Transcripts For BLOOMBERG Bloomberg Markets 20160816

High but today we are down. That has been the pattern over the past months. Every time, it has fallen. The other tally we have been keeping, it is now 26 straight sessions that the s p has not had a move of at least 1 . Tightened, soages that seems to be the case today. Once again, weve got significant movement. Weve got some deals today and potential deals. Share, a 90 premium to jim case close yesterday. You may be wearing their products, they make uniforms workplace uniforms and linda combine to to form the Worlds Largest supplier of industrial gas. Those stocks are rising, linda not rising. We continue to watch Retail Stocks on those companies earnings. Weve got fixed Sporting Goods and home depot is unchanged. Secondquarter profit of 9. 3 . Earnings were in line with that. That seems to be preventing the stock from doing better. s is raising its annual forecast. Matt breaking news on epa rules. A hot commodity lately since carl icahns letter was made published by bloomberg news. The epa is coming up with tougher trucking regulations. Both concerning tractortrailers which will require 10 bigger cots cuts in emissions than the epas proposal last year. Carbon emissions will drop by 20 last year, compared with the standards required for 2018 models. Getting more stringent over the next decade. Pickup trucks and vans would be affected to. To awould have to become half percent more efficient each year until 2027. All we got from a statement from the white house. All this ties into commodities. How are commodities reacting . I should mention, i am looking through the truck makers on this news. One of the other stocks that we watch on these headlines is navistar. Bouncing around a little bit but not seeing a lot of change. An engine maker had been supported supportive of these changes because it makes the advanced Technology Engines that would potentially benefit from these changes. We will check on those as the day progresses. The u. S. Dollar has been declining over the past week, it has declined particularly against the japanese yen. This decline has been benefiting commodities, particularly oil products. If you see the same chart for oil, you see the inverse. We have increases of eight and a half percent. On this speculation, some kind of action to perhaps limit production at the opec meeting next month. We have been watching natural gas which has been bouncing and in terms, 6 10 of 1 of natural gas and oil producers. Chesapeake leading the pack. Metals have been rallying a little bit because of that decline in the dollar. Gold, copper, platinum, all seeing a boost. Matt now lets check in on the first word news. Mark has more. Hillary clinton has jumped out to a big lead over donald trump in virginia. A new poll gives clinton 85238 lead. That springs to seven points when thirdparty candidates are included. Have started to reseed in louisiana but rivers and creeks are still above south of the capital, baton rouge. 20,000 people have fled their homes and at least eight have died. Warplanes have found an Islamic State stronghold in libya today. The attacks bring the number of airstrikes to 48. The u. S. Began its campaign on august 1. The Bombing Campaign is critical to protecting National Security interest by denying Islamic State interests a safe haven in libya. Russian warplanes are using a base in neuron to attack the Islamic State. They attacked the city of aleppo today. Vladimir putin discussed the fight with irans leader. Fewer people in the u. S. Are getting food stamps. Employment is down 9 to a little bit more than 43 million. Seven states are ending benefits earlier than they have to. There are almost twice as Many Americans getting food stamps then there were before the recession. Powered 54 hours a day in more than 120 countries. I am mark crumpton. Scarlett there is no shortage of fed communications. Morning, bill dudley suggested a rate hike is possible, edging to the point where it would be closer appropriate to raise rates. John williams call for policymakers to rethink how they operate in a new economic environment. Aree nominal targetings options, fiscal policies must take on the burden to sustain economic growth. Joining us now from london is hot record, is constant reddick or. We are awaiting Charles Lockhart later on today. It is interesting how these points come across. He wrote an essay that seemed more like an academic expansion than anything else. Float aley is trying to trial balloon with his comments about the possibility of a september rate increase. How does each of these fed speakers set up for what janet yellen will likely say . We think that the central bank in the u. S. Is not going to hike rates this year or next. We we have to look into Inflation Expectations that have not done what you would have expected they would have done. Why Inflation Expectations have been held back has a little to do with the global aspects. Overcapacity, and it especially is emphasized in asia. Is depreciating in trade rated terms, currently at an annualized rate of 11. 5 . The United States is a part of the global. Within that, it is going to be difficult for the Federal Reserve to hike rates. It would initially increase rates in the United States. It is what drives the u. S. Dollar higher. It takes Inflation Expectations to a lower level and therefore, i would say it would be a mistake. The target must be to allow inflation to reach its target. We have to think in the prospect of what do we find in the u. S. Economy itself . The economy has lower returns on investment. Rates,like using real you have a real appreciation for debt. Therefore, i think the fed is going to wait in the u. S. Dollar is going to stay week. Scarlett when you look at dollar yen, why do you think the yen has strengthened so rapidly this past week . Or is therecal, more of a fundamental shift . I have seen that for the entire year. It is in line with our thinking. We developed it in november. This is going to be the year of the japanese yen. The reason we were assuming that, we looked into the japanese yen yield curve. What we found was a fairly exploited yield curve. Inflation expectations are falling at a faster pace than nominal rates could adjust to. The result is that real rates in japan go up and it has been the real rates differential driving dollar yen to decline below 100. 25 big seen more than figures moving this marketplace. Thelong did it take from dollar yen to go up to 80 from 125. A half year of this year was enough to wipe out half of those gains. If i look at Inflation Expectations, here in the u. S. Weve got a 2. 2 rating on core on but the fed is focused core pte. Japan, i am looking at inflation of a target with the same 2 but actual inflation coming in as deflation. When do you expect the picture to turn around and for us to see real inflation around the world . The situation is crystalclear. You have this overcapacity. Overcapacity suggest you will have a lower return on you have thisd overcapacity being funded by an increasing debt. When you have debt you have an obligation to save, adjuster balance. That actually means for an savings are going to go up, and there is no investment, that is a economy that goes into a bond market. Therefore, bond yields are in the negative territory. They are losing the impact on their Monetary Policy into easy and monetary conditions. That implies when you have two major sentiments not having this effectively,o ease i think more of this is on the u. S. Central bank. Means, to me, the Federal Reserve has to stay low for ger with Interest Rates the rate differential, which is significant between emerging markets and america is going to stay where it is. Trading this demand for the emergent market products. Matt but what is going to turn that around . That has been ongoing. What do we need to see to change that . You need to look into that economy where you have the smallest output gaps. I think one of those, you could find in the United States it self. There is no sign of that. So i think the feds policy has to promote inflation to reach the target. Therefore, you cannot talk about the preemptive rate hike. Thisse it would kill little baby called inflation which we tried to nurse now. You have anst that underperforming situation, you havent global best a global underperforming situation. Scarlett does setting a higher inflation goal or targeting nominal gdp help us get there . You have several proposals. Bernanke he said the debate needs to be built globally into this direction. We are interlinked with trade. 60 of global gdp. Costsn talk about local but i cant talk about local inflation. Those days are over. When people are talking about coordination, it is the coordination of policy to bring inflation back to when nominal level. Take those banks that still have the opportunity and flexibility to act, compared to the European Central bank who has lots of capability and the boj, by using instruments have lost that. The boj may when they consider going to more of a revolutionary step forward but it looks like we are not at that level yet. Let me get outside of the u. S. Central bank and the bank of japan discussions. Debt trading idea right now . I noticed some interesting South African rand pair that you like, something that has to do with norwegian krone. Into, whichoking has yet moved, and we need a role to look into those areas where the chance was in the Global Deflation to do a little better compared with trading partners. You mentioned norway. It depreciated significantly, the f15 at about 715 1015 . It has an impact on inflation, which is lasting 23 years. I think norway could be very well into position to appreciate because inflation is doing better. So, norway is a plus. You need to look into those thatmies closer to china, should be a relative play, a relative value play against norway. It is a possibility. Otherwise, euro versus sterling, and we to call out 94 are currently trading at 86 in eurosterling. So why is that . Is it has why this is a lot to do with the huge deficit in this country. It is 7 . In these countries were looking at, there is one country higher and it is columbia. This economyat after brexit has to go into supply orientation, and then you whicho look at the euro is a current account surplus environment. Deal with exploited yield curves in a similar way as japan has to deal with them. Thatrope, you can get deflationary increase in real yield. Covered by productivity, nor by better output data, it is just driven by the fact that nominal rates cannot fall as fast. Scarlett got it. Thank you so much. Hans redeker, thank you for your time. Big coming up later, two guests on the opposite side of the lyrical spectrum. Carl icahn is supporting donald trump and at 4 00 p. M. , paul krugman joins us. He says now is the time for governments to borrow more and worry less about debt. This is bloomberg. Scarlett this is bloomberg markets. Virginia is still a spring swing state, it is swinging far away from donald trump. A New Washington post poll shows a commanding 14 point lead on Hillary Clinton. Is bloombergs politics reporter. Virginia is home to Hillary Clintons Vice President ial pick. Was he a deciding factor . Maybe. Speaking, Vice President ial picks are more of a problem than an asset to candidate. Paul ryan didnt help mitt romney when wisconsin. You can pick up at running mate but taking a good running mate doesnt necessarily mean youre going to win that state. For virginia, these are troubling signs for donald trump. Bitunit is pull a little and you see some of the groups romney one with. When push comes to shove, trump needed to do better with romney with certain groups. Women and minorities. Is instead ofeing that, we are seeing him trailing romney in a number of key demographics. The one i found most interesting was military homes in virginia. Clinton is winning by 49 . Eight points she is beating trump. He clearly knows this is an area he needs to win and it was one he was trying to talk a lot about her record as secretary of state. The truck area where campaign thought was going to be a place where he could make up ground. If he starts losing out to military families and he starts losing places where romney won, what are the chances he backs out . It is too hard to know. People are talking about it. Anyone who pretends they know what donald trump is thinking clearly doesnt know what donald trump is thinking. But we are seeing some signs where he is starting to fall in of behind that the conversation is at least coming up. We still have the debates and debates can change races but he is running out of time. Early voting starts in early october and if he turns this around he has to do it soon. Scarlett thanks so much. Hour, carle next icahn will be joining us to talk about his support for the Trump Campaign and also his warning to the epa that renewable fuel credits could cause a surge in oil refinery bankruptcies. This is bloomberg. Matt were live from bloombergs headquarters in downtown manhattan. This is bloomberg. Scarlet lets begin with first word news. Mark crumpton has more from the newsroom. Mark c. Hillary Clintons Campaign Says that former secretary salazar will lead the team in the transition to the white house if she wins in november. This marks an intensifying of perforations that started preparations that started months ago. 15 prisoners aqua tonto obey at Guantanamo Bay prison sender have been sent to the united arab emirates. Some of them had been held for more than 14 years. Generalania attorney Kathleen Kane is under pressure to resign after charges of abuse of power. She was accused of leaking secrets. She does not have to step down immediately. She could stay in office through january 17 when a new attorney general is sworn in. Turkey is taking another step towards reconciling with israel. The government wants to shield relatedrom legal action to ship in the gaza strip in 2010. The restoration of ties is expected to unlock Energy Contracts worth millions. Dayal news 24 hours a journalistsore than in more than 120 countries. Scarlet we are looking at u. S. Stocks retreating from record highs. Right now you have Dennis Lockhart speaking in nashville. Looking at the comments, on the cedents, theer rake hike would be likely. Array kite says rate hike is likely. Matt he says he is not locked policy. He is confident about the inspects for u. S. Growth 20162017. Not hearing the speech live, but just hearing the headlines it does not sound like a lot of conviction to u. S. Growth. Scarlet that might be why you are not seeing a lot of change in the dollaryen growth. Dip followinghe buildup these remarks. Just looking at the bloomberg dollar index, the chart looks almost exactly the same. If the market really thought that voting members that there would be stronger goes in the second half and that would be reason for growth increases, the chart would look a lot different. Scarlet lets go now to Abigail Doolittle with the check of the markets. Abigail we have lots of big movers starting with stocks that are lagging. Alarm. Com, on at pace for its largest decline. This after they put up a solid second quarter. We do have a downgrade. In onam wanted to day what could behind this. , anpoke to howard smith analyst. He says a few things could we happening here. With stocks struggling, a couple of investors may have been looking for a blowout quarter. Plus, one member is no longer on the board. Howard smith is very bullish on the shares. He does have an overweight rating. He is very bullish on the stock. Another dry, activision. One of the worstperforming stocks of the day on news that the heads, including the ceo and chairman, sold 17. 5 million shares, cutting the stakes in half. This really stands in the face showing thes news prominent investors recently became involved in the shares of activision and blizzard. Bright spots, we looking for any signs of green. Abigail there certainly are. And ggk services cintas. And the Conference Call started at 11 00 and a lot of information is coming out of it. Cintas says they feel good about the antitrust process. This is interesting and important because we have seen some deals recently struggle around the regulatory process. Scarlet thank you so much. Abigail doolittle reporting live at the nasdaq. That real estate is where good deal of opportunities lie. Joined bloomberg goern earlier today. We are seeing additions to the commercial Property Side that are likely to have a significant impact. Certainly, we have seen significant increases in the amount of multifamily housing under construction being delivered in some places like San Francisco and new york. That is where the first new supply occurred i suspect we will see it across as more multifamily housing is available. I have been kind of a bear on for some time. I see a lot of movement in the office space arena by do not see a lot of growth. Who areue to see users more more clever of needing less space, and therefore, less demand. On the singlefamily side, i dont know enough about the numbers that you just quoted in terms of housing. Issue oni think the housing has been the fact that there has been very little inlity to generate demand what we call the starter levels. Ultimately, our entire singlefamily system has been starting atowing home, then growing. The starter site has been pretty weak. I would not take any great from financing. Yesterday, they warned that a lot of amateurs are running into the market. He is calling it publishes. Whether they are individual investors, they are coming in with yields that they cannot get it. Some investors might come down the road to bite them. I just think you have to look at supply. City, youre adding 10 18 increases in the hotel space. That has got to have an impact on cash flows. See 1020 feet of additional demand. You see on the credit side, we had to control it a few weeks ago. They are saying a dramatic , extending maturities, things like that, do you see that . Are we getting a little hot in the commercial market . I think that kind of assumption may be true of all financing, not just real estate. If you were to compare how difficult the conditions were in 60, it is verys different and easier. William dudley is saying a september rate hike may be possible. With that in mind, there is a big debate about where rates will go. Ive tried to figure out the outcome here. The top of the cycle, a lot of bang, no buyers. What is the trigger for the sudden stop we have seen historically . I dont know. If i knew, i would be rich. I dont know which of those issues will be most prominent. I think it is very easy to see oversupply and radically change the state of conditions. Lookere are you going to in real stage a good you are looking at outofthebox places like brazil, mexico, china. Why their . You guess history says that tend to make a lot more money when you buy at the bottom and when you buy the top. It is pretty easy to say that , andll is at the bottom the u. S. Right now is probably at the top. When you think about the fact that five years ago we sold assets in brazil and the real was 1. 67 and in january it was 4. 14. There has been a reduction of massive amounts in the value of the currency. I think when you have that kind of disparity, you have a lot of opportunity for recovery. You can hope they do better in the situation when youre dealing with numbers that are near alltime highs. Zell on that was Sam Bloomberg earlier today. Coming up, americans continue to splurge on remodeling their own home. More insight coming up. This is bloomberg. You are watching bloomberg. This is your Global Business report. We are getting the first take on the state of the u. K. Economy after the brexit photo. It is not looking so good. Google is getting a video chat is this. Can they compete with skype and apples facetime . Prime loans are making a comeback. Inflation in the u. K. Picked up last month. Inflation rose. The weak pound led to the sincet jump in the cost 2011. It is the next step towards opening chinas equity markets to international investors. Chinese regulators have improved the longawaited stock trading link between hong kong and the city on the mainland. Options toother auc buy equities. The collapse of Raw Materials has sent profit plummeting. Bhp says earnings fell 81 . It was the worst result since 2001. Iron ore and other commodities they do see a brighter outlook for oil. Tradeo expect prices will in recent ranges for a while. I dont think they will get any higher anytime soon. Google has introduced a new chat application designed to compete against skype and face time. Andorks with Android System apple ios. It also uses phone numbers rather than google account. That would make it easier to call people already stored on a contact list. Time now for our bloomberg quicktake, where we provide context and background on issues of interest. Ago,hat many years loans attacked the economy. It was found that they would never happen again. The sub prime rebound has been fastest in auto. Terms. Nders have eased this year, leaders including the jp morgan ceo has warned that the auto market is overheating. In home loans, lenders are subprimeear the mortgages that were handed out 2005. The word subprime did not enter the lexicon until the late 1990s. It referred to credit levels below prime loans. Then, the Housing Market heated up and subprime loans took off. Made big feesnks for making loans and investors collected higher subprime Interest Rates. The combination led lenders to make loans to more stressed borrowers. More than 7 million foreclosures since the start of 2011. Here is the argument. The financial crisis tarnished the idea of Home Ownership for every american. The question now is whether people are better off with less access to credit. The increase in subprime auto loans attributed to the rebound in car sales. Though rising to the glitzy rates have made some wonder if the trend will end in tears once. Gain that is your Global Business report. Had to bloomberg. Com for more stories. Scarlet weve got some breaking news. Cut 50 fund is said to of the workforce after which rawls. Jobs going to be cutting about 15 of the workforce after losses. It is 11 billion hedge fund. All of this according to people familiar with the matter. Matt thats right. Those were in regulatory roles. We will continue to cover the story for you. Obviously a huge one for wall street. Now i want to get into the and retail at little as well. Home depot reported secondquarter earnings that matched estimates as more americans spent money remodeling your homes. What about new construction . New housing climbed 2. 1 in. Uly, a fivemonth high tie those things together and it gives us a sense of where home prices are headed. We bring in a chief economist from home advisor. Thank you for joining us. This lack of supply, new home construction, hopefully we saw elatelate of the a bit. Will that turnaround . Will people start buying more Single Family homes . Slowly, but surely. Basically the number that came out today shows that Single Family was responsible for all the starts. Matt what is holding back singlefamily construction as opposed to multiple family construction . Reportinggs are shortages of lots. Shortage of labor as well, but shortage of lots. That means that all over the country lot prices are above previous peak. I mean above 2006 levels. People, especially d. R. Horton, on the Housing Market. Scarlet what does it mean in terms of actual houses . If you come inside the bloomberg, we have seen the new home price appreciation has moderated. Sure there was a number. In march 2015, but it has pretty much stayed at this level. It is inevitable that home prices precision has to slow down before bumping up against severe affordability problems. For five years ago affordability measures were fantastic. The market was taking off. Iffy. Ings are getting i can, going back to the cost of construction and therefore the cost of homes. Scarlet what does that mean for peoples willingness to spend on improving their homes . Are they more willing to spend on their homes if the price of new homes have been moderating . People have been, over the past four years, seen a doubling in the home equity. That is massive. That has a sweeping impact on what people are willing to spend. They just feel good about their homes now. They are putting money into their homes. The defensive way idea is i will get some sort of return on putting money into my house as long as home prices go up. Home prices have been going up for so long now people feel like this is a safe place to put money. Matt existing home prices continue to rise considerably. Yes. No home prices have been running at an unusually large margin of median home prices. That is not sustainable. Slower to have this low rate of increases. Close the gap. The normally 50 gap is now larger. Matt thank you so much. Scarlet coming up later on bloomberg markets, two guests on opposite sides of the political spectrum. That is at the top of the next hour. At close the gap. The normally 50 gap is now larger. 4 00, a nobel prizewinning joins us. He says now is the time to borrow more and worry less about debt. This is bloomberg. Scarlet welcome to bloomberg markets. Matt live for my World Headquarters at 731 lexington avenue, good afternoon. Scarlet midtown manhattan as well. In a few moments, carl icahn will speak exclusively with bloomberg about his support for donald trump. Ofrlet on the opposite side the aisle, nobel prizewinning economist government will join us later and he says nows the time for governments to borrow more and worry less about debt. Lets get a quick look at where the markets are trading, off a little bit after yesterday hitting all new highs. The Dow Jones Industrial average is at 18000 and the s p 500 is is higher. We hit alltime highs last week and all three of the indexes for the First Time Since 1999, we continue to entire but taking a breather today. Scarlet julie hyman has noticed that has been the trend every time we had a record high, the following day, we back off a little bit. The big mover this morning has been the dollaryen pair because the yen strengthened. It is on the heels of what bill dudley had said which is perhaps it is time to think of an Interest Rate increase. Lockout lockhart something similar, that their policy actions are not set in stone and it could be that you see an acceleration of the economy in the second half and in that case, the fed would have to act again. Scarlet a lot of things to keep an eye on. Lets it to one of the most influential folks on wall street. Has been taking prominent positions in Companies Since 1978. Carl icahn has been taking prominent positions in Companies Since 1978 and he is still at it. Erik schatzker is standing by with this exclusive interview. Erik thank you very much. Good afternoon to you and good afternoon to our television viewers. And Bloomberg Radio listeners worldwide. Quite to have you. Thank you. Begin with this last week, you were on twitter talking about Donald Trumps economic plan and you were subsequently on twitter to recommended it the solution to americas economy. Yesterday, you were sparring with mark driven on twitter about the president ial campaign. With mark cuban on twitter about the president ial campaign and now understand you want to start a super pac that would be protrump. Does this mean carl icahn is about to throw his weight and money around in this president ial campaign . I think i made it pretty clear all through the campaign from the beginning that i think trumps policies are possibly the only thing that will save us from going down this decline we are in on activity which is important in this country. I really think we have had a tremendous decline in Capital Spending which everybody knows. I am not making that up. Major decline in productivity growth. If you think about that, i think one of the major reasons for it is that some of these regulatory agencies, im not against regulation. I think certain regulation is important. Im not against some of the financial regulations. I think some of the investment banks cause a lot of problems back in 2008. Arbitrary ander capricious regulation like what bp epa is doing concerning refineries. Thats a microcosm of what im talking about. It absolutely scares business. As ours looks at this business and government and happens is that a ceo and a mediocre ceo and i am no fan of mediocre ceos, they go in and say weve got the great advantage of zero Interest Rates and we will borrow money and buy back stock and invest it in capital which gets the stock up. They make 100 million bucks or whatever they make and they go live out the rest of their lives and the middleclass worker suffers greatly from it which they are today. You need someone to come in with in certainom and, cases with regulatory agencies, take hold of what they are doing and show business that we not against them. Thats why i am for trump. Thats the whole story in a nutshell. Erik what i was getting at is i would like to know more and i think lots of other people would like to know more about what you endorsingto do beyond donald trump the way you have, talking about his economic plan. Will we see a super pac . I am considering it at this moment in time but what i am doing is moving against some of the regulations that the epa has. They are arcane. I think they are completely and totally illegal. They are going against refineries. See as country, you will lot of smaller refineries go bankrupt as a result of these regulations were these refineries are simply, to make they are penalized for something they cannot do. They aresaying responsible for blending with ethanol which is fine except nobody will buy the gasoline we blend with ethanol. I own refineries so i have an agenda can that doesnt matter. Up to is really standing what bp is doing so thats one little example of what is wrong with our economy and thats all im saying. Im getting involved at that in this moment in time. I did not go on the Economic Committee as you maybe know because it gives me the room to do a pac. But i considering that will not say i am definitely doing it until i do. I am saying we came out with a big paper and we will continue literally fighting the epa. We think its illegal but more than that, i think its reprehensible. Erik its one thing to write a letter to the epa and another thing to start a super pac that would challenge some of the regulations that you find chafing. Thing to conflate some concerns about regulations that are in place governing refineries and Renewable Fuels with the whole president ial campaign. It certainly is. They are not mutually of mutually exclusive. I will not say that i will invest 20 million in a super pac. As we speak, i am talking to the people who would be working with me on the super pac but that being said, i dont want to Say Something here where you can call me back in a month and ask me why didnt do it. I will not say it now but i am in an that we will be argument with the epa. Of the stuff he does is salutary and necessary. What they are doing here, i honestly cannot understand it. I have been in fights with companies all of my life. I think what they do is wrong. I think its dysfunctional but there is always a good argument. There is no good argument for what the epa is doing. The old u. S. Steel in days and i fought with time warner and so many companies. Billions forns and investors. I made a lot myself. Capitalism ise about is incentive. What im trying to tell you is i have never seen anything as absurd as what the epa is doing here. Matters to you more right now today as per speak . Making or somehow forcing the epa to make these changes whether its through the power , conversation or a super pac you could start on the one hand or whats more important . Or is it about putting donald trump in office . They are not mutually exclusive. Erik i recognize that. See very much would like to donald trump when this because i think he is the only hope to save america the way we know it. I really mean that. I think that right now, our economy is not doing well. Gdp is not going up and i could give you a lot of reasons but the most important is that the middleclass worker does not have good jobs. The unemployment numbers are not accurate. A lot of these people have left the workforce in these jobs are not paying that well. I am saying that the middleclass that is why you the sun rising for Bernie Sanders and you see it for donald trump and you see brexit and whats going on in italy. There is an undercurrent of great unrest in our global economies. The 1 of people resent government for allowing this. The epa in this small rule is and they areil helping a couple of very wealthy Companies Make a fortune and putting the smaller refiners out of business. You could say big deal but that is why there is distrust of what is happening in government and this is what i would like to do something about. If i believe i can make a difference with donald trump, i will do it but i have to believe i will make a difference. Erik you through a number out there of what you might spend in a superb pack, 20 million. What would it take for you to spend more money on the donald Trump Campaign . Thus far, youve only spent 100,000. That may be a lot to some people but in certain ways, i supported him. He had that rally for the veterans which was great. I gave a half a million and immediately when they asked me to at that evening event. Words, i did some things but that said, i am not looking for praise. What i am saying is i want to really believe that donald has a shot to win. You dont . Anie i do believe it. Erik the way you set it is you are trying to persuade yourself. I you know something, maybe should not say on bloomberg but i will say it i do believe that donald has a great shot if he sticks to the positives, not so much the negatives. Meaning that he talks about the economy and what i am saying and tells the worker in those swing that Hillary Clinton is making promises, i will do tunnels and bridges, where is she going to get the money . You have a divided congress so good luck. Done butcted anything you know the one thing donald trump can deliver is he can change the regulatory agencies as president. He does not need congress. He does not need them about immigration. Its a little bit ludicrous to let people come into this country from the middle east that isis is looking to kill you and you let these people come in so these are the things he can deliver and thats what he has to stick to. Why doesnt he listen to you . You and he saw each other this past weekend. Did you tell him . This weekend was pretty quick. I do talk to him and i am going to keep talking to him about it. O. Knows this, to i think he is great when he speaks about these things. His economic message a couple of mondays ago was terrific. If he sticks to that, he will win. Him that youlling forgetn in the polls all of this negativity and arguments. I would do a super pac thats positive about donald trump and not negative about Hillary Clinton. Maybe i am saying too much but i think donald is great. I think he would be a great president. I believe it but a lot of my friends dont. I believe it and i believe he is exactly what this country needs. What he has to do is get that economic message across instead issuesing glibly about that really dont mean a hell of a lot. Erik why isnt he listening to you . I dont know. Ask him. Erik that leaves you in a problematic position. You have strong points. Donald trump is a strong personality and believes himself immense good. He will build a consensus. Negatives are criticisms you can make about anyone. That is what i think is becoming a problem. Would just get him that positive note about this economy, he will win the election. The middleclass american, i believe there is an undercurrent. They are disabused about what is going on. I investigate deal of money and i own 20 companies and i have turned them around. They were dying and we cleaned them up. We have 90,000 people working for us. Now,ssue is that right i have cut back Capital Spending. I am scared of what the epa is doing on this stuff and of im am scared, and imagine what these Small Businesses feel like. They are killing smaller clinton has hillary not said one word against them and these crazy regulations. A lot of the regulations have run amok. There are great regulations and some great regulators. We need regulation and i say that to the consternation of the wall street friends i have. Regulation,better things would be better but what they are doing today is crazy and thats why there are no jobs for the middleclass because there is no crappy spending. There is no Capital Spending. Erik you may be right that donald trump could deuce some things on his own exit could do some things on his own about comeration and certainly in some respects, about regulation. But he has made similar promises to Hillary Clinton when it comes and also oneements infrastructure. Are they not similarly false promises . Great point. Yes, you are right. Every president , going back to even george washington, has made promises they cannot keep. I think donald believes he will keep them and he believes he will build a consensus in congress but its a question. I agree with what you are saying. I think he has a better chance of delivering on those promises then Hillary Clinton. Therefore, lets look at what he will definitely deliver. This is the point he should make is that what he will definitely deliver to the middleclass worker who is worried about his in manufacturing when you stop manufacturing in the country come all this other stuff is nonsense. Its a Great Service economy but we will lose our hegemony. 100 he will keep this promise because i know how he feels that he will stop these crazy regulations. He can do that first day in office and i talked to him about it. That is 100 . He can stop a lot of the crazy immigration which i think is crazy. That you can argue but the regulations you have if i wanted to go into the stuff like putting the smaller refineries out of business for no reason, the epa has no reason. Will tell you that he will stop that. That is 100 and thats what you have to tell the swing state voter, the middle state voter who wants jobs and a sick and tired of the status quo today. Thats what he can do and if he does that, he will win. Its difficult to go into how insane these regulations are. Fought u. S. Steel. I thought time warner and all these companies you know about and i made a lot of money for myself. Ive never seen anything as idiotic as some of these rules that are being promulgated right now by the epa. Thats the quintessential example of whats wrong but there are many other examples of whats wrong. Erik whats another good one . Whats wrong with these agencies . Look at some of the rulings they make concerning labor. Ple are afraid i have aell you that lot of unions working for me and they are fine but some are terrible. Some go off the reservation. Protects them. Im not against them. I sympathize with workers. I look at the Union Workers and people think im too tough. I am notugh guy but against that. What i am against is we have gone too far in areas like that. The ftc does a good job at what they do. Im not against them, per se. I believe in a lot of regulations and i have had a lot of fights, disagreements, with some of my friends on wall street because i think you do need regulation. If you are so certain i want to talk to you about the economy. When you first heard the donald trump message, if he could get the on the negativism and talk about the positives and the things he is going to do and he would have a shot you believe he has at the white house why is it this may sound like a complicit question but not intended to be why is it that the stock market is where it is . With valuations so high that i noticed in a statement you made with your son earlier this month that you dont feel confident making any large investments. Absolutely, i have said it before. I have hedges on. Evermore hedged than i have been before. There are certainly good verynies but its overvalued at 20 times the s p 500 and i will tell you why. A lot of it is the result of zero Interest Rates. Thats what i said, you have zero interest and a lot of buybacks. Money is not going to capital. Take it as a rich family that that decides we will have a lot of fun and set around the pool. You keep doing it until you go broke. Is whats happening in our economy, zero Interest Rates are building huge doubles. You have retirees that saved 1 million. Friends of mine asked me what to do with their money. They want to buy stocks. 0 ord them whats better losing 30 . You have bubbles building in real estate. In new york alone, the Real Estate Market is going through the roof but its coming down somewhat now. I think the market is literally at very high levels because of zero Interest Rates and if you really look at it, the dollar is pretty strong right now which will hurt International Earnings. They live on International Earnings in the s p 500 so there will be a day of reckoning. I have seen it many times in my life. When things look good, they look great but thats when you have to pull back and stop buying. What will tell you happen tomorrow or next week or next month or next year but it will happen. You have to change the direction of our economy. I cannot say it pointed in that but donald trump will change that and rain in some of the abuses against Capital Spending. Wellry clinton said it be lets unleash the great power of our companies. She wants to tax them and regulate them. Its a mishmash of a contradiction. Erik your point on Capital Spending maybe bang on from economists. Thereare a few cynics out hearing you complain about companies levering up to buy unlessock who remember im mistaken, that you have asked companies to do just that. Maybe more than once. You are very right. Buy backpple should stock and i made a great deal of money doing it because apple has 200 billion sitting there. They had extra money. It did not affect their Capital Spending. One iota and their stock was dirt cheap and i told them to. Boasting butto be we brought apple at one of the cheap prices. I told him cook that you should buy back your stock i told tim cook that you should buy back your stock and i was instrumental to get them to do it that that does not mean that a lot of these companies that and not levered today really what i consider to be making true earnings, borrowing money and buying back stock, this is making a false market but worse than that, its to deplete tools for their workers and its costing them the ability to go into new things and therefore, they should not be buying back stock. Its like saying you have two sons and maybe one is sickly and the other son is in great shape. Its ok for him to go swimming for three hours but its not ok for the kid with asthma to go do it. Therefore, there are companies that should buy back stock. There are good regulators and good regulations and good ceos but it does not mean that its a broad brush. You cant do that. Thats my answer. Ofk you say that a day reckoning will contact the stock market and you cannot say whether it will be this week were this month or even this year or next year. Lets talk about the factors you believe support tate such a correction. What would cause stocks to fall . One of the things thats causing it to fall is happening under your nose. We have no Capital Spending. Capital spending has gone way down. In a society like ours, manufacturing is important. Sooner or later, you cannot just keep texting each other. We are a Service Economy and thats great. What is that mean . Everybody will sit and text each other and thats wonderful. Why should anybody work . I am saying to you that this is what is happening as we speak. Capital spending is down. In the last two years, its down 4 in the last quarter which is unheard of. Is not telling. Its at the lowest point its ever been. Thingsre very important in a capitalist system. Unless you have a dictatorship, of venezuelahe way or argentina. You will have a major problem if you keep doing it. Erik i think most people realize that on how the Economic Conditions are not a recipe for rising stock prices. Peopleck to go down, like you are going to have to start selling and either move your money into fixed income or cash. You said you are more hedged than you have ever did but apart from the couple of small dispositions, you are not selling yet, right . Not right. Its obviously not helping my position but i have to admit that i am short a great deal of the s p 500 but i am long more than im short. Eye on so many companies. I own so many companies. Weve got debt on it and these are companies that have been built over the years and we are proud of them. We own a number of companies i just bought pep boys and there is a future there. I thinkot mean these companies will survive and do ok. I only finerys and we are unhappy with whats going on. Refineries and we are unhappy with whats going on. Point, i thinkmy it builds on itself and i have seen it happen before where you suddenly start realizing that these Companies Really dont have true earning power and Fund Managers start selling and once that toboggan slide happens, it will be pretty bad. Day. Nk it will be one there is nobody in the world to predict when and where it will happen. Its an insane way to spend your time. I will just tell you have a problem and Hillary Clinton will because shee believes in big, big government. She said it, you must unleash the power of companies in this country. We are a capitalist system and you have to have companies that invest and have faith in their government. Over the last eight years, we have become more and more with government and you dont see the spending. You can Say Technology companies are spending but when will that come to fruition . It may be years away. Ironically, it has happened sooner than you think. You have more and more people Walking Around using the iphones and whatever. Course, youve got globalization to help you somewhat. We could go into it for hours and hours but i think one of the we ares you have is that importing cheap goods from china all these years and that will stop. There will be all kinds of problems we can go into. I spent hours thinking about it. Im a bit of a workaholic and i read about it. By the way, i am not the only smart guy saying what i am saying. If you read some of these guys, they are very negative. They are pretty negative. They are the guys i respect to the most. You make the point about regulation. Absent the kind of regulatory relief youre looking for, what do you do . These refineries through this company you control called cvr, correct . Erik yes. For can you use them Something Else like buy up other independent refiners to find some economies that help you whether what you term this regulatory storm . Its a unique and insane problem. Goes back a few years but the epa has ruled in their great wisdom that we, the refineries, think of it this way, we are responsible to blend a certain amount of ethanol. We have to blend it. Thats absurd on the face of it because the people that use the ethanol at the gas stations are owned by big oil or owned by these huge chains. Not letys say we will you blend because we will not buy your blended gasoline. You tell the epa, how can i be responsible for blending when i cannot sell it . They say too bad. They say you have to deliver it is a certain amount of what they call rim. Erik i understand the problem and its thorny. As you pointed out in your letter to the epa, there is speculation going on in that market and others have said there is fraud in that market. I dont want to get more intimate because it is weedy, but what about the alternative . We are a strong company. I am not telling you we will not have troubles as will many strong refineries. Go bankrupt or be taken over by big oil and when that happens and you are taken over, you get an oligopoly. With the epa is doing is what big oil could never do themselves, get rid of its competition. The ftc would not let them do it and i would like to see the ftc stop this business. They are doing for big oil with big oil could not do for themselves. Happen is within a few years, these guys are on their backs and we will be, too. I made a lot of money on this investment over the years so i am not crying and no one will cry for me. Big oil will take over these companies and all of a sudden, we will have another rises when gasoline prices go through the roof. Thats one thing that may happen. And i keeppening saying this is rulings like this , thousands of ceos understand the problem. The epa raisesy wand and we are bankrupt or almost or losing a fortune. Why should i invest in more capital or more machinery . Therefore, we cannot compete and therefore the middle class does not have manufacturing jobs. Not a say we are manufacturer, just a service company. We are aountry, reserve currency. I dont know how long you can depend on that. Sooner or later, im saying there will be a massive problem. Erik i dont see you backing down on the epa issue. You said you have gone to battle with many ceos over the years and i think of last year when you called for the breakup of aig. Aig came back with another plan and today, they continue to execute on the plan selling united guarantee for 3. 5 billion. I am proud of them for that. I really think Peter Hancock and i see i to i and what they should be doing at aig. I supported him recently. A few people wanted me to go to bat. I think he takes it very seriously. I am hopeful he will do more of this. That shouldompany do buybacks. As they get more cash, their stock is so cheap relative to what they can buy it for them and have that money around. Machinery they can buy. Aig does not by machinery. There is a company that should do buybacks. Each one is unique and not every company should do it. Thats a good one you just mentioned. Iieve that hopefully cannot say more i think they should do buybacks. Erik maybe it was not a hostile situation but it was an adversarial position and you are now on the board. He is now moving fast enough that he brought your round to the idea that aig can take an incrementalist approach by selling assets and returning capital to shareholders . I will tell you Something Interesting that you might not believe. I go into these companies and see unique things they should be doing. In certain cases, we fought with the ceo for a while and then we become friendly. Im not saying we have christmas dinner together. Take ebay with donahoe. We were against splitting it up. Suddenly, he said you are right. Lets split it up and it was great. Look at paypal which is a great company. Warner did just what we said in a took five years. You saying that hancock will come around to your idea that the Company Needs to be broken up . Im not even saying that it everyone of my ideas do not have to be followed to the letter. If hancock does a general thing which i believe should be done, if you have a company there that i have saidsets, this publicly so i can say it, legacy assets, they cannot make as much money as other insurance companies. They should be sold. Aig obviously sells at a lower ratio than a lot of other insurance companies. Once that is done, i think we have a good p c company. I like the company itself. Part of that company should be sold, part of it in japan. These are the things im saying. I will not into at the board is saying. Erik are you still telling peter he should fight the civic designation . I cannot going to more than that because thats getting into the board. Erik thats fair. Let me ask you about allergan. You just took a new position and it was disclosed yesterday. What do you want to see happen there . Dan loeb is in allergan as well as john paulson as of the end of june. Will you just sit back and see what those guys do . I cant really talk about that. What i amlk about buying or selling but allergan is a unique situation that fell apart. Erik the pfizer deal. It was not that meaningful. It was tarred by the brush of valeant. It is not valeant. It is a separate and Different Company than valeant. They have an excellent ceo and i worked with him. Tomade a fortune once he got be ceo. I look him as a great com knows what hes doing. Allergan and we made a great deal of money with it. We finally got that done. I have sold it and it went higher. I thought if it ever comes down, i would buy it. It is notwn and valeant therefore, i bought the stock. I think it has a good pipeline but i will not go on tv to tell people should buy or sell. Think brent is an excellent ceo and we have gotten along great. Into,companies we get they listen to the ideas we have. We have been around a long time. We get friendly with them so its not like warfare all the time. There is war and peace. Im just telling you there is more and there is peace. There is war and there is peace. These are good people. I think the epa could be fine. I think they should look at this thing and become rational. Thats all i ask. You dont think theres any chance the epa, as its currently constituted, might become more rational in the Clinton Administration . I sure hope so. Should not be an obligation on the refineries. Rig market. Righey should clean up the market. Dont allow hedge funds and speculated to come in by the securities like the rins. In this case, you have some insller quarters of these r which is absurd so you hope somebody will get rational. When you work hard on something and we have a bit of the bully pulpit, you go in and get something done and get at least rational trading in the rins, make it unlawful for speculators to come in and ordered them. And board them. Hoard them. This is some sort of unregulated trading of a commodity. My ceo just told me on the phone, he said i told the New York Times in an interview that if Pablo Escobar were alive, he would not be doing coke, he would be trading rins. Erik one more before we let you go. Federaled to take private and its trading above your last offer, are you still interested . I cant talk about that, you know that. Erik i had to try. Its been great talking to you and i look forward to our next conversation. Not justreat stuff about the economy but your support of donald trump in a rational and why you are concerned about the epa and the regulatory environment. Carl icahn live with us on Bloomberg Television and radio. We will be back after this short break. Scarlet this is bloomberg markets. Matt lets get straight over to julie hyman who is looking at nonearnings losers today. Lets start brought them and we will look at individual stocks. First of all, this is the s p 500 which is been bouncing around the lows today. 1 inonly down 4 10 of its the 27th straight session without a move of at least 1 . This chart looks of the daily moves in the s p 500 and it goes all the way back to july 8. To 27reak has lengthened straight sessions. Individually, there are a lot of big names. S celestial is having a big move as the stock is plunging after the company said it was delaying its Financial Results on accounting concerns and abandon its fullyear profit forecast. Those shares are plunging today. They are down about almost 27 . Part of the reason they are falling so much is not just for the lay of the disappointment that perhaps this company is less likely to be when white wave was purchased, there was speculation that perhaps other socalled natural Food Companies would also be targets. With this new accounting review, there are questions about whether that would be the case. Were also taking a look at Activision Blizzard some top executives including the ceo sold 17. 5 million shares in the company. They still have substantial stakes but nonetheless, these insider sales are driving the shares down today by about 4 . Gn,re also looking at verisi one of the worst performers in the s p 500. We heard from senators and congressmen who are calling for a competition review of their contracts with the web domain registry. They said this in a letter to the justice department. They want the department of justice to look at pricing practices or the. Com registry. Verisign willith be up at the end of september so there may be danger of it not being resigned. Servicemaster owns term and examines dropping after the president of that unit owns terminix whose shares are down. Matt some nonearnings losers in stocks. Scarlet its time for the Bloomberg Business flash. Tesla is launching a full investigation after one of its during cars caught fire an event in france. A Spokesman Says no one was injured and all passengers were able to escape the vehicle. In 2013, the shares declined after reports of fires surfaced and it has great suspension and added a titanium shield to protect batteries. Plans to increase its China Investment and actively participate in the internet strategy. The apple ceo made the announcement today in beijing. He spoke during a meeting with the vice premier of china and the official press agencies as apple plans to set up an independentr d center in china before the end of the year. Scarlet a new owner for gawker could happen today. They lost an invasion of privacy lawsuit hulk hogan and only has two bidders. Univision, thees deal could be worth 2. 5 billion in breakup fees. Airbnb is moving forward with plans for their Home Sharing Service to a Multi Service trip planner. Whichtesting a new app offers access to the itineraries loaded with info about upcoming rentals and city guidebooks and dining and happier events. A person familiar with the matters is the apps name and feature could change before its release. That is your business flash update. Willet stocks and bonds continue to keep rallying, making it a tough year for but funds. Yone said the u. S. Election could upset trade. Time we saw Something Like this was in 2012 during the unlimited qe forever. 2013, we really shook things up. The typical catalyst to bring about this is a backup of rates. Going to say that jackson hole, the market is pricing less than 10 chance of a hike in september. To me, its amazing. There starting to see riskier assets, the cyclicals doing well in stocks and yet people are getting more confident about growth outlook. They still think the fed will be on hold. The other aspect, the Biggest Tail Risk is the election. The only way the market can get it right is what you have more years of gridlock. Its tight fiscal policy. Any other outcome meaning that if republicans or democrats do a clean sweep in november, we will see a significant easing of would policy and that backup rates and that would be a big problem. Scarlet we love it when our guests mentioned the proprietary indexes. Talked about this volatility in the different Asset Classes and how it has come down a bit. We talked about positioning which seems to be trumping fundamentals. Pronounced of this year as opposed to past years . The main reason is investors are struggling. Are you going to put on the same trade as everyone else . If that goes down, you still have your job. If you are the only person putting on the trade and you lose, you lose your job. Whats happening that as more money moves out of actively managed funds, investors have to redeem, they have to so what is ever overweight. That means underperforming. There are lots of reasons why this is the case but there is no question it comes to a point that investors reconcile themselves that fundamentals dont matter. Oe what do you recommend they do as opposed to changing whats going on . If you go back to 1985 and go through the election years, people usually worry about the uncertainty. The way the market is positioned, very low risk parity for portfolios would suggest the market things Hillary Clinton will have a walk in the park. A lot of options look very attractive if you look to play for the transition regardless of what your view may be. The implication is a clean sweep. I think things are very underpriced in the market. Ofrlet that was the head global rates for bank of america. The fiscal policy in Upcoming Elections what we will discuss today with goodman on what did you mess . Off onugman was sounding the election of donald trump and Hillary Clinton. One thing we will discuss with him is that Donald Trumps proposals include priming the pump which is ironic. Joe im excited about this cussion because he set th he sits at the center of economic politics. Isnt it just politics now . The donald trump rhetoric in the selection specifically says we should take advantage of the fact that if his rates are low and we should spend a lot on infrastructure. Proposed double what Hillary Clinton has proposed to spend. It sounds like it is out of the paul krugman playbook, particularly the lack of discernment the lack of concern about the deficit. Peopleugman was slamming sounding off about the deficit. Im curious to get his take on this. Is not goingugman to in any way support donald trump. In any way. I am fascinated to see this how hisw and find out opinion differs from that of donald trump. Donald trump is essentially saying that we can take the money now and worry about the terms later. That is negotiable. Where as paul krugman does not , i dont know,a cavalier way. I dont know if he endorses his strategy of renegotiating debt. That being said, this idea that we can drop some of our preconceived notions about what is responsible or what is good longterm thinking is something paul krugman has talked about a long time and he has slammed the people who have said we need to be very responsible with all her actions. He said ultimately that is damaging. Scarlet he has written about the idea that Hillary Clinton is a better candidate for many reasons but one of them is a she is not promising too much. Joe from his writing, it sounds like, from an economic perspective, the fact that Hillary Clinton is not promising like spending all of this and the deficit will go down and everyone will have everything, at least from the paul krugman perspective, her economic message may be is short of ideal but at least its realistic. Pretty far to be the right of paul krugman. Joe i would imagine his dream economic scenario would not [indiscernible] i will be eagerly awaiting than interview tonight. Scarlet 4 00 p. M. Eastern time, paul krugman. This is bloomberg. It is 00 and london. I am shery ahn. I am vonnie quinn. Welcome to bloomberg markets. We are live and bloomberg World Headquarters over new york over the past next hour. Covering stories from new york, las vegas. Here is what were watching. Stocks are pulling back on comments from fed officials. Mgm ceo is a lifelong republican, but why is he now endorsing Hillary Clinton for president you go we will talk to the Business Leader about why he is crossing the aisle in just a moment. With success comes more challenges. The ceo joins us for professionally professionally and personally