm this time . Michael the governor has been pretty communicative to the population in terms of saying all the things they have prepared, but theres some worrying signs in terms of the state utility company. Several of their generators are out and several of the helicopters they use are not serviceable, so i think people here are sitting with their fingers crossed, so to speak. David thanks so much. Eiberts michael d reporting from puerto rico. Coming up, more market and trade analysis in todays first take. This is bloomberg. David now for the bloomberg first take, where we give you the news and trade analysis of the markets. First, brexit risks return. U. K. Prime minister Boris Yeltsin alix Boris Yeltsin. You said Boris Yeltsin. [laughter] david wrong country. Has asked the queen to suspend parliament. Investors are afraid there may be a no deal brexit blooming. Reporter, bloomberg and evan brown, ubs Asset Management head of multiasset , thank you. The market is disassociated from this event because, who wants to trade binary events and headlines . I do in this situation revert back to one of jon ferros favorite lines about brexit. It was the story of a world of the world for a day, the story of europe for three days, and the story of the u. K. Since. We are already seeing reports this morning that the dup would look to renew terms of any agreement they have with the u. K. Conservatives ahead of the next election if that were to come to pass. This is really just another sign that boris seems very committed to dragging this across the finish line himself, and doesnt seem to have a lot of help or support in so doing. Evan agree with luke. Lets put it into context. First of all, it is much more of a u. K. Specific issue now than brexit was originally. But companiese, now have had three years to prepare for this. Markets are increasingly pricing and the probability of a new deal brexit. , ofhe shock value of this us getting a no deal, is not so much at this point. If you talk to pretty much any asset manager, they all want to buy the dip if you get a no deal brexit. That is going to limit the actual downside of sterling. Alix but is it really just a u. K. Issue . I bring this into the broader conversation i feel like is happening in the markets, that it is the relationship between central bankers and politicians. Mark carney literally cant do anything until brexit resolves, which is a politician issue. In essence, carney will have to bailout the choices they make. I feel like that is the 10,000 foot view on this. Evan it is a very hard time to be a central banker these days, given political dynamics in the u. K. And here in the u. S. We saw the former new york fed president dudley come out with an oped yesterday, essentially saying that the fed shouldnt underwrite President Trumps trade war, and that led to a lot of controversy and the like. Sayi think its fair to that central bankers do have to be careful in easing to aggressively easing too aggressively so they dont give politicians the right to push more aggressively, which could damage the economy further. Luke to take a step back, though, central bankers have pretty much always been in the business of having to take whatever fiscal policy, whatever trade policy they are given, and respond proactively or react to whatever is given rather than trying to influence it. If you want to go back through the greenspanclinton era, were you can see central bankers trying to nudge towards the policy they want. Even in 2010, ben bernanke arguing for deficit reduction. We can say in hindsight that was way too early. Yesterday was making the subtext text and saying the quiet thing out loud. This is not something you want in the open, and i think if you are trying to look for a glass halffull on this, a Bloomberg Opinion columnist yesterday essentially said before all this, the conversation was is the fed politically beholden to trump. Now the conversation has shifted thanks to bill dudleys ease,ts, where if they do they potentially show their independence. David to what extent was mr. Dudley actually just telling the truth that everybody else is thinking about . There is a difference this time because Central Banks have so much more assets on their balance sheet. This is part of what he had to say. Feds accommodation encourages the president to escalate the trade war further, increasing the risk of recession . Officials can make clear the fed that keepsout making bad choices on the policy entree policy on trade policy. Evan theres a long history of Central Banks being in the political realm, and theres been this underlying myth of true centralbank independence, but now its just fully out in the open. Is thatoncerning now President Trump can look at what dudley said, amp up his attacks on the fed. It puts the fed in a very difficult position, more difficult than they already were in. Alix i wonder if the question is less you central bankers bail out politicians, and do central bankers bail out the markets. You have record lows for the bond yield. You have record lows in italy. It seems like the market is running the show and the fed has to get in on that, and they and theyve proven it. Evan thats appeared in the two most recent edition in the minutes the two most recent editions in the minutes, but policy is still tighter before he cut rates come up and they only shifted because of Market Expectations. As a stark and announcement as you can get. Expectations change because your delivery changes. Financial conditions tighten the outlook and activity darkens. That is the tradeoff you are working with here. ,he way their policy works primarily through influencing financial conditions. Then you kind of get the secondorder effects on real activity if people respond to them. Central banks beholden to the markets is an old story that is new again here. Alix true. What makes it different, though . Because you are right, weve seen that for a while. You can make the argument go back to greenspan and clinton, but does this feel different . Evan it is a little different in the sense that the market is just completely demanding the fed to act much more aggressively than the economy as it stands would justify. You have yields below zero. Thats the real change. Evan so where we are now, bernanke use call this the hollow marriage. The danger of a centralbank needing to meet Market Expectations in order to prevent a tightening of financial conditions, so they continue to ease, the markets continue to demand more, and it becomes a very unhealthy feedback loop. Toand thats a frayed and thats a phrase thats been revived in recent days as we seem to be going into the same situation. As it applies to the fed and what they are willing to deliver, we should know that essentially the only times the market has demanded easing and gotten exactly what it asked for her the 1995 and 1998 scenarios. When you look at one year eurodollar spreads, it is a lot ise usually, so this probably more than we woulds expect. The market seems to be telling us more and more when you look s that u. S. Policy isnt too tight for the u. S. It is just too tight for the world. In onethey succeeded theg, preventing financial apparatus from seizing up. But when it comes to driving the economy, the Central Banks cannot generate Sustainable Growth in the underlying economy. That is what we are seeing with the record negative yield right now. It is not working. Evan i think Central Banks cant do it on their own. Everyone in the world is to maintain germany take fiscal stimulus. It would be a very different story in europe if you had fiscal stimulus, banking reform, fiscal reform, and the like. I think Central Banks have done pretty much all they can at this point. The fed still has some more ammo. But when we talk about these countries that have deeply negative yields, clearly theyve run out largely of that ammunition. They need more help from the politicians. Wouldon that note, they pretty much all agree, and theres certain sects within hardcore market monitors, that Central Banks can ever permanently boost the level of asset prices, that Central Banks can never move the economy to equilibrium. What we are seeing more and more is that central bankers like Jerome Powell are starting to note the limits on their power, but also note that potentially, their policy can raise the equilibrium a little bit, run the economy hot, get Labor Force Participation up. So that is a story they are seeing on the margins, but on the whole, even cyclically now, they are going, we cant bear this all on our own. Alix and of course, it leads to the other conversation which goes back into the flip side of dudleys argument from yesterday. One chart that struck me over the last 12 hours is that the s p dividend yield is now higher than the 30 year bond yield. We saw that once in the crisis. When you look at that chart, what do you do . What do people do . Wouldmy question for evan be, when he looks at that chart, does he see that yield a sustainable, or as a sign that the market expects dividend yields to be cut . Evan right. We are still trying to figure out what bond markets are telling us and what equity markets are telling us. What is the bond market seeing that the equity market doesnt . At this point, we still see a stable enough u. S. Economy that you can gain yield in certain , utilities, telecom and the like. We expect the economy to hold up. But we are, everyone i think, is a bit paranoid given the message that bond yields are showing. They are being held down by what is happening outside the u. S. , but still, there is underlying discomfort that maybe we are missing something, and we are very focused on trying to figure what that is to figure out what that is. Alix yeah, like returns. Luke kawa, good to see you. Evan brown of ubs Asset Management will be sticking with us. Go to gtv on your terminal to gtv on you terminal 2 browse the features and charts. Janus said to be headhunting for spies via linkedin. This is bloomberg. Viviana no comment yet from google. It is not clear if this is linked to president Donald Trumps demands that Companies Look for other alternatives to china. China is reportedly using linkedin to recruit spies overseas. According to the new york times, chinese agents see linkedin is a prime recruiting ground to contact thousands of foreign citizens. This includes government officials. Linkedin is the only major American Social media platform not blocked in china because the company agreed to censor posts containing sensitive information. That is your Bloomberg Business flash. Alix i found this story to be really fascinating and completely frightening at the same time. We kind of knew this might be happening, but this is now, like, government officials are getting tapped on linkedin . David obama officials and danish officials have gotten approached on linkedin in various ways, saying lets talk, and maybe we can help you out. Youd think, what are the chances someone is going to respond . But in fact, theres one former cia official and Defense Agency official who was sent to prison, and he was originally approached on linkedin, so its actually worked. Alix as we were talking about earlier, which is ironic, because we cant do the same thing. Ubs, you were saying . Evan i think what this story shows you is as much as markets are focused on the trade war and the economic damage, this is a conflict that goes way beyond economics. It is technology, national security, and the like. It is just growing. This is going to last beyond President Trump. These are the two largest economies in the world that have very different ways of doing things, and it is inevitable. David two of the largest economies in the world, and they are linked in which we cant understand. What we report here is largely on the surface. Says, whatent trump liu he says, things like that. Lix i think it was the ft talking about corporate response ability in china, worried that companies are going to be scrutinized more intensely because they are u. S. Companies, and they are worried about that. David there was a report that the Chinese Government would really be going after pwc come the auditing company, because some of their employees might have been supporting protesters in hong kong. So its not just what you have done is a company, but maybe what employees have done. Alix which is why we seem companies in hong kong say, dont go anything. Evan brown sticking with us. Coming up, another Tropical Storm barely towards puerto rico. We discuss Climate Risks with dan glaser of marcia Mclennan Companies next. This is bloomberg. Alix this is bloomberg daybreak. U. S. Equity futures kind of go nowhere. The real action is going to be in the bond market. You have italian equities down by 5 10 of 1 . Youre seeing record yield on btps. Under 1 to lend to italy for 10 years. If you change up the board, you can see where we at. We are not even at one basis point. Unbelievable, the move we have seen come on really no news. Even if there is some kind of deal between the fivestar and democratic party, what is the probe ability they will actually Work Together and get anything done . You have to wonder if the ecb will continue their buying, if there is fiscal stimulus out of germany, all of that playing into it as the curve continues to invert. David this is an interesting time to buy italian bonds. Alix you would buy it because you want the yield, but because you expected to appreciate more. The fact you expected to appreciate that much more, the why is a real question for me on that. David now lets get an update on what is making headlines outside the business world. Viviana hurtado is here with first word news. Viviana british Prime Minister Boris Johnson is moving to make it easier to leave the eu without a deal. The government will ask Queen Elizabeth to suspend parliament from midseptember to midoctober. That would significantly hamper s to block affort new deal brexit. Johnson said that would still get plenty of time to pass legislation. Italian president Sergio Mattarella will meet with main political leaders come along some rivals five start leaders, longtime rivals and ther party democrats, to try and form a coalition government. Forto rico is bracing a hit from Tropical Storm dorian, which will bring rains come about bring rains, but thaty not the wind affected puerto rico during hurricane maria. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. David thanks. So much as we just heard thanks so much. As we just heard, Tropical Storm dorian is set to hit puerto rico today, and may be a hurricane as it hits did to make an republic. With us now is as it hits the dominican republic. With us now is dan glaser of marcia Mclennan Companies of marsh and Mclennan Companies. We hear a lot about Climate Change, about el ninos in various storms. Is the need and expense of sharing going up . Dan certainly the expense is going up following losses, and lossyear was the largest irma,urricanes harvey, and maria. Im wishing the best for pretty weak oh and the dr because for puerto rico and the dr because theyve been hit pretty hard over the past years, but there are implications for Climate Change, particularly in hurricanes and wildfires. On hurricanes, essentially when you have warmer sea temperatures, you have more power for hurricanes. If you have higher temperatures in the atmosphere, you have more water vapor, so then you have more extreme rainfall events. Extreme rainfall is basically when it is in the 99 percentile. Then of course you have rising sea levels, so you have increased storm surge. It is really a triple whammy of potential damages. David how do you see that in your businesses . Do your customers want more extensive coverage . How is it changing their demands . Dan i think for most corporate customers, they evaluate what they need, and it doesnt change year by year. I think the issue is really with regard to homeowners and small businesses, particularly in the United States. Flood is the largest natural catastrophe in america. It is rising is a risk not just because of changes in climate, but other factors as well. We believe theres been about a tripling of the amount of large flood activity in the u. S. Since the 1980s. Theres about 15 disasters per year, about 15 billion. The issue with regard to flood is that most homeowners are not insured. Alix before we move on to other risks that businesses and homeowners might be dealing with, who pays for all of this at the end of the day . I focus more on what happened to pg e and california with the wildfires. Who bears the cost . It winds up back with the taxpayer if you see a bailout. How do you see it . Dan when you talk about wildfires, that is typically insured within a homeowner policy. The damage you saw in california was likely insured. Prices may go up post losses, but it is insured. Flood is a different matter. Lets take Hurricane Harvey. Only 20 of the people who were impacted by Hurricane Harvey were insured. There are a few reasons for that. It is basically a lack of knowledge. A number of homeowners who would think that their standard policy covers flood when it does not, or they think the government may. Ail them out post catastrophe for some people it is an affordability issue. They basically have the view that floods are really unlikely, so lets roll the dice. When you look at Something Like harvey, the average fema grant oft that loss was average 10,000. For the lucky 20 who made the decision of being insured, the average Insurance Claim payout was over 100,000. David go beyond natural disasters now as you look at the needs for your customers. What are the top ones . Is it cyber . Dan Marsh Mclennan is the leading service in the world in terms of Risk Strategy and people. We are the number one insurance broker, the number one hr consultant in the world, the number one outsourced cio. There an advisor to 91 of fortune 1000, so we have a pretty good Vantage Point with clients. I would say clients these days, it is basically geo economic concerns and cyber probably top of the list. For most boards, cyber is viewed as the number one risk facing their organization. We get very involved with companies trying to do the right thing, protecting the perimeter, multifactor authentication, encryption, knowing your crown jewels, testing, retesting, preparing for a breach. That sort of thing. I have to tell you that Cyber Security in general is very frustrating for ceos. In private conversations, essentially, ceos like to get things done. There is no done here. This is a race without a finish line. There will never be a time where a company will say we are fully protected. The other issue is the trust rating for ceos. Issue that iser frustrating for ceos, there is a bit of a blame the victim mentality sometimes. David economics is something we talk about here a lot. How do you ensure for geoeconomics . Dan you really dont, but you ensure the trends. Ultimately it is a risk factor. It is not about insurance for most of our clients. It is about risk. We talk to them about risk, and what they are saying now is clearly there is left theres less optimism than there was in 2018, with either the ,hina and u. S. Rivalry slowdowns around the world, brexit all have some areas of concern. What we are actually seeing on the ground, we are still seeing growth in most regions in exposure units. Exposure units being property values, payrolls, shipments, still going up mildly. Alix thank you for the perspective. Dan glaser, Marsh Mclennan ceo. Still with us, evan brown of ubs Asset Management. We made the connection of if you are going to protect yourself as an investor, utilities are supposed to be safe, right . But then you wind up having risks pg e, for example. They are expensive now. How do you view Something Like that . Evan we have a climate aware strategy that looks at individual companies and the risks that they are taking into account in terms of Climate Change, floods, hits to the electrical power grid, and the like. The kind of needs to be a new risk premia that we think about and attach to these companies because of the growing risk of Climate Change and disaster that could occur. Alix and how safety might not be so safe. That brings me to the other safety in the market, which is gold. I want to show the golds p ratio. Says,as a note that equity markets continue to look vulnerable, and we are testing some keypad it points here in the ratio. Do you like gold . Evan gold i think is, so because thes positioning has move aggressively to the long side. I think theres a case to be made that as Central Banks increasingly move to negative yields and yields across the zero andbally head to further into negative territory, theres just a scarcity of safe assets out there. So gold is one of the few options that kind of has unlimited upside and is a place to allocate some of your portfolio to on a strategic basis in this kind of environment. David evan brown of ubs Asset Management, thanks so much for being with us today. Coming up, spitting towards a an ipo. Eloton plans to go public come up with a warning it may not be profitable in the near future. This is bloomberg. Viviana this is bloomberg daybreak. Coming up in the next hour, mark haefele, ubs Wealth Management global cio. Heres your Bloomberg Business flash. China is coming to the rescue of british shipping operator thomas cook, acquiring its tour division. Maybe you are feeling a little hangry this morning. If you havent had a bite of popeyes new Crispy Chicken sandwich, you will have to wait. They sold out. At some restaurants, that lead to chaos. Manyes said they sold as sandwiches in the last two weeks as they expected to sell throughout all of september. That is your Bloomberg Business flash. Alix i heard there were cops or something. David ive never had popeyes, actually. Alix you could do it and then report back. We turn now to wall street beat, to cover three things wall street is buzzing about this morning. Quietly boosting its minimum pay after the House Financial Services Committee Chair Maxine Waters prods the firm. Ipo. Eloton cycling to an spinning might be better. It is among the biggest ipos this year. David join us now joining us now is sonali basak. You and i have talked about this. Citi pop citi is not the first one. Annmarie it was very quietly sonali it was very quietly done, as you said. They said we are raising it to 15. That is something jp morgan has already done and wells fargo has already done. Bank of america has committed to 20. Alix why the under the radar feel . Sonali it is a really tough time for banks. All the banks right now are under a lot of pressure to solve a lot of problems and show that they are doing a lot of good for society. They are really focused on the income gap, gender diversity, and regulators will also be looking at anchor pay over the next year or so, so it is a good time to be focusing on at least memo wage. Focusing on at least the minimal wage. David lets talk about the hong kong dollar. Sonali i love this story. If have kristin oday saying you are trying this, keep trying. Before. T worked one of the reasons i love this is just about a month ago, one of my sources pointed me to kyle bass on twitter. This guy is saying that china is going to invade. Meanwhile, kyle bass has a paper out saying that capital is going to flee. You should be moving your money into u. S. Dollars. Kyle bass is definitely one of the big contenders here, saying the peg is going to break. But again, weve seen this in history before. David and at one point says it is before the anniversary come october 1, you will see them go and. Sonali what do you think . David i have no idea. [laughter] alix ive been hearing, too, that the u. S. Pushed to early. They should have waited a bit because now theres more time, and the u. S. Says we wont negotiate with you if you do something in hong kong. Sonali i would also read the story out today by nishant. He also have a lot of compelling as a dense about why in the short term you also have a lot of compelling evidence in the short term about why this does not look likely. Ipo, andotons they say getting profitable will not be likely. Another ipo that doesnt make money. A big winner that could 10n this ipo is the billion valuation at chase coleman. If it hits 8 billion, it is well above the 4 billion and change they were last year. David when does it price . Sonali im not sure when the pricing is. It is something that, however, it is lossmaking. David but its growing. Sonali but you pay 2000 a bike. Thats a lot of money. Alix i will tell you, when people buy it, they preach over it. They are like converts. Ive had conversations at cocktail parties where all the talk about is the peloton bike. David bloombergs cinelli bostick, thank you for being bloombergs cinelli bostick basak, thanksonali you for being with us. Us onyou can hear Bloomberg Radio, sirius xm channel 119 and on the Bloomberg Business at. Business app. This is bloomberg. David democratic president ial debates resume next month in houston, with a narrowing field and tougher rules to qualify. One of those fighting to stay in the race is former maryland congressman john delaney. We welcome him back to bloomberg. The reports, if you read axials, says he will have a tough time if you read axios, says you will have a tough time qualifying. Mr. Delaney in many ways, i think the campaign is just starting. Really, because most voters are just starting to dial into this whole thing. Now is when i thing most voters are really starting to pay attention. David youve got some ground to make up on name recognition and the polls. How are you going to do that . What do the voters need from you they are not getting from somebody else . Mr. Delaney what they get from me as someone who has a real vision for the future and has a way of making it all happen. I think voters should ask every president candidate, what is your plan to build a Better Future . How are you going to pay for it . How are you going to get it done . I dont think any candidate can answer those questions better than i can, for all the issues that are affecting the american people, particularly american families. The issues they talk about at the kitchen table. I have to best vision for that future, and i have a pathway to find the kind of Common Ground we need to get it done. So many of the candidates are running on impossible promises or fairytale economics, where i actually have Real Solutions that we can build a Better Future around. David lets talk about this, particularly when it comes to economics. We have some of the things youve laid out, like a 15 minimum wage, expanded health care, but not medicare for all. Is that a defensible position with respect to the Democratic Base . Mr. Delaney yes it is because im for inverse will health care. The problem is for universal health care. The problem is i believe singlepayer is a bad way to go about it because that will result in a Healthcare System that is underfunded and has more limited access. If the government is the only payer in health care because the government doesnt pay the full cost of health care, you will get a system that is underfunded. What i am four is a universal system where everyone gets a backbone basic government plan, but then people have options. They can opt out, they can buy private insurance, they can buy supplementals, they can keep the health care from their employer. It is a mixed model like germany has. I think that is a better way forward. David so how will you pay for it . Right now we have 18 of gdp going to health care. We cant keep going this direction. At some point you have to bring the cost down. Mr. Delaney i think a universal system will ultimately bring the cost down. Right now we actually have universal health care. Its called the emergency room, and it is the most extensive form. My system illuminates the corporate deductibility for health care, which is one of the largest loopholes in our tax code. I use those dollars to provide universal expansion. But what people who work for companies can do is opt out of their basic government plan, get a voucher because they are not using the government plan, and give it to their employer to help pay. David but if my company doesnt get a deduction for my health care, wont they opt me out . Mr. Delaney for example, but i think bloomberg would do is you which up with your basic government plan. They would say we want our employers to have more options. Weve negotiated a Group Supplement to plan that adds onto your government plan, that gives you the same benefits you have now. But that costs much less because your Major Medical is provided by the government plan. So you would end up in the same way, but that is how it would all work. David how are you going to grow the economy . This is something President Trump ran on, and we had growth. How are you going to grow the economy . Mr. Delaney i think we need to make some investments in infrastructure. That is huge to get on the trajectory of longterm Economic Growth. Thats one of the key things to my Economic Growth strategy. Weve got to do things to help workers, like expand the earned income tax credit, which is the best text program we have for hardworking americans. Ultimately, we have to do things to fix public education, which is really failing to Many Americans and creates this skills gap that holds down, growth. I would also get us back into holds down Economic Growth. I would also get us back into the Trans Pacific partnership, which at this point i am the only democratic candidate supporting. We are seeing every day what not being engaged globally from a trade perspective is doing to act on the growth. So trade, infrastructure, skills gap. David lets assume you got to the oval office. I think we all agree theres a ways to go before you get there. How could you work with republicans, much less fellow democrats, to get things done . Theres a lot of resistance. Mr. Delaney you have to be focused on finding Common Ground. I did exactly what you just described. Part of it is because i came into congress as a former businessperson and ceo. In that world, you have to actually get things done. On all of these issues, whether expanding the earned income tax credit, building infrastructure, i believe theres a pass to get it done. I had a huge and for search rebel that had 40 republicans huge infrastructure bill that had 40 republicans and 40 democrats. You have to be wired to not just give speeches, but actually roll up your sleeves and find, ground and find Common Ground. David former congressman john delaney, thank you for being with us. Alix coming up, we speak to art hogan, National Holdings chief market strategist. Ubs andrk haefele of his call for dumping out of equities. This is bloomberg. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy a new samsung note. Click, call or visit a store today. David alix ix we are so fixated on u. S. china trade that brexit is something, because its been hanging out with us for three years, we kinda of forgot until today. I think it is really important to rumor that could be just as bad. When you things up, it is going to slow down a euro economy even more. That could be a disaster for the rest of the Global Economy. Alix it has a bigger signal to me in the market, that when you have positioning onesided, what happens . Last week you had a huge move up in the cable rate. We had an emerging market currency years ago, but now it feels like that is the action in the bond market. Art we are one headline away from triumph or tragedy, and that makes trading really difficult. We are down about 3. 5 for the month of august. In august of 2015, we were down some 16 . We seen august be difficult. In the shortterm, this kind of action is very difficult for people who do this for living to make decisions. Guy that is my question david that is my question. We seem to have a number of World Leaders who are willing to say some things we thought were impossible. Suspending parliament . I would have said no way you can do it. Certainly, some of the things President Trump has done seemed impossible. Art the parallels are uncanny right now. We will go to the queen and have her give everybody a timeout. I want to get my way, this is the way we are doing things. Thats not what we are used to. Until we have a brexit, deal or no deal. But the problem is that does not give boris any more leverage with the euro zone. The euro zone has said this is exactly how this plays out. Weve long advocated there should have been or should still be a second referendum. I think if people had a chance to know what they were voting on and actually turn up and vote, there might be a different result. But unfortunately, i think we are heading fast in the wrong direction. Alix they remind me of my daughter who just had a breakdown the other day. I just want to do what i want to do. Yeah, thats life. Come inside to bloomberg. You will see the s p yield versus the 30 year dividend yield. We only saw that really back in the financial crisis. Is it just noise . This will affect global yield for a long time. We saw the s p 500 yielding more than the u. S. Tenyear, and that was the time to say this is the place to be. The tricky part is you have to be very tactical right now. If you are going to get defensive, no it is expensive. Stay in what is reasonable. Utilities and staples continue to be expensive. I think the multiples on staples are very expensive. If you look at health care, it is much more reasonable. If you have to be in technology, you probably want to avoid things like social media and semiconductors because of regulatory and u. S. china tensions. Look at software and service, which has done very well throughout the course of the cycle. David i want to come back to this affecting the euro zone, not just the u. K. People really think brexit is just a british issue. Why would it affect the euro zone, and more of the United States . Why or markets around the world reacting . Art you take the u. K. And the euro zone combined, you have the Third Largest economy in the world. You take the Third Economy and for more pressure and disruption into the way they do business, change the supply chains, the pattern of doing business. The u. K. And the arizona are very important to each other. Disrupt that really send the euro zone are very important to and the euro zone are very important to each other. Disrupt that and you have problems. Alix Jeremy Corbyn speaking right now, saying he will call for a noconfidence vote at some point. Whether it is Boris Johnson or theresa may, i feel like it is the same rhetoric. But if you suspend parliament, that negates any ability to vote on a deal that wouldnt result in a brexit, and hes going to push back in a big way. David of course, he wants a general election because he wants to be Prime Minister. This is, as he called it, a smash and grab. Alix i didnt hear that one. David he called it a smash and grab on democracy. Parliament in suspension is a smash and grab on democracy. Alix it is, right . At basically, if you are market purchase but now, you have to care about politics. We talked about that yesterday, how you are whipsawed by trump tweets. The macro doesnt feel like it is immune to that because you are drawing in the fed, for example. Art thats exactly correct. I think you laid that out very nicely. He first got there, he said i think boeing should cut the price on air force one, and then boeing hit and bounced back. Now we are seeing it hit what should be parts of what should be independent parts of the u. S. Government like the Federal Reserve. Im sure in history, there have been president s who havent liked with the Federal Reserve was doing or had harsh words for the chairman. Historically, we didnt have twitter. We didnt have the 24 hour news cycle. Lbj had very strong things to say back in his day to the chairman and was very physical with him, but we didnt find that out until 20 years later. Now we dont know how to react to this. The markets get whipsawed on a daily basis. Andhe says china called me once get back to the negotiating table, or maybe they didnt. Alix we are still trying to figure out what phone call that was [laughter] that was. [laughter] david art hogan is staying with us. Coming up, the Worlds Largest wealth manager turns bearish on stocks for the First Time Since the euro zone crisis. We will talk to the man behind that decision, mark jefe left, ubs Wealth Management mark managements wealth global cio. This is bloomberg. Alix the cable rate still down by about 7 10 of 1 . Jeremy corbyn, the labour leader, is talking to reporters. We will do everything we can to stop no deal brexit. Boris johnson needs to be held accountable by parliament. He does say he wants to call for a confidence vote at some point, so the timing is a little bit murky there. You mentioned, a smash and grab on democracy, Boris Johnsons move to have the queen suspend parliament, which helps the no deal brexit scenario come through. David he also says he once to try to get a vote on the issue to get ae wants to try vote on the issue of a no deal brexit. Hes going to try, it sounds like, to get it through parliament. Alix good. More dysfunction. David because it doesnt get suspended until such number 10th. Alix we will see when they come back from until september 10. Alix we will see when they come back from vacation. Ubs cut stocks to underweight for the First Time Since the euro zone crisis. Mark haefele rights, we believe it is prudent to take action to neutralize part of this event risk. Mark joins us now on the phone. Walk us through your call. Why now, when trade tensions . Ave been with us for a while mark youre right that trade tensions another geopolitical issues have been with us. We are starting to see the trade tensions showing up in the Economic Data, specifically in manufacturing data, and now with the high likelihood that new tariffs will be levied on goods that will impact the consumer, we think there is increased risk that this could spill over a little further into the consumer economy, and certainly pushback something of a recovery of growth further into next year. So the risk has changed a little bit, and we think that carry strategies and trying to click a coupon probably has a better riskreward now in the nearterm then being overweight inequities. Alix so that was my next question. Where does that ball of money go . Obviously its been going into the bond market and Corporate Credit market in the u. S. Where do you go and still keep in mind valuation . For u. S. Investors, certainly Higher Quality credits make sense. Like u. S. Dollar denominated emergingmarket sovereign bonds as another way to pick up some carry getting outside the United States. Then we have some carry strategies involving higheryielding emergingmarket currencies. David one of the challenges here is because a lot of the things you identify could switch around on a dime, particularly when it comes to trade policy. Weve seen it go back and forth on a dime. How do you protect yourself on the downside, but also have some upside . Mark youre right, it is an environment that things can turn around. One thing i would say is we did and analysis of the president s comments for things turning around, and it seems that when the stock market is doing better , hes often used that as an opportunity to ratchet up the tension. We think theres something of a thatn the upside, given one thing that did come out in some of the backandforth is that the desire in the United States to redraw some of this trade balance is still very present, and thats the first aspect. Discontinue, it is still should this continue, it is still going to take time for the Economic Data to turn around when the s p 500 is still trading close to 18 times. Alix jp morgan saying you might want to buy equities here in the u. S. Because of the september rally. They see European Central Bank Quantitative easing potentially restarting. They see a bigger potential rate cut from the Federal Reserve and signs that maybe weve bottomed out in certain activity measures. What is your perspective that . Mark i think the first pushback is that, as we seen, the white house has used strength to ratchet things up again. That is the first piece of pushback. The second is other risks, while that scenario is certainly possible, and we are not pritikin but the u. S. Economy goes into recession, we also know that, given the state of yields in the rest of the world and the slower economies outside the United States, even with that extra stimulus, its quite possible that yields remain low or fall further, and that should benefit carry strategies even if equities did somewhat better. David so what about the likelihood of recession . We are seeing numbers by economic surveys in the u. S. Fed monitor raising the change within the next 12 to 18 months. Where do you put that . Mark these numbers are a little tricky because many of these models will, even if you are in a recession, never go to 100 . We see the chance of a recession at this time still around 25 . As more tariffs are implement it , are implement it, as they are implemented, as they hit the consumer more, those changes go up. At some point, you are going to see more of this stimulus come through, say, towards the end of the year. But weve got a bit of a bumpy ride between then and now, so we thought this was prudent and appropriate for the portfolios. David is there a natural limit . Might there be a discount, actually . The one thing we know politically is that donald trump wants to get reelected in 2020. If he sees the likelihood of recession going up, you know he will do whatever it takes, so to speak, and a lot of it would have to do with what hes done on trade . On trade. Mark i think that is the strongest argument for why you should not put a hypermobility on recession a high probability on recession. We know the white house is following these things very closely. Yet, at the same time, i think the risks have gone up a little bit as they move into the consumer tariffs. That is playing it much closer on the white house side. The fed response last week at jackson hole, if you noted some of the interviews, i think there was a shift in tone, and that was, yes, it is the Federal Reserves response ability to react to the data and support the u. S. Economy. Members we had some x members and even sitting numbers say there is a real limit to how much we can play into supporting these policy moves, which are only going to lead to more and more cuts and could potentially further reduce the impact of the Federal Reserve to influence Monetary Policy or influence the economy. , in thisk that heightened environment, it is harder for fed policy to have an impact. Another thing going on is chinas policy response has been extremely measured to date. Should things increase or get increase or getf little bit out of hand, that policy response is no longer so reserved. Some of that ability to walk ink may bethe br taken away from the president. Ubs wealthhaefele of management, thank you so much for joining us. David coming up, who loses the least in the u. S. China trade war . Bloomberg economics put together a scorecard. We will bring you those numbers next. This is bloomberg. Viviana this is bloomberg daybreak. Purdue pharma and the family that controls it made an 11. 5 billion offer to was all of all the lawsuits from the opioid crisis. The proposal called for purdue to declare bankruptcy, then hand itself over to a trust controlled by the states, cities and counties that sued. They would have to come up with at least 3 billion in cash. The computer Design Software maker coming out with earnings that is appointed. Citi cutting its price target. Google is reportedly moving production of its pixel smart from from china to vietnam. It is converting a nokia factory in the north of the country. It is no plate it is not clear if this is linked to Donald Trumps demand that Companies Find alternatives to producing in china. Alix theres no winner in a trade war. What matters for the u. S. And china is who loses the least. Bloomberg economics had an analysis of 7000 data points that showed china will likely have the upper hand. Still with us is our token of national securities. They looked at it in one particular way, and that was supply chains. Youve seem imports from the u. S. To china fall off, but you have not seen a rise in imports from the rest of the world, signifying that companies are kind of doing without. They cant move their supply chains that much. Art that is the problem when using about, hey, we will just start manufacturing in vietnam or mexico. The supply chains we have developed right now have been developed over the last 20 years. We spent two decades developing complex supply chains. To disrupt that and think theres perfect substitution like there is an economic theory, there isnt in practice. Whats even more dangerous, the next tranche, the 300 billion worth of goods that largely faces the consumer and things like apparel, shoes, almost all of that, there is no other supply for anywhere. So win and if that next tranche, weve those tariffs on, there is no substitution. What we seen in the first 200 50 billion of goods has largely been things that help manufacturers make things. Its those types of things, at some point in time, you will be able to shift your supply chains. Right now, most of our toys, apparel, all of our shoes come from china, and it is hard to find from other places. David in terms of relative pain, what about on the export side . Does china have substitutions for people to buy their goods if they are not selling to the United States . Art i think to the extent that, and the Global Economy we are in right now and the pace of Global Economic activity, probably not. Its very much like the energy market. Theres a lot of supply, but what is happening in the Global Demand picture . China doesnt have a robust Global Economy to otherwise sell their exports to, so that is absolutely true. Alix does it make you rethink how you allocate within u. S. Equities in terms of sectors . Art yes and no. In general, our Asset Allocation model has looked at three things. The way we think about this is not necessarily over what types of things may be disrupted. We are trying to avoid things like semiconductors that get cut both ways. They want to sell into china and they do a lot of their manufacturing in china. We would instead look at software and services, much less affected by what is going on in the trade war. What is going to get difficult is how we think about agricultural. Ag trade continues to be difficult because china has already put in orders for next year, and it is not with us. It is with brazil. Those orders have already been placed. Alix which then pushes back to the farmers here, which goes to the election, which goes to them getting really mad over the last of of weeks and having biofuel conversations, ethanol, those things. Art hogan of National Holdings will be sticking with us. Coming up, we will speak to exfedranchflower about president bill dudleys oped. This is bloomberg. Alix this is bloomberg daybreak. I am alix steel. U. S. Equity futures continue to rollover. The s p down 10 points, around the lows of the sessions. European stocks take another like a lower. It is a twopronged story. One is the rush to the bond market. You can see the different examples. The two10 spread around five basis points. In italy yields are down 13 basis points. Andcord low in the 30 year another part of the story has to do with the cable rate, still down. 7 . Hard to break the dysfunction. Part the trade issue, partly the search for yield. Those factors percolating as a risk off issue continues here. Boris johnson says he plans to suspend parliament for five weeks ahead of brexit. Just moments ago, Jeremy Corbyn spoke to reporters and said they will do everything to stop no deal brexit. Joining us from paris is david merritt, bloombergs senior editor. What is on the table over the next six weeks . Mr. Johnson has just thrown an enormous spanner in the plans for the opposition. Yesterday we had the opposition parties meeting together. They concluded they will have to grab control of parliament and pass legislation to stop that from happening. Today mr. Johnson has limited their ability to do that by taking out parliament for a fiveweek period. It is not unusual to suspend parliament when a new agendas announced, normally two or three days. Five weeks is fairly extraordinary. The reaction you are seeing is furious from across the board, from the opposition and from people within his own party who oppose a hard brexit. It is a high Risk Strategy. We are more likely next week to get the vote of noconfidence. We could see people on his own side voting against his government as a last ditch attempt to prevent the no deal brexit from happening. Then we are in the grounds of a new general election. David thank you so much for reporting. Works, or as we say a wrench. We welcome now danny blanchflower, a contributing editor at Bloomberg Television and a former external member of the bank of englands Monetary Policy. Thanks for being here. We want to talk about Monetary Policy and mr. Dudleys remarks but we have to get your reaction ,o the spanner in the works Boris Johnson the queen to suspend parliament. Say. it is as you people have described it as a true, including xmen of the tory government. The chip checks members exmembers of the tory government. I think wenerate will see a vote of noconfidence shortly. This will generate a huge number of court filings. The house of commons are dense the brexit and a majority in the country. This will not go down easily. The strange thing is the obvious thing for johnson to do was call an election. This looks like his statement but i cannot win an election, so you will see chaos for the next six weeks and it will have an impact on the economy, which appears to already be in recession. David lets turn to the central bank question. Dudley we had bill right this piece for bloomberg which has gotten a good amount of attention. The heading says that all the fed should not encourage trumps trade war. What he is saying is if we cut rates and become more accommodative, it is just toouraging President Trump become more aggressive in trade policy. Is this the proper role of a central banker to take this into artan account . Take this into account . I have some sympathy, but ultimately central bankers serve out the will of the people that elections have consequences. It is hard to argue the central bank will kick against the president of the United States. In the u. K. , there is a thing called the bank of england act which would allow the Prime Minister to take over the Monetary Policy committee. There are rules to prevent that. The other thing is how do you know how much of the slowing is due to the trade war . I would put down a lot of it to the fact that the fed raised rates nine times. Is all not say this about the global trade war. There are other forces going on. I think it was rather foolish. Decideely, the people and the independence of the Central Banks only president because of the argument they can do better than the alternative. The broaderls like conversation is due Central Banks bailout politicians are not . We got a lot of pushback from Bloomberg Opinion experts, coming out very strongly against what bill dudley said. Mohamed elerian said the most interesting thing is the last thing Central Banks would want is confrontation with government officials. Arent we already in a world where central bankers are bailing out politicians . Danny the job of the central bank is to deal with the economy and take a long run view, not a short run political view. In a sense, the fed has brought it on itself. Lets look back. September,back to the fed had not acknowledged the u. S. Economy had been in recession for nine months. The central bankers wrought those kinds of attacks. The nine rate rises look to be in error at the market does not believe the fed anymore. The feds credibility is in question and the reality is are they doing a better job than the alternative. The answer for a long time was yes. It is unclear today whether that is true. Sir. you are labor, you are a labor promisor what is the chance a manufacturing recession could turn into a consumer recession and cut jobs in the United States . Danny the concern is absolutely that. I think the fed wrongly estimated the scale and raise rates at a time when a lot of people are still earning. A lot of underemployed people, the employment rate is way below what it was theyre still not substantial wage growth. If you look at the wage theory, everybody said in january we talked about this, production 4 ,nonsupervisory work was today it is 2. 4 . We are seeing slowing in the labor market at the same time as all of these other global forces, including brexit. The likelihood is we will see a broader slow down and in a sense that is why trump is panicking, why the fed is having a difficult time. The markets are telling it you will have to cut rates four time. If you dont, the markets will respond. The markets have priced in four cuts. If the fed does nothing, there will be a market move to their inaction. Alix what you make of bill dudleys point talking about the fact that Central Banks efforts to cushion any blow will be ineffectual but will wind up making things worse . What is your response to that . Danny i do not see any evidence to suggest supposing we see lets say they cut five times between now and next to jude. Id and next june. I do not see how that will possibly make things worse, given the economy is slowing. Saying, getamous your retaliation in first. Data vindicated are slow to come in. It is hard to argue right now that what dudley says is plausibly true. I give it a 0 plausibility of being true. I do not think that is on the table. We are in a global slowdown. Why would you think that china to respond with stimulus to a global slowdown what hurt . You may worry about peoples risk behavior, but the central thing is you stop the economy changing. Alix great to get your perspective. Danny blanchflower of dartmouth. Still with us on set is art hogan of national securities. What did you make of that, that it could do more harm than good . The other angle is even if they cut five times it will not do any good. Art i think there is some truth in both of those. Looking at how the fed feel sitting around the table. In terms of economic theory and economic policy, everyone sitting around the committee as opposed to tariffs. Whether you say that out loud and keep that yourself and focus on your dual mandate, there is no one on Federal Reserve saying i think a great way to your a de is the use of tariffs to negotiate trade is the use of tariffs. If we look at financial conditions right now, the ability to get capital is as easy as it has been throughout the cycle. Is that when you should be coming rates . Cutting rates . How effective is that. How effective is that . The larger point is here is a group of people that do not believe in tariffs and they know theyre enabling them every time they hes policy more at a time when it might not help they keys policy more they ease policy more at a time when it might not help. They remain datadependent at we will see how long it lasts. The longer the trade war lasts the more aggressive they will have to get with stimulus, and that is the long way the wrong place to be. David i recently talked to the head of the Investment Firm the Rock Creek Group and formerly a senior official at the world bank about the effects of central bank such as the fed keeping Monetary Policy so accommodative. The danger is that, in is one of our biggest strengths in the u. S. , where we are very innovative and create new companies and get them to grow fast. That is a good thing. Having capital available to do that is wonderful. The issue that is going on is because so much capital is going on, whether it is in the u. S. Or in asia, the danger their is that a lot of companies that have low profitability and will also not be profitable in 10 years, and especially if we have a downturn will get hurt or not exist. They are getting funding today. That is dangerous. David with the Central Banks, the fed, the ecb, so much involved with the marketplace. Is it inevitable they will become more political . They have become incredibly powerful, and what is interesting is that the Federal Reserve or the bank of england or the ecb traditionally will run by economist, people with strong economic strength. Today, as we are looking at the new leadership, the ecb decision, at the same time we are getting leaders in the u. S. At the Federal Reserve and leaders in europe who are not just coming from economics, but they have had political experience in their jobs. Alix that was part of my interview david that was part of my interview with the founder of the Rock Creek Group. The full enter the full interview airs at 9 00 new york time. Now we turn to Viviana Hurtado with first word news. Viviana puerto rico is bracing for a hit from Tropical Storm dorian. It is likely to bring heavy rains but not the devastating wind seeing with parking maria. The storm is likely to be a hurricane after hitting puerto rico. In italy, it appears the new government will be headed by the current Prime Minister. Movement and the centerleft democrats are headed for a deal following days of stop and go negotiation. Donald trump has told eight he will pardon lawbreaking has told aides he will pardon lawbreaking if necessary aides reporting the president ordered they have also been told he has aggressively seized private land two aggressively seized private land and disregard environmental rules. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Viviana Hurtado. This is bloomberg. David coming up, the potential remarriage of altria and Phillip Morris. Ts part the potential what has sparked the potential reunion after they broke up more than a decade ago. That is next and this is bloomberg. Viviana this is bloomberg daybreak. Coming up on bloomberg markets, tom lee, muskrat Global Advisors cofounder. This is bloomberg daybreak. Here is your Bloomberg Business flash. Amazon is seeking exclusive programming for its streaming service. Amazon is talking to studios and other tv programmers as it builds tells builds out a service. The journal saying amazon may create always on channels focused on genres such as crime or lifestyle. The crackdown by airlines on some models of the apple macbook pro. Qantas is barring some models from checked luggage because of concern the batteries could catch fire. Virgin atlantic, singapore, and Thai Airlines have impose their own restrictions. Apple recalling the laptops involved. I am Viviana Hurtado and this is your Bloomberg Business flash. Alix hudson bay is trying to sell the operations of lord and taylor to a clothing subscription company. The price tag is about 100 million. Hudson bay looking to sell its operation of lord and taylor, but once to maintain ownership of the underlying real estate good that make sense. David it is time for bottom line, we look at three Companies Worth watching. We are joined by emma chandra and taylor riggs of Bloomberg News and Brooke Sutherland of Bloomberg Opinion. First we want to look at tiffany. Emma tiffany just came out with their secondquarter earnings. They are rising as they beat on earnings per share and maintain their for your guidance. Advisory saying this was as expected. We did see the company miss on a key metric of samestore sales. We always talk about this when we talk about retailers. They came in 3 . Two times worse than analysts had been expecting. That has been caused by dramatically lower spending by International Tourists in the u. S. , particularly lower spending of tourists from china, impacted by the stronger dollar. The spending is crucial to brickandmortar operations of tiffany in the u. S. , particularly its 5th avenue store. This is something that has impacted tiffany over the past few quarters. If we take a look at tiffany stocks over the past year since it set a high in july, the stock is down about 40 . That has been weighing on investor sentiment. Sayingeless, the ceo they are focusing on things they can control, including and accelerating new product and building the profile in asia and china and india. Alix thanks so much to emma chandra on tiffanys. The Second Company is palatine. Pton, ther me it is ticker listing they have filed for on the nasdaq. They are looking to raise about 500 million. Eight to 10 billion is the valuation they are looking at, which is higher than 4. 2 billion in the last valuation round. Topline Revenue Growth is growing. Up 99 . 110 yearoveryear. The bad news is the losses on the bottom line are growing. Now looking at losses of 200 million, up from 48 million the year before. In the statement, they are saying we may not be profitable, and if we are we may not be able to maintain that profitability, is citing the stickiness of the customer. 92 of those who have subscribed are still active subscribers as of june 30. Alix the last set of companies is Phillip Morris and altria. Brooke sutherland has more on the merger. Brooke they came out yesterday and claimed they are in talks for a merger. This would be a reunion because Phillip Morris was spun off from altria into 2008, the idea being to now the companies are thinking about getting back together. Wall street is not sure what to make of this. Divided opinions. Phillip morris stop falling nearly 8 yesterday. Altria down for percent. 4 . Own david that is the question. What is the overall climate . The reading is more than the the reunion is more than the biggest in the industry. Smoking habits have changed a lot since 2008. Brooke demand for traditional cigarettes is down but we are seeing a surge of demand for ecigarettes and vaping devices. They do have this device that feeds rather than burnt that heats rather than burns tobacco it is supposed to be better for you. The idea is if you merge that it makes it easier to market and sell. You get some synergies for putting that all under one room and it is easier if you all bring in rather than cannibalizing yourself. Alix what is also happening is lawsuits related to vaping. How will they deal with that . At the same time he of regulatory issues. Brooke that is why some people are saying this makes a lot more sense for altria than Phillip Morris. If you are Phillip Morris do you want to take on the regulatory risks with juul . We thought we might get some answers on what regulators want to do with juul by octobers, so that could be what regulators are waiting for. There has been the reports about the very dangerous respiratory illness they think might be connected to vaping. Not sure why that is happening. A lot of questions. If im a Phillip Morris shareholder, i would be worried about taking on this incremental risk. David s overseas demand still growing faster than domestic . That is the original reason they split them up. Brooke it is, but you are starting to see cracks there. Even in japan, which has traditionally been positive for cigarette sales, you are starting to see people move away from that as Health Care Concerns rise overseas. Maybe they see more Growth Opportunity in the u. S. With the rise of these nontraditional cigarettes. There is also an opportunity to take the i code and expanded overseas. Phillip morris has the infrastructure to do that. L has only made marginal inroads internationally, but that is contingent of this being allowed by regulators to go forward. Alix Brooke Sutherland, great deep dive. Thank you very much. Puerto rico is prepping for a storm. If you live in florida you need to pay attention. More on what i watching, next. If you are jumping into your car, turn on Bloomberg Radio heard across the world on sirius xm channel 119 on the Bloomberg Business app. This is bloomberg. Alix heres what i am watching. Puerto rico and Tropical Storm dorian. Theou take a look at function that shows you all Tropical Storms, picking up steam to puerto rico. It looks like what you might see is divergence. Floridas east coast could be hit. They wind at 60 Miles Per Hour. It could pick up to 100 Miles Per Hour and could be a category 2 hurricane when it hits florida sometime on sunday or monday. David right now it looks like it will hit up to the east, not the center of puerto rico. Alix hurricane seasons, it feels like, have been getting worse and worse and creates the question who pays for that . That does it for bloomberg daybreak americas Peter Bloomberg daybreak americas. Coming up, the open with jonathan ferro. This is bloomberg. Jonathan from new york city for our audience worldwide. Im jonathan ferro. The countdown to the open starts right now. Jonathan coming up, the treasury market weighing on investor sentiment. 30 year yield alltime lows. Italian bond yields making fresh records with politicians on a course to avoid recession, and Prime Minister Boris Johnson looking to impair parliaments ability to block a hard brexit. Good morning. Here is your wednesday morning price action. Futures negative three on the s p 500, down. 1 . The bond market in the drivers seat. The 30 year yield at an alltime low. The tenure of down four basis points. Lets begin with the bait issue the 10 year down four basis points. The bond market in the driver seat. A huge rally. A flight to safety. Bond bears are dead. The Growth Outlook is challenged. The fed is