Run on a cumulative basis has been small. Performer,is the slipping the roles between the dow and the nasdaq that we have seen over the last week or so. The vix is down again, volatility down below 10 today. Points out if you are looking volatility, their places to find it. You can find it in individual stocks, but you can also find it relatively in europe. European equities more volatile than here in the u. S. Looking at the 20 day realize volatility for the s p in blue, its been going lower and lower, and for the s p 600, the stoxx 600 in europe, in yellow. The biggest gap in volatility that we have seen thus far in 2017 with european stocks being on a relative basis, more volatile. Where we also find some volatility is in technology. We have a move today with the nasdaq and the nasdaq 100 specifically, seeing its biggest oneday gain going back to july 19. It hasnt been that long, but its been quiet on the tech front until this most recent gain. Some of the bestperforming stocks in the nasdaq 100 today are the chip equipment makers, with a callout. An analyst at 30 the stock to apply buy from hold, saying its , theoundry growth chipmaking and chip equipment making growth, set to be supplemented by improving trends in process control in memory device manufacturing. Memory device manufacturing is becoming more challenging, and therefore, theres a big you need for their services. Research is higher. That stock rising after an analyst in north Coast Research upgraded the stock to buy from neutral, saying it is gaining market share at the expense of patterson companies, its closest competitor in the high market consumable market. Henry schein up. Julia in the middle of the talk of neuheisel record levels, one segment of the s p is having trouble catching up, the small cap stocks. 200 or see the russell 2000 has been falling further behind the dow, for International Small caps, which im showing you in yellow, are Still Holding their grounds. Joining us is david nadel, and he is just published a new white paper that makes the case for allocating to International Smallcap stocks. Its great to have you on the show. Give a sense of what we are looking at. Never mind on valuation terms, in terms of the number of steps of funding this is two times the amount of International Smallcap stocks then there are in the United States. On that basis alone, theres opportunity here. Mr. Nadel its a much larger universe in terms of the number of stocks and aggregate market cap, and doubled in size of the domestic smallcap market. Julia on the return bases, if you look over the last 10 years, we have an interesting chart caps andares x small on the return basis, its pretty nice. Mr. Nadel its remarkable. The Asset Classes outperformed International Large caps by about double on a rolling tenure basis, looking at the last 20 years in total. About 50 higher return than emerging markets, with about twice as good a sharp ratio than either of those. A riskadjusted measure of return on a sharp ratio. In other words, volatility is lower than people think, its actually lower than domestic small caps. And barely higher than International Large caps. The return of International Large caps. Julia why, on the volatility basis . Julie was just showing the chart saying european stocks are more volatile. Why less volatile than domestic stocks . Mr. Nadel i think she was looking at a shorter time per iod. Our data is looking at 20 years. We are looking at a longterm timeframe, rolling tenure numbers that a lot of asset alligators like to look at these types of numbers. , some ofink about it these are country specific, summer global. There is inherent diversification, and you wind up getting volatility that is lower than to mystic small caps and barely larger than International Large caps. Scarlet you paint a compelling case for investing in International Small caps. Why is the reason to allocate this now . Mr. Nadel theres a number of answers to that. Number one, asset allocators have been severely under allocated. Its getting 1 or 2 allocation in profile those fashion portfolios. Valuations, theres a huge gap in International Equities and domestic equities. If you look at the Robert Shiller cyclically adjusted priceearnings ratio, its about double what it is in the u. S. As it is internationally. Dividend yields are about twice what they are internationally as they are domestically, including with smallcap stocks. Ofour universe, about 85 the constituent companies in our benchmark pay a dividend, which is often surprising for people to hear. Its a much higher number then and domestic small cap. Scarlet i want to pick up on the point that is under allocated. When people do on these International Small caps, what group does it tend to get subsumed under . Mr. Nadel you mean . People think i invested in international stocks, im good. I dont need to look at International Small caps. Mr. Nadel it often gets included with international all caps strategies. Sometimes people will say we. Avent all caps strategies but thats heavily weighted towards large caps. They are getting very little exposure to that small cap. The other thing about International Small caps is the correlation is extremely low. Large caps,national if you are correlating that versus the s p, its. 9 . If you own unilever, you own png. They are both multinationals in doing the same thing. When you look at the International Small cap space, its among the least correlated of these Asset Classes. When you add to that factor that its outperformed, with not much volatility, its pretty strong asset allocation, which is what we describe in the white paper. Julia why does he get skipped over . You talked about analyst coverage, which is quite fascinating. The fact that there is so much fewer coverage in terms of these individual names that you may have never even heard of the opportunity. Mr. Nadel thats right. I think its because a lot of the companies are relatively obscure. In the case of our portfolio, a lot of these companies are global number one in they do, but its niche markets. Areas of people dont think about, below the radar. We call them dull but necessary activities. When asset allocators think about going international, its human nature to go nestle, unilever. All names they know. You look at an International Short smallcap portfolio and people have not heard of a single one of the companies. We feel like we are sitting where domestic smallcap pms were sitting 30 years ago, when you were trying to make a case that its not only about buying next years microsoft, its about buying good businesses that will grow slowly and be great at total shareholder return. Thats where we are with international. Scarlet lets talk about the names you identified. Alsos cochlear, theres and mr. Nadel the idea mr. Nadel the idea is preventing these problems. Cochlearmakes these implants. What do you think is the best returning country equity markets in history over the last 100 years . The last 50 years as well . Scarlet im guessing its not the u. S. Mr. Nadel the number one is australia. Dividends,son is cochlear pays out about 70 in dividends. Australia is a really great market and has not had a recession in 25 years. Which is more than we can say. And cochlear is a fantastic business. They have about 300,000 installed cochlear implants, surgically installed in the year of people who have severe hearing loss. The on the scope of a hearing aid. There are about 45 million of these people around the world, a 1 penetration of their market, but they have 60 market share. This is a market that has a huge runway for growth. And about one third of their profit profits come from asset aftermarket support. Recurring revenue streams. You retain his customer, is literally an installed base in this case. Surgically in the persons head, they are not going to switch suppliers. Its a child that has hearing loss, you have a customer for 80 years. Do you want to talk about the others . Scarlet talk about what i couldnt pronounce. So, they are a Brazilian Company that is in the dental insurance business. Scarlet i sense a theme. Mr. Nadel we do have a lot of health care companies. The dental market is huge in brazil. There are 285,000 dentist in brazil, the number two is the u. S. We have 40 fewer dentists but 80 more people. This is a big dental market. And the Company Provides dental 12 rance, which has about penetration rate in brazil versus about 60 here. So again, really nice five to 10 year growth story. 30 returns on invested capital year after year, a very asset Light Company and typical of the stuff we invest in. Julia a summary wants to get exposure to the small caps, why not buy an index . You told me the answer when you said they are niche businesses, but why not go for an index . And the second question comes from a guest viewer questions saying have you observed any survivorship bias the between the large caps on small caps indices . Have you looked at that . Biasadel survivorship between the large cap and small caps . I havent noticed that. Is an interesting question. There are too many smallcap indices to go by there arent many smallcap indices to go by. Theres not much in the way of etf activity. Its one of the few areas of equity markets were active managers pretty consistently outperform. We happen to be outperformed by quite a bit this year, i think ours is an interesting strategy from that vantage point. There are a lot of my peers that outperform as well. Its not like to missing large cap, its pretty tough to add value these days. Even International Large cap. Thats one of the reasons that people will tend to go with an active manager. About one third of the benchmark has moneylosing companies. If you want to throw your lot in with those businesses, good luck. Julia select carefully. Mr. Nadel i think so. Scarlet david nadel, thank you for your time. Lets get a check of bloomberg first word news with mark crumpton. President trump and secretary of state Rex Tillerson held an hourlong phone call today. The white house as north korea and mr. Tillersons weekend trip to manila for regional summit were among the topics that were discussed. The United NationsSecurity Council has unanimously approved new sanctions on north korea over its nuclear and Ballistic Missile programs. The north reacted angrily to the sanctions, promising to strengthen its arsenal and threatening revenge against the United States. The president s new chief of staff is trying to put an end to the chaos at the white house. Has blocked casual walkins to the oval office and warned against the leaks. ,ccording to several accounts kelly also told staffers to the country first, the president second, and their own needs last. Frances finance minister says paris will come out ahead of frank for in the race to become the European UnionsTop Financial Center after brexit. We will take the difficult decisions. We will lower the french taxes. We will make our country more attractive. Take the Structural Reforms and structural decisions that are needed. For instance, we will simplify the market. Mark he spoke exclusively to bloomberg in paris. Slow moves in the labor market has slowed frances efforts to move bankers from major banks. Jordans king abdulla held talks with Palestinian Authority president in ramallah today. The firstank as it is in five years. They came in a time of rising israeli jordanian and israelipalestinian tensions over jerusalem shrines known to muslim and jews. The crisis erupted when israel installed metal detectors at the after month over arab gunmen killed two israeli policeman. Jordan serves as the muslim custodian of the site, home to the dome of the rock mosque. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am mark crumpton. This is bloomberg. Thanks, mark. Still ahead, from equities the bond. To cite of the industry are clinging to the idea that inflation is going to make a comeback. We discussed, from new york. This is bloomberg. Julia this is bloomberg markets, im julia chatterley. Im scarlet fu. One of the top stories on the bloomberg today, two titans of industry are clinging to the idea that inflation is going to make a comeback. Blackrock and vanguard theater only a matter of months before inflation is back at 2 . James bullard address this at a conference today. James bullard we were telling a story that inflation was gradually going to return to target. You can see the gradual return to target seemed all be going according to plan, until we got this year. And this year, this number has fallen way off, at least on the scale you got here. This number has fallen quite a ways off. Scarlet earlier today, bloomberg daybreak americas, on if they would take the same bet. I think ben cardin blackrock are right, and the central bank of america sees it coming as well. We just cant tell when. We cant ignore the data we saw friday. This is incredibly positive stuff, inflation has to come orioles weve got all this one wrong. The question is is it friday . The great thing for the central bank as they have until december to make a decision because september is out of the equation. David you said there are robust numbers coming in, many more than were thought. At the same time, which pressure only went about 2. 5 annualized, which is fairly modest, given where we are on unemployment. Why is that . Why arent we pay more to our workers if were employing so many of them . At the end of the day, there are still plenty employees to hire. Theres the whole debate about whether you can hire the right people, but at the end of the day, there are still people coming out of retirement, etc. The point withto unemployment where we are at the breaking point, and thats were inflation has to kick in. The market brees design relief that we had 2. 5 and not 2. 2 . I wouldve been really worried about cpi this friday, but we are going with a slightly higher element of confidence. And looking at the work function on the bloomberg, it shows you where the federal future funds rate are showing we might potentially see a hike. Its not coming in december. 41 , just a 42 chance the market seems to be telling us. Do you agree with that, not a hike on the equation for 2017 . I dont agree. My primary reason is we have seen the markets fight the Federal Reserve for the last five or six years, and you fight the Federal Reserve, you wouldve been right. We are seeing the market wants to Say Something is wrong. The market has been fighting this whole move in equities this year. If you followed it, and were doing extremely well. With respect to the data and respect to the market is fighting. I think the fed is right i would stay with that. Haveen you are saying we been fighting equities as well, it is time to no longer fight . The s p 500 is tentatively close to that record high, continue to be with that. You have to stay with that. I worked from home last week i have bloomberg on all day. I noticed a lot of your guest kept trying to warn of the correction that is imminent in once againnd yet come equities go to new highs. Its been a theme for the last three to four months. At some point, people have to accept the fact that this is very real, its a global thing we are seeing and of the hopes for tax reform are still growing. Its incredibly positive for risk overall in markets, and that includes equities. The next thing i think would be when does the bond market reacts to it . Coming, butay it is when . These cpi numbers were going to get this friday, do you expect those to take up . Patients one got our side. We have another four months until the Federal Reserve has to meet and decide. I think effectively september is out of the equation. The fed is really patient, they are incredibly wellpositioned. We have another three or four months. ,he market will wait that long we will see a break in the trend. The last two inflation be sedated were low. See something on next rotations on friday, i think the market would immediately start to rethink december, at least taking it to 50 , and that would be a good start. Richards,t was paul catch more on inflation and the economy with an interview with james bullard. That interview at 1 00 p. M. Eastern on wednesday. Coming up later in the hour, softbank reports earnings and gives new insights on the hunt focus tohifting its dealmaking with its 100 billion vision fund. We break down strategy, from new york. This is bloomberg. Scarlet this is bloomberg markets, im scarlet fu. Im julia chatterley. Its time for the Bloomberg Business flash, the biggest business stories in the news right now. Valeant pharmaceuticals recent research could be raising turnaround hopes. Its setting greater demand for its gastrointestinal drugs and have boosted wall street sentiment. They added billionaire john paulson to the board. They have more than 50 in the past three months and reports earnings tomorrow. Directv now let cbs and showtime to its roster. It will give at t streaming subscribers access to popular shows nfl games. The company is expanding its entertainment holdings. Alibaba and marriott are teaming up to chat into a chinese tourism boom. They will set up a joint venture to feature Marriott Hotels on alibabas travel sites. Marriott has 6000 hotels including the sheraton and rich carlton chains. Thats your biggest business flash update. Scarlet oil in focus on this monday as opec and producers meet to discuss out the cuts. We hear what the markets want to hear. From new york, this is bloomberg. Track your pack. Set a curfew, or two. Make dinnertime device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. Introducing xfinity xfi. Amazing speed, coverage and control. Change the way you wifi. Xfinity. The future of awesome. This is bloomberg markets. A Commodity Markets are closing in new york. Oil with opec and other large producers discussing why some are meeting that are falling behind and cutting out put. 4937 is the latest print. We are pushing gold prices lower. Still assessing how the federal they say the latest data bolster the Central Banks case for more rate hikes this year. Soybeans are all up. Julia . Lets turn it back to oil. We asked if 80 if 86 compliance sounded right to him . Slightly lower for those 11 countries that are part of the opec and nonopec deals. Part of that lower estimate stems from the fact that iraq is basically overproducing. They are claiming their compliance level needs to link to the change their escort volumes. Demand hastic increased their exports are lower and the markets are lower than that basically means they are compliant. This original agreement after november 2016 is an agreement of producing production. If there is an announcement and not just say export cuts. They basically precluded shortterm entering into the market. Over the last six to eight months. They continue to say or give the markets the reassurance that the overall market is balancing . We have to look at what supply and demand looks like for the year. Be in a supplyto deficit for the year. Leading to a high amount of exports and continued build and inventories. We should start to see more active draws an inventory. That should lead to prices moving higher with what they intend to achieve. That is a lot to ask. For theires that mean next move after this extension of the supply cuts . Does it go to the per . What should it do at the start of next year . Market arches appends are looking for next strategy. They have not really formulated one and we should not expect them to formulated. We dont know what libya and nigeria are going to be producing. We dont know if theres going to be an reaction. We dont have a sense of whether venezuela is owing to be producing half a million barrels. Er day as far as prices, trading in the 52 barrel range next year. Bloomberg first word news this hour with mark crumpton. The Trump Administration is encouraging more coal mining online and. To invigorate the coal industry. 643 million acres on land mostly in the west. The move is opposed by conservationists and democrats. Prime minister Benjamin Netanyahu must reveal his phone records. And a free newspaper in israel. Probe deepens into Corruption Cases involving the Prime Minister. Is expected of Crimes Involving fraud, breach of trust and bribes. British taught british Prime Minister theresa may is dismissing a report that the country will pay 47 billion to leave the european union. A Government Official calls the figure speculation. Meanwhile supporters are pushing back against the idea of paying any sort of exit fee at all. His plan would affect 32 thousand people with earnings above 500,000 for individuals. The plan must be approved by state lawmakers. Powered by 2700 journalists and analysts in over 120 countries. This is bloomberg. Fresh often earnings beat. We will discuss the billionaires potential targets. This is bloomberg. Its time now for the Bloomberg Business flash with the biggest business stories in the news right now. According to people familiar with the matter, they recently made an offer of 140 per share. Largestould enjoy the netflix is climbing on the superhero bandwagon with its first ever acquisition. It is buying the comic book publisher behind such characters and story such as kinsman and old man logan. It will produce films based on the characters. Terms of the deal not disclosed. That is your business flash update. In earning softbank reported firstquarter operating profit of three billion dollars. Part to subsidiary sprint, which would return to profit for the first time in three years. News, who has been on the hunt for more news and investment. Joining us to but this in the context is cory johnson. Lets talk with how financially it is doing. How does it fit in with where it wants to be . Debt inank has a lot of the next few years but the markets have been forgiving and their ability to refinance it is out there for them. Always lookinge for ways to grow the business, change the business, and push forward. He has the 300 year plan for this business and a lot of ways that arent. He is one of those executives that visited resident elect trump, he reannounced a fund that he has yet to raise. He was certainly thinking about this tmobile deal. He really wants this thing to go forward. He has not given up in hopes of the regulatory change will come to pass. The city 5 billion financing attached to that, this is a mammoth potential. About softbanks strategy and push this forward. Teaching hedge Fund Selection and investment in an nba program. Us your perspective in who this man is and what strategy is for softbank. Some people have a balanced concern with debt versus equity. Up was born in japan to korea and perry ends the the son of a poor fisherman went pachinko parlor owner to the u. S. , went to california and learned english and learned what a different world was out there. Was extremely informative. He used his korean name and not worry about anything that would be different. At the end of his annual presentation, it ends with happiness for everyone is his final slogan. Fair he went on to 1999. Man of the year in he was bust, he had no money at all. You will worry too much about the cbs spreads or any of those things. This is the spread on softbank. When it goes up it shows concern about the companys ability to pay it off. What we are producing is the small uptick taking us back to the november levels we have seen a little while ago. Bondholder, if you are a debt holder you have seen this movie before. They lost the iphone monopoly and the new into the hundreds. Out again on christmas day. There is a hell of a day to make an announcement. When the markets are so deep. The personal is so interesting. When you think about the standpoint of this merger, we cant have just major carriers, that is not good for consumers. Not thinking about what is best for u. S. Consumers or the Business Environment. We want to be number one. Not providing the best Business Environment or best services for the u. S. Consumer. I think thats worth inking about. And acquisition that we heard a lot about in particular. Crazy. Spending my when he says he was to be the best, what . What is the ecosystem here he is building . If you look at alibaba, he put six 4 million in alibaba. Was 68 million,. Raded to 12 billion what i think you will see is he is also in super cell. Will goke most people anywhere, any place. More money than raise in the entire money of Venture Capital in 2016. In the vc world or private equity world, do people still talk about him . His lawyers are Silicon Valley lawyers. He has dealmaker all over the you can get tension anywhere you want, especially where deals are plenty of people are always raising money. He absolutely gets a lot of attention. Alwayspoint out hes willing to spend it. Accelerator, though started guys, we can go from series 82 b. Its very different where it was a few years ago. I think his money is very welcome in Silicon Valley. He purchased fortress investments. He shows up all over the place. I think that really has changed going toic to say im be focused on a, b, and see. He will go anywhere. Professor at Columbia Business School for your thoughts. Up, sport tv rights, what we see from the traditional providers next. This is bloomberg markets. Getting a list after a deal with how obama the features hotels on the chinese giants travels website. I think what my favorite things is alibabas travel state is called fliggi. Something. An am sure it does. Going to feature all of the Marriott Hotels. And the two companies are going to link their Loyalty Programs and provide promotions to chinese travelers. And they are each gaining something. Alibaba is trying to build up travel services business. There really has been two things. Alibaba, a big important partner. And there is the power of the chinese consumer. We spent 110 billion dollars according to the China National tourism administration. He pointed out the currency is probably helping out this business. I found this pretty astonishing. This is the chinese currency year to date worse as Major Trading partners. For a lesslooking expensive place to visit, the United States is it. Challenge to me, the name means the flying paik. Pig. Ying thank you for finding out. I do what i can hear. Marriott reports after the close. A 1 decline, revenue estimate at 5. 6 billion. A 45 increase. This includes the starwood acquisition. We will be looking at the numbers to see how it continues to digest that acquisition. Espn and the cost benefit is in focus. Foray into its first sports content outside the United States by poaching Television Rights for atp tennis from sky. This is their second move into live sports. Bloomberg intelligence director of north American Research call Sweeney Research paul joins us. I want to talk about this, it was quite interesting. 30 million per year for five years. 1. 4 billion pounds, 1. 8 billion. The price tag is testing the water. Should the traditional paytv the answer is yes. They are dipping their toe in tennis and the u. K. We saw yahoo do an nfl bill. This is dipping the toe in the water of tech companies. If we see an increase in our return in investment works and then we will scale up. That is exactly the problem. It is happening with amazon as it is with netflix and hulu. A lot of these are ramping up their investment programming. Amazon is the Third Largest buyer of programming in hollywood. They are going to spend 4 billion in programming for amazon prime. Scripted programming as well as licensed programming, so they are already a major player. Been,estion has always when are they going to go into sports . The reason they havent gotten there yet, it is so expensive. And now we are starting to see them. The Major Networks and espn have locked up rights. Its not like they can jump in when they are ready. All of thes beachfront property in sports, certainly in north america, starting with the nfl. As those rolloff i think were going to see new ones come in that we havent seen before. Places where consumers are spending more time. It was two years ago this week there was a media meltdown. Disney will be reporting tomorrow after the bell. Is espn still struggling . Employee disney and select the market is where we were two years ago. We had some Cable Companies and some weak advertising. North American Research director paul sweeney. Coming up, Berkshire Hathaway sitting on almost hundreds of billions of dollars in cash. Julia it is 3 00 p. M. In new york. Scarlet welcome to bloomberg markets. Julia were life and bloomberg World Headquarters in new york over the next hour. Here are the top stories we are covering. Warren buffett is approaching a 100 billion cash. What can buffett due to put the money to work . Some of the biggest carmakers on the planet. We will hear from the ceo. Plus, bitcoin expending its record in the cryptocurrencies. We will have more on the bitcoin ecosystem ahead. From the close of trading. Let us get a check on the markets with julie hyman. Julie the dow and the s p are both that records on a closing basis. He dow got their intraday nasdaq is not trading at a record. It is worth mentioning volume today. It is august. Is 22 on the s p 500 below, typical at this time of year. Shares, we have consumer doing well. Technology shares also outperforming today. Energy is the real drag, as we have oil prices lower. We have been watching this chart pretty regularly over the past one that we have been seeing the past run we have been seeing in the dow. We are reversing a trend that weve seen for much of the year. That trend is itself being reversed as today is the nasdaq outperforms. We will see if they will outperform the big tech stocks that have been outperforming all year. Have these big tech stocks. Apple is up. We have the report saying the company is looking to disengage it smart watch further from the iphone to allow the watche to operate without the phone. We have some burning reports. I mentioned what is going on with consumers. Former the out her outperform her. Horizon pharmaceuticals raising more aboveg out with the estimates. Berkshire hathaway going and the other direction today after Warren Buffetts company came out with operating profit for the third straight. Railroad and energy performing well. There was an undermining loss in the insurance businesses. That drive down the numbers and the stock. Scarlet thank you so much. Must it you checking out the headlines. Sued attorneyhas general Jeff Sessions over his threat to withhold federal funding from the socalled sanctuary cities. The Justice Department has no authority to impose sweeping conditions on chicago and other cities that dont go with the crackdown on undocumented immigrants. Says thesent conditions apply in the face of longstanding city policy that promotes cooperation between local Law Enforcement and immigrant communities. President trump has accused mexico of stealing u. S. And jobs. Now he is trying to get mexican workers a pay raise. U. S. Negotiators will push for better wages and conditions for mexican employees, making mexico a more expensive place for companies to do business. This may encourage u. S. Firms to state but rather than moving south of the border. China and vietnam or at odds. In manila, the Chinese Foreign minister canceled a meeting with his vietnamese counterpart. According to people familiar with the matter, the cancellation was due to a Statement Released on the South China Sea and land reclamation. Over oil andagreed gas in the region. In south africa, the National Assembly speaker will allow secret ballots. The president faces mounting opposition from his own Ruling National Congress party. Only a handful of members say they will defy their leadership umasote for z outstanding. Global news 24 hours a day. Powered by more than 2,700 journalists and analysts in more than 120 countries. Im mark crumpton. This is bloomberg. Buffett warren Berkshire Hathaway sitting on almost 100 billion in cash. He is under pressure to put the money to work. What do shell holders want him to buy what do shareholders want him to buy . Berkshire makes up about 12 of one of his funds. Tom, great to speak with you. The key for joining us. Is what he should do with all that cash. Do think you should institute a different end until the market corrects him for more opportunities . Tom i think both of those outlets could prove to be useful overtime. At this time, i think the renspects of war putting huge money to work, a crisis situation will appear. This is a larger amount of money that he is dealing with. Opportunities to act decisively and quickly, which has been his hallmark. Forability to write a check huge acquisition is unviable. He hasnt really developed much in the way of an International Portfolio yet. Withepped abroad recently a motorcycle equipment company. I would look for some International Investment to round out his university. Julia he kind of made the point this weekend that it is not great to have that amount of money just sitting and low yielding assets or Cash Equivalents effectively. Do think he feels under pressure . We are not leaving to see him for that money to work or let us say it drags on another six months to a year and he hasnt spent a significant portion of that money. Would you start to think now this is a problem . M he has. A lot of cash for the past five years. His content annual return to shareholders has approached 15 . That is well below his 50 year average, but over the past five years he did a terrific job because he puts on of money to work out what amounts to investor returns that were made teens mid teens. Longerterm, i think there will be a more robust buyback dividend to help the charities and help them meet their annual spending requirement. He can do that without having to go out through share buybacks. I think all that could come. There is a tremendous number of ways that money gets invested. The Portfolio Companies under a lot force can have railroads and the utility business, even in insurance of the opportunity is right. She has the opportunity to have an enormous money money put to work. Do ank they could still lot. Scarlet one thing i found interesting was he was talking about Warren Buffett lamenting about not having a proper Analytical Framework with bridge to invest in amazon in a meaningful way. The stock has run up quite a bit and if you didnt get in, you cant really get in now. Toia that goes exactly tom, the question i was going to ask you. He mentioned some of the classics of the utility and insurance we can associate with Warren Buffett. He hasnt invested in apple. With her 100 billion dollar vision fun and the target now woulde big tech names, you like to see Warren Buffett branch into more of these tech Growth Opportunities . The longerterm horizon in some of these is even if the risk reward is more suspect. Om it has been an area he has largely avoided because the risk of the Technology Generation moving so quickly. Itpoint where amazon got to the point where amazons movement is right and left, there focus is in technology but business. Technology a lot of them to pitch to the consumer and a more important way across categories. This makes it more compelling. The roads that would have been likely something that berkshire would have held, they held walmart for decades because of its franchise and they sold that outright this year, recognizing that its is deep in the region of amazon. I never looked at that either. It has become more than that. Scarlet one thing that charlie bezos said was that jeff build up his empire by solving problems through inversion. I know that is something you wrote about in your note, as well. Atyou think investors are risk of making the same mistake by categorizing other companies as tech names when in fact they are more than that . We can be talking about netflix or alphabet or facebook. Theyre not necessarily tech companies, are they . Julia make that specific to war and. Is one making a mistake . Warren. Is warren making a mistake . To it i tom it is hard to see the future. The analysts today are so much more powerful. You are trying to ask the question is whether or not we are operating on her own and we spit we stick to the less technologically driven companies. I must, the technology that is so destructive is also enhancing their own businesses as they migrate toward ecommerce and digital communications. All is not lost. The businesses have the ability to mount new programs using the technology that is becoming so quickly enabling. Julia always great to have you on. Tom russo. Joining us by skype. Scarlet from new york, this is bloomberg. Scarlet this is bloomberg markets. Julia it is time for the Bloomberg Business flash. A look at some of the biggest business stories. Hedge funds are benefiting from rising stock markets. Fund and viking are both more than 9 this year. Kensington funds are also higher by about 7 . Teslas sale will bolster its Balance Sheet at a record 1. 2 billion in cash at the second quarter. Financial shares began trading today. The metlifes and off was valued at 7. 5 billion. It sells Life Insurance to individuals in the United States. 220 billion in assets. That is your business flash update. Scarlet let us turn to the text system in europe. Exclusively and found that taxes will be lowered and harmonized across europe. We want on the same Playing Field for everybody. When you are doing business in france, you have to pay taxes. You cannot take the benefit of doing a business and france or in europe without taking the taxes are paying in europe or in france. It is for all the companies and all states. Does that mean you want to lower the company tax to 25 everywhere . We will lower the corporate by 2022. for the second step, we want to around the members of the euro zone. We have 19 members of the eurozone. We have one currency, the euro. And we have 90 levels of taxes and 19 different economic policies. We cannot do it this way anymore. That is why were advocating for tax harmonization. A taxrst step would be harmonization between france and germany. I am quite convinced no later than 2018, we should be able with germany to have a common which should be the basis for harmonization of all corporate taxes of the 19 Member States of the eurozone. What concessions you expect from the germans in order to further this european integration . In exchange, would you expect germany as the head . We need to be patient. We are in 2017. We still have some time before deciding who will be the next chair of the ecb. Before takingwait decisions as far as the integration of the eurozone is concerned. I think we should be able at the end of 2017 to make a first step toward more integration within the eurozone. Scarlet that was the French Economy and finance minister speaking in paris. Paris is trying to compete with frankfurt to absorb some of the banking jobs processed brexit. Just five years ago, they were out there declaring banks as the public enemy number one and putting 5 tax rate on highincome earners. A big nono for a lot of the companies. And the labor laws. It is interesting to hear about the likes of france and germany coordinating on the tax policy fronts. There is a greater harmonization. Remember i wish tax rates irish tax rate is at 12. 5 . Beyond that, i think it will be fun and games. Andl ahead, michael kors jimmy chu. We will tell you how to trade ahead of earnings tomorrow. From new york, this is bloomberg. Julia this is bloomberg markets. Scarlet it is time for options insight with julie hyman. Joining me today is jim from holdings. We are getting to the end of earnings season but we still have retail ahead of us. What is the general sentiment there . It seems like the sentiment surrounding retail is not great. At all i would say, with just about 30 of Retail Companies within the s p reporting their tracking down around 40 25 . Names still to report. It is important to mention about 85 of the s p components have reported tracking almost at 11 the second consecutive doubledigit year of year increase since 2011. Weong focus on retail, but still expect this location on this. Julie we have a chart looking on the s p retail index versus the s p 500. The retail has done better, although one can argue it is a little deceiving because you have Companies Like amazon and priceline better in this particular index. Exactly. 38 ou dig down, just about of those Underlying Companies are actually up on the year. That compares to around 75 for the s p 500. Eighted index has a better performance because of a few companies. If you look at the spider retail etf, its components have much worse performance year to it reflects the fact you have a stock better you have stocks that are down. Julie when company that will be reporting is michael kors before the trading tomorrow. Kind of the handbag, accessories centered business. We have seen coach improve. What are your analysts looking at her course for michael jors . Kors . They recently acquired jimmy hoo. Over the next few quarters we do see additional downside. Were looking out to november and it is sort of a three levitre. How does it work . A what we want to do is find upside call spread to find a downside put in november which gives us earnings tomorrow and the second fiscal quarter. A we want to do is sell 42. Strike call5. Defines this. Julie there was a typo here. It should have been called, not puts. Risk if thee your stock goes up. You have the downside that comes into play. Sometime before expiration in november. Julie getting us ready for retail. Thank you. Julia still ahead, bitcoins set 3300,ecord of more than setting a rise in currency within the last two months. This is bloomberg. Whoooo. Youre searching for something. Like the perfect deal. On the perfect hotel. So wouldnt it be perfect if. There was a single site. Where you could find the. Right hotel for you at the best price . There is. Because tripadvisor now compares. Prices from over 200 booking. Sites. To save you up to 30 . On the hotel you want. Trust this birds words. Tripadvisor. The latest reviews. The lowest prices. North korea is promising harsh retaliation over those new United Nations sanctions. Putregime threatens to thousands will prevent attacks against United States. They said it will enter negotiations on their Missile Program onto the u. S. And what the north cause hostile policies. With u. S. Ter day met secretary of state Rex Tillerson. It is the highest level president n between duterte president duterte j and a member of the Trump Administration. He dismissed questions about human rights, he has been accused of abusing by several groups. The telling Authorities Say 15 firefighters in sicily are expected of deliberately setting fires or having friends or family call in false alarms so they can be called to work to earn more money. This scheme began in 2013 and ended in 2015. The alleged ringleader is in custody. The Associated Press quotes s