, with the small moves for stocks, it would make sense to look to other clues. Investors look to the volatility index to see whether it is on the rise. Whether these record highs can be sustained. Another volatility index is on the rise. The index in white. Some of them call it a panic index. Year,e in july of last when the s p 500 was carving out new highs, the scio index was high. Skew index was high. Keep this in mind, considering we have the vix low, the skwew s px on the rise after the 500 is at record highs. We have talked about green shoots, and one of the things that backs that up as the resteepening of the yield curve. The spread between 10 year and two year yields rose above 25 basis points for the First Time SinceJuly Caroline july. Inverted fort only a week late in august. There has been a noticeable flattening of the curve. Long head has rallied stronger than the short head. Basis ifpositive by 22 you look at the spreads between two month and five year yields, its a different story. Thats a curve that was inverted from the middle of march through the end of october. It has since steepened and hit 19 basis points. It has really flattened since then. The low was about three basis points today. Of the curveart that do professor kam harvey identified when he was looking at the curve as a recession symbol in the 1980s. About three basis points, it is clear he may be looking at worries about the yield curve as a recession signal soon. In a world where geoPolitical Risk is high, the bulls are full, and margins are wide, we advocate a valued approach to the market. The curve youre looking at is the cds cash bond basis for em u. S. Dollar sovereign debt. That of the 16 constituents with available data, they all have a negative basis. You can own the long bond and default protection at cheap levels, meaning you can reduce your default risk, have near zero Interest Rate risk, and still have a positive spread again above u. S. Treasuries. This is an highyielding countries like brazil, mexico, russia and south africa. A fantastic chart. Joe i love that show. You can find it on gtv go if you want to find it. Luke, i want to back with to what brian mentioned. He talked about jay powell. Did he say anything in his system money to congress that move markets or gave us a hint as to how the fed is thinking about things . Luke not really. It was deja vu. One comment yesterday that did stick out was him pointing out and reinforcing the room to grow on the labor market and the idea that the fed would wait to see some heat. That speaks to brians point about the bar for cutting and the par 4 hiking being two different things. If there was a change in testimony today, both days, he stressed the idea that the longterm budget outlook is unsustainable. This time, when he was asked about being on the track for 10 years would be dday. He said, he things that is a while off, because of the strength of u. S. Institutions, depth of u. S. Financial accents assets. They think the runway is longer. They think the u. S. Has the ability to engage in countercyclical spending. Joe will the fed be on hold in election an Election Year . There is a thought that for now, rate moves are out of the picture, barring something dramatic. Will they sit on their hands for a while and revisit in 2021 . That will be their preference if they can do it. They would like to be on the set the sidelines. The bar to hike any an Election Year is much higher than cutting. They are sensitive to trade policy uncertainty, deterioration and data. In data. They have been effects in terms of what consumers are buying and what has been going on in the housing market. Are loose at the moment. I dont think theyre going to cut borrowing again, but i think there will be in their cutting if they dont. Not going to are factor in the trade deal until we have seen the signatures on the pieces of paper. You are worried about the headwinds coming in from the global trade concerns and a deeper slowdown. What are you doing with her portfolio . Where you put your money . We are not overly enthusiastic about hedges, how high the s p and dow will be able to climb next year. We are not overly enthusiastic about earnings growth. With this is one of those years were growth outperforms. We have seven health care and tech. We know health care will be interesting in 2020. The Political Risk is somewhat priced in an overblown based on the conversations we are having. Those will be the areas we are parking money. If we are dipping our toe into the value, rotation or cyclical rotation, it would be more in financials than energy or materials. What we make of the rotation of value and growth what we make of the rotation of value and growth . We have seen so many head fakes, that has never taken off. Luke this seems like the most durable opportunity. If you want to go back to the idea that value did not take off when we had a period of synchronize Global Growth and rising yields. I think after that, everyone said, value cannot work now, that it will never work. This is causing people, because at this point, what has been a good couple of months, reevaluate those positions. If you look at the scoreboard for the bull market or for this year, youre going to see growth outperforming. You will see expensive names, software ive been looking a lot at recently. If you are over eight times enterprise value to sales, you got there by rallying so much more than the market. Many names are doing better than software large. Joe are you surprised that we have seen this big move out of the expensive stuff. We have seen the unprofitable Growth Companies like uber and b eyond meat get slammed. We saw the appetite for a haveny like wework to disappeared, and yet we are at alltime highs . If you look at where the pains come in in the fourth quarter, we talked about what could push Interest Rates higher than they are now come up to 2 or above. Its the same story. What can keep the value story going . Those are the stories that is something we dont know. A lot of the more expensive names, take it out or doing theyve done less well. I think that reassures us that, while we are not overly enthusiastic about the next couple of quarters, we dont think the cycle will come to an end. We dont think we are overheating. Cannabis should cannabis stocks show profitability. That seems to be the mantra of the market. If you dont show it, we will beat you up hard. Will that continue . The threat to Profit Margins are not going away. It costs will be up yearoveryear. What you are doing in terms of investment to grow your business. As a whole, the economy is not moving in that direction. Get us set up for tomorrow, friday morning. What we have to look forward to . Luke justin most important part of the economy. Thats what people will be looking for. Get the reassurance that the u. S. Consumer is doing with the u. S. Consumer is doing. Brian noted that for the last two quarters, all of the growth has been courtesy of the consumer. If there is any hick up that front, that is something you could see exacerbate the bond in thehat we have had consolidation in yields this week. Thank you both so much. That does it for the closing bell. Romaine bostick is stepping in for whatd you miss. All the updates on what people are buying and selling. This is bloomberg. Caroline live from bloombergs World Headquarters in new york. Heres a snapshot of how we wanted to eek out some gains on the s p 500. We are close to. 5 up. Joe what did you mess . Miss . Caroline germany dodges a recession. Just. Major head hedge funds key filings in a few moments. Hong kong, paralyzed through protest. End tont xi calls for an the violence that closed Public Schools and caused some companies to tell employees to stay home. Joe lets take you around the world. Lets go through some of the data globally. Chinas economic engine is still sputtering while exports fall, and growth hit a record low. Investment growth hit a record low. Exports fall amid trade tensions. Germany, dodging a recession. The finance minister thinks the economy is growing slowly, but is not in crisis. We have always described the situation as Something Like cautious optimism. If you look at all the data and projections, you would understand there will be growth, even if there is bigger growth next year. Joe for a global view on the economy. Bank bring in the deutsche chief except economist. Some trough or reb the, it is one of narratives that people have been telling as this market has picked up over the last several weeks. Do you buy it . Trade war uncertainty has been a driver of holding Global Growth down in the u. S. And europe. It looks like the target derivative is Getting Better intrusive uncertainty being lower than it was. Issue is about what it means for how planning will go on in the minds of ceos and cfos. Will they allow a lot of spending or will they pull back a result of the uncertainty . Romaine amid all the data, the ones that stood out was the data on china. Some of the weakness there seemed to be not all about trade. That there were other issues that were china specific. When you look at the global economy, to get the growth of a higher rate, can it do it with china in this mode . Gosten if you type ecf see ecfc ,go. It will tell you what to expect. Global growth is better than interpretation. Its reputation. What is to be watched is how much it will drag after the uncertainty. There are stories about brexit and u. S. Sentiment. Manufacturing and nonmanufacturing have not turned around. We would like the data to turnaround more strongly, particularly in the u. S. We have a soft patch ahead of us, but we are still optimistic on u. S. Growth in Global Growth next year. Much, when we start to say, ciscos results, a big drop, especially what is happening in china, Business Development has not happened there. What do you think is needed to have a trade deal that gives us confidence for the unleashing of investment from businesses . Will they just look to the next set of uncertainties . Torsten this is really the achilles heel. X have had a slowdown in cap in the u. S. There is really noticed u. S. There is really no sign it will let up. They are still suggesting there is more downside to cap x. The question becomes, can the consumer hold up growth . Hopefully the uturn will be quick. If it lasts longer and it then weworse in cap x, could see a bigger drag on gdp growth. Upn, consumption, holding it , up. Joe lets suppose we do have a trade deal. Would that do anything for ceo and low not officer loan officer confidence . Shock thatermanent will not tip us into recession can be just dont get a rebound . Reboundjust dont get a recession, you just dont get a rebound . Torsten this is an important question. If there is this uncertainty in terms of planning for cap x, it could be that the trade war to go away with a phase one deal. Is, what if other uncertainties appear . Willegin to worry, corporate spend . Or could be an excuse for them for holding back and say, we wont take out that spending . Romaine some breaking news. Nike just crossing the wire. It raised its quarterly dividends. It had been . 22 a share. It is going up to 24. 5 cents a a share. 24. 5 it appears to be an annual increase they do that they have been doing for the past two years. This is bloomberg. Funds disclosing their thirdquarter investments. The 13f filings are coming fast and furious. Standing by his abigail doolittle. We have found out quite a bit. The 13f for Berkshire Hathaway has been released. That is one everyone eagerly anticipates. There have been changes to the portfolio. They have reduced for positions. We have apple reduce, not in a big way, but it was a cut to apples position. A bigger cut to wells fargo. The reduced they are in syria satellite and phillips 66. Into Occidental Petroleum at the piece of that was the funding deal for anadarko. And then, the former Restoration Hardware. Thigh. E added shopper shopify. Took away its unitedhealth position. Managementase tiger get in on quite a few ipos. We will be watching for other breaking 13fs and we will bring them to you shortly to see what some investors have been doing. In june. An ended when it ended in june. Caroline lets turn our attention to more earnings. Walmart is pulling out a win. Shares slumped after hitting a record high earlier. It closed on the today up 1. 3 . Our reporter joins us from washington. We did not get euphoria in the share price, but we did see real execution. What is the winning formula they are managing to pull out . The strong comparable sales growth is was built on growth and transactions. A proxy for foot traffic. Also, when people are coming into the store, they were buying more expensive items or adding more items to their cart. Of their strength has been grocery both online and instore. This is what is powering their online growth. Its how they differentiate themselves from amazon. Understandoceries, i why they may be making inroads. Will that be a winning formula from a profitability standpoint . When i hear groceries, i dont think of a Company Making a ton of money selling onions and canned soup. Thats a great point. Grocery is important to them from a traffic perspective. You are right that profit is an issue there. One thing Doug Mcmillon told investors this morning was that on walmart. Com, while food is strong, they need to do a better job in general merchandise. Categories like home and apparel, where the Profit Margins are fatter, that needs to be a place where they continued to pick up share with consumers. The hope is that grocery drives frequency. Its the thing that brings footfall into your stores and makes you loyal to walmart and get you coming back again and again. Joe is there a halo with groceries, such that, if im inclined to shop with walmart grocery, i will buy other stuff, or has that it be proven . I think thats what they are counting on. Thats why they are changing their grocery offerings so that their program used to be that they could just buy groceries, now they are adding more merchandise to the offer on the theory that you will come in for the food, and then they will hook you to buy more stuff over time. Caroline where is amazon in all of this in terms of the competitive nature . They made a purchase of whole foods. You may clear in your story that they have a mixed message and will start is making it clear. Thats right. Amazon spent 13. 7 billion on whole foods a couple of years ago. Whole foods is essentially the same. , but have been price cuts the instore experience feels the same and it has not exactly let the grocery world on fire. It has not really change the competitive set any meaningful way. We had news this week from amazon that it will start an entirely separate grocery chain. This raises a lot of questions about what it strategy is. The idea buying whole foods and cutting prices to was to open it up to a more massmarket consumer. Why did they need to start a separate chain to reach more shoppers and how does that coexist with amazon fresh, their ecommerce grocery operation it has had. Had . Joe always great to get your insight. Caroline lets get a quick check of the latest headlines. Bloomberg has learned that apple is looking to bundle its paid Internet Services next year, with the idea of attracting more subscribers. They sold apple news and plus as part of a bundle, the publishers would get less money. Uber with a 650 million employee tax bill employer tax bill. They say they have been missed classifying drivers as independent contractors. Unemployment and make sure that the taxes are paid. Uber will fight the decision in court. Warning investments is baby boomers to lay off the stoxx for stocks. 70 are iney have retirement. Most one tent of boomers are entirely inequities. In1 10 of boomers are equities. This is bloomberg. Whether youre out here on lte. Or here on a wifi hotspot. Xfinity mobile has more coverage to keep you connected to what matters most. Thats because its the only Wireless Network that automatically connects you to millions of secure wifi hotspots and the best lte everywhere else. Switch now and see how you could save up to 400 a year. And get 50 off when you buy any new lg phone. Xfinity mobile. Click, call or visit a store today. I am Mark Crumpton with bloombergs first word news. Two teenagers are dead and three others wounded one another teenager open fire in santa clarita, california, north of los angeles. The shooter reportedly pulled a gun from his backpack and shot five other students before shooting himself. It is a sad day in Los Angeles County and the nation for another tragic shooting at a school. The sheriff station received a call that a shooting at saugus high school. Mark the other victims remain hospitalized. There shooter is in grave condition. European Investment Bank has approved a new Energy Investment plan that would have the lender moving away from financing fossil fuel projects. The Vice President made the announcement in a Conference Call today. Venezuela is skirting sanctions with a boost in oil exports. It loaded 2 Million Barrels of oil onto a tanker under contract for Russian State Oil giant the vessel was in western europe. The transponders were turned off before it slipped into venezuelan waters. The practice is becoming more common as shippers look to avoid penalties. Alibaba cofounder jack ma is concerned about the trade war between the United States and its native china. In an interview with bloomberg from west africa, he said he does not see tensions getting resolved anytime soon. Say usa and china relationship might be in some turbulence. Next 20 years. We have to be very careful. Comes as therning United States and china are struggling to complete a phase one trade deal. The Financial Times reports officials on both sides remain locked over agricultural purchases and tariff rollbacks. Will news on air on at tictoc on twitter power by more than 2700 journalists and analysts in over 100 20 countries. I am Mark Crumpton. This is bloomberg. Canada stocks have been in freefall with most progressing back to 2017 levels. On theth the latest cannabis, we want to bring in a Research Analyst from William Oneill and company. We got the numbers, they were pretty bad. 156 loss. The are not going to meet 250 million target. The ceo said there were several known factors as to why they missed and once those are dealt with, they will hit that target. What are the factors . There have been a lot of roadblocks this year. The slow rollout of stores in toronto, which has 40 of the cannabis population. That has been the big roadblock, among many. Most of these producers think once the store count, which has been growing, is up to speed, they will be selling more. Canadae slow rollout in was well understood and flagged from day one when legalization happened. What has been the biggest error investors have made . The repricing of risk was massive. Andrew one of the largest mistakes is the assumption the black market would switch completely to the legal market. If you look at some analysts, some management consultants, the reports they put out assume that over 80 of blackmarket customers would transition to legal challenge within the first year. It is about 20 . Caroline long term, the euphoria we saw on the share prices, does it still stand in a long term . Or are we going to get the slow movement from illicit to regulated, slow Movement Worldwide . Andrew i think if you spoke with a lot of these ceos of these companies, even a year ago when the Canadian Market was about to art, what they were excited about then and what they attributed their high valuation to was this opportunity. International sales have been immaterial. That is still why some of these premiums enjoy these evaluations. It is not about the market. Right now canopy did 4 million in cannabis sales. Basically nothing so far. Joe what explains the failure of the legalized recreational entities failing to capture more of those sales going to the blackmarket . Why dont people want to go in stores . Andrew in any industry, especially a lot of the sales come from a small portion of customers with High Frequency users. In canada, the people who are heavy consumers are sensitive to price. You might not be if you are a soccer mom that is trying it out and you want to get the best product. Otherwise you are not going to want to pay higher prices. Romaine a year ago there was this proliferation of companies coming to market. What about this possibility of consolidation when you consider the valuation of some of the stocks are down from where we were a year ago . Andrew there could be consolidation. A lot of these companies are going to go away. Is no advantage to partnering. Andrew there is so much Production Capacity right now already. It is not that expensive to build. As of august, 16 million square feet of production space in canada, active square feet. Thats enough to produce one point 6 billion grams of marijuana, which is 50 grams per person. Per adult. There could be 150 joints per year, per adult. There is overcapacity there. These companies dont need to buy more capacity. A lot of these companies that stockublic were really promotions that they wanted to build up the story and dump it on the public markets. You are starting to see some real issues. Much,hank you very andrew. Gianters at a mexican oil have been crippled and the hacker responsible is demanding 5 million from the company i the end of the month. Heres with the story is will who covers this for bloomberg news. Thanks for joining us. With these attacks, and youve been reporting on a lot of these, how often do they actually get paid . Or do companies say, heres the money . Say sometimes companies do we are going to pay. Calculus, howr well did we backup our system. These companies that got hit will go, lets check the backups. How bad did we get hit and how long have the hack is been in our system . How urgent is that demand . Is the company about to fall apart . We dont actually have great data on this. A lot of the companies will hire an instant response firm. We dont know. There are some companies that do pay. Some companies, 5 million may not be that much. Caroline it feels as though theyve gone to kick a company while its down. Pemex is not in the fittest shape. Do they go to Vulnerable Companies . Will when you target a multinational company, hackers will look for Vulnerable Companies. They will take their time to see where the pain points might be and no how to make it as dramatic as possible to increase the chance of a payout. You are right. Is strapped pemex for cash and try to get more. Romaine you cover this industry a lot. There are a lot of Companies Selling protection for these companies. How do they factor into this and will we see them benefit from this onslaught . Industry is exploding. Everyone is terrified. There is no silver bullet. No one can guarantee you can stop packing. If you do not implement them, it might not work. Even then, if you have a sophisticated hacker, hackers in russia, that their entire life is hacking, you might not be able to defend against that. Law do authorities or enforcement have any view on this . Do they say dont pay . How does that interaction work . Will the fbi says dont pay. You are making the problem worse. There is a good argument not to pay. If you do, they may tell their friends, this company will pay. Say, are companies that you are screwed. You might just pay. The weird thing is there is this honor among thieves. Some hackers, you pay them and they will give you the key. Caroline is it always crypto they ask for . Will mostly bitcoin. Caroline great to have you. Keep on the amazing coverage. From new york, this is bloomberg. Caroline hedge funds are disclosing their findings. We have a breakdown. Certainly a lot of exciting news in terms of those 13 investors. Ago we updated you on warren buffett. Lets do that again. They have made some changes. They trimmed their positions and apple, wells fargo, and phillips 66. They added positions in Occidental Petroleum, the people for theance convertible anadarko acquisition. They also added rh. As for some new positions, David Einhorns green light added newbase therapeutics. Square,eds pershing they trimmed the chipotle position. Elliott management added at t among other positions. Tiger global management, chase colemans fund, they added something stake and duquesne boosted their stake in amazon and ge. More headlines as time goes on. What exciting to see investors have done in the quarter ending in september. Romaine thanks, abigail doolittle. , abigails now mentioned apple stakes slightly trimmed. One of the better performing stakes they had. And Restoration Hardware . I know. Who knew. Like i thought the wells fargo was interesting because by and large buffett has doubled down on banks. He was defending wells fargo. The new guys in town. To see buffett pair that was interesting. How people are paying the Tech Companies are interesting. Joe we have seen this rotation and prices. What do we see when it comes to Hedge Fund Positioning . Comes, when volatility it is good for hedge funds. Was one of the biggest selloffs last quarter. Off withring microsoft. That trend is continuing. Come tomorrow we will see what that looks like. We also have amazon and netflix, one of the biggest launches of last year doubling down, adding more to that. Paring back on alphabet quite a bit. Diversions. Come tomorrow we will have a grand view of what the data looks like. Caroline facebook looks loved. Sought hard by the founder. Is my favorite to talk about. You did see the cuts. They are hanging on, even though travis has sold it off. They are holding that position. It has only fallen more since then. Something that is interesting, and ipo company is slapped where they have sold stocks also. That is interesting given they had some pain. Not facing those existential issues you see in uber. Romaine we saw some minor positions. Ipo this year. We had a lot of ipos that flopped or did not do well. Palatine, smiled direct. Names pop up those a lot. Sonali softbank also. Do you follow softbank . Romaine she knows everything about softbank. In all seriousness, just jumping on those hot ipo trains, we did see a little bit of that at the little bitq3 was a quieter for ipos. Do we still see that appetite . Sonali we do. This is not a public company, door dash raised money. You do see a risk appetite, even for softbank, caroline. I would not say people are legally off these completely off these ipos, especially for health care. Viking did sell their stake in united health. It is super interesting seeing them leave some big positions when that is a politically charged name. Caroline thank you for giving us your early take. The latestck on headlines for you now. Cowboy owner was in talks to buy shell, valued at more than a billion dollars. If oilt not be viable and gas prices stay low. Lasts for benefits rose month. It could reflect seasonal adjustment issues. Jobless claims hit a 49 year low. That is your is this update. Your business update. Joe chaos in hong kong as anxiety builds over what china will do next. How the government is responding. That is on asia head. This is bloomberg. Caroline time for a look at what is trending across the bloomberg universe. Hey are starting a hedge fund with about 750 Million Dollars and commitment already. It comes in a difficult fundraising environment after years of mediocre returns. Bloomberg. Com has a story on apple which is considering bundling it paid services as soon as 2020 in a bid to gain more subscribers. The latest sign of the strategy is the provision apple included in deals with publishers that lets the iphone maker bundle the news plus Subscription Service with other paid offerings. Tictoc on twitter has reported nike will pull its products from amazon to sell more directly to customers. Moveplit comes as the toward online sales. Nike is not alone. Undercut sellers to prices and sell counterfeit products. You can follow all of those stories on tictoc on twitter. Now to asia head, xi jinping calling for an end to the violence in hong kong saying restoring order in the city is urgent. This comes after the protests have closed Public Schools and forced some companies to tell employees to remain at home. For more thats bring in shery ahn. Thinking about all of these companies that are telling employees to stay at home, the economy was already looking very terrible. The last gdp reading was worse than any economist expected. This only seems like it is going to exasperate it. Shery the biggest slump in about a decade. We get the final reading this morning, more confirmation hong kong is in a technical recession. We are seeing this demand for cash jumping. We are talking about the hong kong dollar as this chart on the bloomberg shows. It has been spiking. When it comes to the three month, we are talking about the highest levels since september 1999. This coming at a time when the hong kong dollar is also weakening and trading toward the weaker end of the trading band. There isl suggests this aversion to hong kong assets. Romaine i want to talk about practical issues. When we started to see these protests, there was still business as usual. We are starting to see cancellations, there was a pride parade that was nixed, a music festival, they are going to move an exam back to avoid having it on a weekend. How is this affecting the larger businesses and these larger events . Is this a state where they are not going to pull these things off . Shery right now for the next week there are tons of measures being planned by companies. We have heard from Hong Kong Financial institutions telling their employees to work remotely. We have seen one banker being caught in a viral video being surrounded by police. , walking onesses eggshells trying to manage the situation in hong kong. The violence has escalated to a different level. We are talking about a death. We had not seen in five months. Last friday we had a debt from a student who fell off the parking lot. We have another man who just passed away, he suffered a head injury. He has passed away. A 15yearold boy in critical condition, undergoing brain surgery from a tear gas canister. Things are getting very violent and heated. The problem is that nobody knows where it is going. We are hearing more strong quoting from president xi jinping talking about punishing violent criminals. What is next . Caroline and what about the United States and International Players . How are other governments weighing in . Shery today we have the senate saying they are going to try to expedite the hong kong human rights and democracy act that has been passed by the house and the Foreign Relations committee. They have not put it to a full senate vote. Now what they are going to do is they will run the hotline on the bill which means they are going to expedite the process. Senator marco rubio was tweeting that they had made progress. Basically we could see this vote anytime soon. What that means is a special review every year. Caroline fascinating. Thank you very much indeed for more on the stories. Dont miss daybreak asia and australia. Dont miss this, the oil report comes out. Joe and Economic Data numbers for retail sales in april. That is all for whatd you miss . Caroline have a very good evening. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort. While premium foams relieve pressure, keep you comfortably cool and limit motion transfer. Leesas hybrid mattress is not only recommended by experts, experts choose to sleep on it too. Order online and well ship it to your door so you can try it risk free. The leesa hybrid is american made. Built to last. And, because Everyone Needs a place to rest, we donate tens of thousands of mattresses to those in need. Experience the leesa hybrid mattress. Right now, its on sale. Order today. Go to leesa. Com. Taylor i am taylor in for emily chang and this is bloomberg technology. Apple considers bundling digital services. We have details. Plus, the standoff simmers. Alibaba founder jack ma says the u. S. And china