Equities are faring right now. What is start. Three days of declines for the european benchmarks, shares rallying today. These currencies falling against the dollar, but yields are down commodities. It has been a data rich day today. Growth accelerating, were talking about pmsi for the first time pmsi for the first time in 3 months. 55. 1 veruss revised 54. 2. Companies reporting that export orders, which climbed to the second highest reading since record again in 1992, boosted by the Sterling Exchange rate as well as Stronger Economic growth in the eurozone, north america, and asiapacific region. The domestic market also contributing to order. It is a weaker level than earlier this year. Manufacturing accounts for 1 10 of the u. K. Economy. The economy chugging along,. 6 rate, a sign the economy is delivering at a robust rate. Weve got a host of figures showing its a robust recovery from Economic Confidence to joblessness to manufacturing, signaling this recovery, gaining steam underpinning expectations from the ecb. Price pressures eventually will begin to build, policymakers preparing for that debate. About the future path of qe, this is a wonderful chart showing you the diverging fortunes of data in the u. S. Versus the eurozone. Its the city economic surprise index, the blue is eurozone. The white line is the u. S. Essentially this chart shows us weather data is beating estimates. The bottom chart shows you the difference, 50. 6. This is going back to the beginning of 2016. Eurozone on this measure outperforming the u. S. By the most in almost a year. 90 minutes into the trading day in the u. S. Are we at 22,000 yet . Julie not yet. We are at a record. Its a big, round numbers of people like to talk about. A record is also notable. All three major averages are higher. The s p and nasdaq up by 1 5 of 1 . Banks are helping propel some of we are seeing, the financials the best performing group in the s p 500 and the banks a big part of that. If you look at the j. P. Morgans of the world, theyre all trading higher, as we do see financial conditions ease. Its an interesting phenomenon weve seen with the banks, their fortunes have been tied closely to whats happening with rates, and even as the Federal Reserve raised rates, as we have seen more of a flattening of the yield curve, financial conditions eased. We have a chart showing that and why this is cap positive for banks. Financial conditions measures liquidity in the system, the. Bility to loan and borrow as weve seen rates go up, those conditions have eased as well which is relatively unusual, and which is also again good for the bank. On the flipside we do have what is going on with the Auto Industry and the industrial industry. General motors and ford, both of them reporting declines in their sales last month, gm 15 and 47. 4 , below estimates. Both down. Then we have some of the Industrial Companies as well, to Manufacturing Companies coming out and missing eaton, which makes engineer products. Its forecast low estimates and comments, that earnings per, Sales Beat Estimates and analysts said among other things, profits hurt by warranty costs. Those shares down 7 . Again, take a look at the bloomberg here. We have a look at these auto sales versus the s p 500, could they be pretending a warning or some sign of things to come . Perhaps not for stocks, but certainly could be an issue for gdp. We have auto sales turning down even as the s p 500 continues to go higher. I will leave the 22,000 watch to you for now. Mark yes, i will ask our guest what could drive starks even higher. A finance professor at the university of pennsylvanias orton school says president Donald Trumps agenda. I think if we do get a Corporate Tax cut, and i think 2017 is still possible, thats another 10 in the market. It may not be until 2018 but i think that is a wild card. That is positive. Joining us to weigh in, another bowl, patrick spencer. Patrick, welcome to do you agree 10 upside if we get the Corporate Tax cuts . I do. Even without the Corporate Tax cuts. Mark you think 10 coming our way . I do. Everyone is giving trump a hard time. If you look at things underneath the table, the office of budget and management last week that regulation is down 40 since obama. 40 since obama. Factors, even if you dont get tax cuts that are propelling this market. If you look at the recent earnings i spent the last couple of times ive been here talking about earnings. This particular quarter was especially interesting. What stands out for me, earnings beat, we know that. Its been well telegraphed. 75 of the Companies Beat on earnings. On sales, companies of 6 , and not all of them reported so far, 73 have beaten and surprised to the upside. Over the last five years, thats only been 50 . If it stays at this level and we finish earnings, this will be a record amount since data began in 2008 for sales. Everybody says, but they are buying back stock. But youre getting real organic gorwht growth thats driving sales. Thats another raising earnings will be propelled higher. Mark im just looking at my ea function, which we can bring up right here. We can show off patrick when its due. The right index, then we can move it on. Theres the s p 500. General growth is even more interesting. As you say earnings, thats the best its been in 5 years. Thats the best its been in 5 years. Mark oil stands out. Which other ones stand out . Highest. Have been the tech has been especially strong this year. We discussed the last time, not necessarily as expensive. I was looking this morning at the s p i. T. Index, and i think they hit a record last week. If you look at the average pe on that, its 23 times, the bubble territory in 2000. Cash. Enerate a ton more theyre almost like staples, some of these stocks. Are of these tech stocks stable, good earners. What point would you decide that maybe you should take some profit . How long can this continue for, porter wise . Quarterwise . Sentimentsook at the of the indicators of the moment, as there is euphoria around not longterm. We heard what greenspan said this morning. Certainly there is a lot of euphoria around. Maybe you get shortterm selling. I think people should use that as a buying opportunity. Thats very healthy and markets because it basically actually, sellers move from the weak holders to the strong holders in that rotation. The interesting thing, rotation has been coming from tech stocks to value stocks for some while. Short term im sure we are going to get some weakness. Its earnings and the direction of those earnings that will underpin the markets. Any weakness we foresee which is shortterm that we think you should be u. S. Using this as a buying opportunity. Vonnie where are you looking outside of the United Kingdom and europe . The emerging markets, china is continuing to look interesting. If you look at emerging markets, they are up 25 this year against the s p, which is up 12. Thats almost double. We continue to look at emerging markets because the dollar will continue to be stable, but its not going to be strong. Even though oil prices recovered to over 50, they are relatively low compared to where they were. Emerging markets is an area we continue to like as well. Mark the flipside of the dollar is the euro. , theyseen euro stocks 50 are diverging, arent they . Is there a level or pace of velocity whereby the strength of the euro casts a cloud over our assessment of european equities . Later on draghi was walking back his view of tapering. Same yellen doing the theres only 40 chance of rate hikes in december for the u. S. Shes more firmly committed to tapering because american banks are in better shape. When they start to taper, i think what you might see is some of that pressure come off the euro because draghi europes always 2 years behind. I think tapering will be some ways behind the u. S. Maybe we will get a bit of relief from the euro. Valuation once again, 200 basis points differential between pes in europe and u. S. Money is still rotating into the euro because of that trade. At the margin it might hurt earnings. Trick, come back. Patrick spencer, vice chairman of equities at baird. Vonnie heres courtney donohoe. Courtney in venezuela highprofile opponents of president Nicolas Maduro are being rounded up. The wife of Leopoldo Lopez says he was taken from his home at gunpoint. The mayor of caracas also seized. That came hours after the u. S. Impose new sanctions on madero and his government. Maduro once to rewrite the constitution after a photo on sunday. Many refuse to recognize. Critics called it a power grab. Its one of the biggest moves yet in putins military buildup. Up to 100,000 Russian Troops will hold maneuvers close to the eastern edge of nato territory this summer. Military officers say this could be a pretext to increasing russias military presence in belarus, which borders 3 european countries. Vice president mike pence says President Trump will sign a bill on new sanctions against russia soon. To thent pence spoke former soviet republic of georgia and he said the administration did have concerns about the bill at first. Russia retaliated against sanctions by ordering u. S. Diplomatic missions there. The federal wants government to pay up. Its asking for 14 million. Even if the funding request is granted, it will only make a dent in the 38 million spent. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. Im courtney donohoe. This is bloomberg. Mark . Mark thanks very much. Coming up on the close, oak Street Capital cochairman howard marks ringing the alarms out on the markets. Find out what he told bloomberg is worrying him most right now. This is bloomberg. Vonnie live from bloomberg World Headquarters in new york, im funny quinn. Mark live from london, im mark barton. Highs,trading at record dow jones flirting with 22,000. The billionaire investor howard marks sounding the alarm bells, and a 22 page memo to klein published last week, he said the markets were overheated and risky. In a bloomberg is was of interview today, Erik Schatzker asked the Oaktree Capital cochairman why he is sending the warning now. Sound the warning is when everyones making a lot of money. That means the markets are going up, enthusiasm is incorporated in prices and behavior. You cant sound a warning after the thing has turned over and died. Markets insee a which there are lots of uncertainties, prospective returns are low, asset prices are high, and people are engaging in risky behavior. Thats the kind of climate in which we should take a hard look at what were doing, and i think reduce risk. there are lots of people who want to keep making money. What kind of pushback have you gotten . Howard heres a shocker for you, erik. I want to keep making money too. But i try not to deceive myself about my ability to do that. This memo has gotten some of the most response out of any in history. I would say 90 odd percent favorable but some strong unfavorables. Erik what do those people have to say . Howard one of them who ive seen on tv this morning says, howard marks says its time to get out. I do not say its time to get out. I do not say anything about getting out. I say its a time for caution. Now is nom said, better time for caution than any other time. Time forno better hedges, etc. Time that we can perceive. In other words, its impossible to correctly put risk on or take risk off. We should always act as if we dont know. Erik that sounds like a recipe for disaster. Howard not for disaster, but i would say nearly mortal performance. If you want to perform at an above average level, one of the things you have to do is, to use your parlance, but risk on at some point in time and take it off at some point in time rather than be consistent in that regard. There are better and worse times for progressiveness and conservatism. Erik youve run the alarm bell before, in 2000, very timely ringing of the bell. In 2005, which you acknowledged was a bit early. Does the need to reduce risk feel any more urgent to you now than it did then . Well, i thought that in 2000 my comment was about the tech stocks. I thought that was much more urgent than today. They really looked offbeat in those days. In 2005, it wasnt quite so urgent, but then the market had another 2 years to run, at which time it became urgent. I wouldnt describe it as urgent today. The economy is still clipping along at a modest pace and likely to do so. There has not been an economic boom. Not really im commenting on the fundamentals, im commenting on investor behavior, and asset prices. Erik so many of the conditions you describe in your memo are reflective are indicative of an overheated market, or least a market on its way to being overheated. Among them, rich valuations, low volatility, super stocks, the popularity of etfs, reach for yield. Those conditions have been in place for months, if not quarters, if not yers. What changed . Why now . Theres no magic. Its the accumulation of things. I want to read where a journalist said, i gather string. I gather anecdotes about high v aluations and behavior. My son andrew brings these things to my attention and we talk about them. I think just enough accumulated so its a gut feeling. Theres no magic. Theres no quantitative miss. Erik does anything strike you as most vulnerable or most dangerous right now . Absolutely not, erik. Its evenly spread out. The main cause for all of this is uniform, and applies to everything. And that is the low level of Interest Rates. Low Interest Rates cause for inflated valuations of everything, and by being so unappealing to investors on safe instruments, they push everything out the yield curve to do risky things. The real question is, how do you make a good return in a low return world . Mark Erik Schatzker speaking exclusively to Oaktree Capital cochairman howard marks eralier today. Coming up tomorrow, conversation you do not want to miss. The Goldman Sachs chief executive. Wednesday, 8 30 a. M. In new york, 1 30 p. M. In london. Dont miss it, vonnie. Vonnie i will not miss it, mark, since i will be prepping for the show. I can keep one eye on that interview. This is bloomberg. Mark fit chrysler and ford came up short. Aas removed executor chairman bob mckenzie for gross misconduct, the Company Calls a personal conduct matter. Shares plunged on the news. The aa provides cover for motorist insurance. This is bloomberg. Mark live from london and new york, this is the european close. Stocks finishing up the tuesday session gaining for the first day in 4 after dropping for a worst straight month, the streak since october. Industrial goods, utilities leading the advance, propelling the stoxx 600 up by 6 10 of 1 . Lots to tell you about. Even as the euro remains strong against the dollar, the german chair maker benefiting from increased computerization of cars and Industrial Production used in cars. Transmission, steering, and comfort systems. Also, surprise components, digitizing factory controls and Initiative Funded by the German Government under the rubric of industry, 4. 0. Look at rolls royce. 10 up today. Biggest gain since june 2016. Beating estimates, restructuring measures, reducing costs faster than expected. The xwb turbine produced the airbus a350 jet and jet proved audience. Drag on ea go function, a wonderful function showing you how the earnings season is panning out. This is the ea function for the stoxx 600, 257 companies out of 406 produced results. On aggregate, sales beating estimates by 1. 25 . Earnings beating estimates by 8 . Earnings not beating estimates by margins. If you hover over that bar you can see 57 of Companies Beating, negative 41 . The doesnt match up to success rate in the u. S. , which is above 70 . This is a sales Earnings Growth metric within the ea function. Earnings are up by 25 . What i wonderful function, ea go. Vonnie im looking at the vix. Its a bump higher but we are way back down just above 10. That is reflected in the dollar index, really surging. We saw that go below 93. That would be pretty stunning, which we did already. Its up 1 4 of 1 and today session. Oil coming off just a little bit. And, 210 spread. Now, so a little bit less steep. Youg20 global macro movers, can see some of the indices we saw coming off yesterday are seeing a bump today. When it comes to the dollar complex and oil currencies, you can see theyre coming off thanks to that drop in crude oil. You can see all the commodities soft and the oils complex are lower today. Thats about it for the u. S. Markets. Mark . Mark lets chat hedge funds. Said to have pulled 15 of their assets from the firms main fund. Shares of man group higher today, the company reporting it attracted a record amount of money in the first half, helps by products with lower fees. He covers the Hedge Fund Industry for bloomberg. Great to see you. Europe seems to be on a mini streak with hedge fund investors. Whats going on . Who had imagined to last year or until brexit or french e lections, but things have dramatically changed in europe. You can see huge amounts of m a activity going on. Political risk has subsided, abated a little bit. That is giving some confidence to investors to put money to work in europe. What types of hedge funds are reaping the gains from this changing sentiment . Is not clear yet. It seems to be quite widespread. Mostly any hedge funds betting on m a activity, equity long short, those guys are getting tons of money so far this year. If you looks out, at other regions, asia or u. S. , investors are basically pulling out money from hedge funds, investing in those 2 regions. They are focusing on europe as the bright spot this year that can work for them. It looks like clients have pulled 15 from the main hedge funds this year. In this environment, is actually a loss . We are seeing more being pulled from other hedge funds. Nishant absolutely. Its a problem of some of the bestknown Macro Hedge Fund managers not making money. Investors just getting tired and pulling out money from them. Weve seen similar situation in europe. All of these funds have been forced to cut fees to retain clients. The problem with the larger managers because if you see the broader macro hedge they have been, able to attract money. They are the biggest beneficiary of the survival of interest in hedge funds. Its that some of these really large hedge funds not making money and investors are deciding and reallocating to somewhere else. Vonnie if i direct viewers to our chart, is never, 74 the bloomberg chart library. Is it purely currency motivated . Nishant until last year, that was the case. If you look at this years performance, they are outperforming, u. S. Hedge funds as well as global hedge funds. Thats what we are talking, we were talking earlier that things are significantly better this year. Thats why this money is coming back. There is a little star, low margin. You are getting more money, more assets, but thats the lower margin. Nishant absolutely. Thats the key takeaway here, its not that investors dont want hedge funds, they are just refusing to pay 2 and 210. 20. Thats the visible at mangroup, they did attract record amounts of money fo rany 6month in their history. Those money is not flying into highermargin products but investors are picking and choosing where they can save some money on fees. Mark thank you for filling us in on the Hedge Fund Industry. Vonnie its time now to check in on the bloomberg first word news. Courtney donohoe is here with more. Carney almost every Senate Democrats signed a letter outlining what sort of tax overhaul they would support. The letter says the tax burden cant be increased for the middle class. The overall has to have an regular message not reconciliation which would let republicans skippy 60 vote threshold. Republican leaders say they want to push ahead with tax wall street regulators have begun to rewrite the volcker rule. Five agencies are moving to loosen restrictions that were central to the governments response to the financial crisis. Changes probably would give big banks more flexibility for handling fine trades along with investments in private equity and hedge funds. The euro area economy steamed ahead in the second quarter, gdp rose 6 10 of 1 . Spain had the fastest growth since 2015. France the strongest expansion since 2011. The u. K. Proposed a National Investment fund to close a Technology Gap with the usa. 5. 3 billion fund would be used to provide money and other incentives to most promising british startups. Europe hasnt produced any giant Tech Companies like google or facebook. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. Im courtney donohoe. This is bloomberg. Mark . Mark coming up on the european close, ferrari known for its ultra far supercars. Now the company is considering , is it the right way to drive sales . The strategy next. This is bloomberg. Vonnie shares have made a new high on the day. Bloomberg west Abigail Doolittle has more on this stock to watch. Why Royal Caribbean . Beat assessment for the second quarter. They raised the fullyear guidance. Our analyst says it has everything to do with strong tends trends in cruising. Lets take a look at the ee function. 1. 71 in earnings, beat by 2. 6 . Nearly 2. 2 billion in revenues. Stacy 8 out of their last 8 quarters, so everything moving in the right direction. They actually beat on rising estimates. Its not like it was a low bar quarter by any extent. If you take it one step further, something that looks solid here, this is where valuations is. We see is right in line with where its been. It looks pretty solid. Vonnie it seems like its not been that long since we had to get over some scandals related to cruising. Abigail the last time i looked at cruise lines last year they were in a tough spot. This year they are doing great. A number of the cruise lines of sharply. 44 at Royal Caribbean, up this year. We have carnival and norwegian cruise lines both of 30 on the year. Some real strength. I did reach back to see whats behind this and whether or not Royal Caribbean deserves to be u pmore. Up more. The makes the point that Royal Caribbeans revenue yield growth for the year is higher than that of carnival at 5. 5 to 6 . Norwegian cruise lines at 2. 75 . One interesting point, norwegian cruise lines talked about the issues with china, the fact that cruise lines are being rerouted from south korea to japan. Overall, the cruise line sector looks pretty strong, vonnie. Vonnie thank you for that. Industry. To the auto shares of carmakers under pressure in the u. S. After general motors, chrysler, and ford posted steeper sales declines in july than analysts estimated. Its another sign the u. S. Auto slump is persisting after seven years of growth. Joining us from our Detroit Bureau is our reporter. Happened . Ase, what surprise,kind of a the big surprise with gm and Fiat Chrysler both down. Everybody expected to be down and they were way down. The surprise under that was pickups. Been a strength and it probably will continue to be a strength for the market. Gms silverado pickups were down 50 less month, the sierra down almost as much. Ram pickups were flat. The big disappointment there was with the fullsize trucks. Vonnie people just bought enough suvs, is that it . Jamie still a huge bias towards suvs. Everyone is getting away from cars, sedans, and coups. You look at toyota which had the good surprise today. It was powered by the rav4, which has become the dominant vehicle. This was the company known for the camry and corolla. The top seller now is the rav4 crossover utility. Vonnie what about discounts and so forth . They areand 10 drop, not something you sort of overlook and say, it was a slower order quarter. This is a sea change. If there guarantees, was any doubt we would see decline from last years record pays and the records set the year before that, that can be given up now. Were still looking at what will be the fourth or fifth best year in the history of the u. S. Auto industry. It is still probably pretty good but some discounts are coming in, they could get bigger, inventories are pretty large. We will keep seeing factory shutdowns that will take a bite out of the gdp as workers are cap tom. Vonnie were still looking for 16. 8 million on an annual basis. The 16 handle is pretty huge, right jamie . Jamie that maybe was the economy economist. 70. 5, the automakers should be making good profits at that level. Vonnie thank you to jamie butters, auto reporter for Bloomberg News. Mark lets stick with autos and turn to italy. Ferrari considering revving up a major expansion the on a traditional supercar nation. Bloombergs tommaso at par with the story and joins us from milan. Why is it doing this . Why is it moving beyond this sports car cache . Strategy, thee first target has been for each fits,billion euros in pro and hes going to make it this year. Now he wants it to turn into a new era of ferraris. How you do it without risk of car,g your super sports you try to grab clients into new segments. Ferrari is trying to find new drivers. This is why they want to expand into what they call ferrari utility vehicle. But they want to do it in a normative way because i dont want to risk losing the dna of ferrari. Mark isnt there a risk diluting the brands exclusive cachet . Thats the main risk. Ferreri is celebrating its 75th anniversary and the dna is based on a super sports car. I see marchionne is aware of that risk. He says, he had said it before, we are considering something to expand beyond sports car. Sources told us, it may have 2 or 4 doors. The bottom line is they are trying to reach new customer, especially in a signup, creating a car which is a ferrari, not an suv, but going into that direction. But willside this suv, be the drivers of this plan . What will be the drivers of this plan . Yanni,plan will be mac sources told us the plan is to double profit from here. Thats why shares did so well today. He wants to expand beyond 10,000 cars a year, which means they lose some exemption in the full economy rules, and so they have to have more stringent rules. Theyre planning in a way that will help boost the power, and grabbing new customer, like the guy who wants a tesla. Mark is he going to step down from fiat in 2019 tommaso . Is that plan concrete . Yes, for sure. Is going to present, next year 2 new plan started one for you chrysler and one for ferrari. It will be like his heritage. For ferrari, this transformational deal, for fear chrysler, he has said he may consider a spinoff, he was to attract much more value from fear chrysler. Hes going to present those plans next year and try to break some news regarding. Sergio is stepping down from fiat in 2019 and two years later from ferrari. Job, our senior italy reporter for Bloomberg News in milan. Time for the Bloomberg Business flash. Fizer sales drop for the Third Quarter in a row, likely to add pressure on the maker of viagra and lie record come up with a deal so we could return profit. Pfizers secondquarter profit was better than expected. Trying to calm investors concerns after debt rose to a record traits the British Properties is lower oil payments for the rest of the year and funds from asset sales will ease the burden. Bp has almost 40 billion in debt. The Company Posted secondquarter profit that beat estimates. Thats the latest Bloomberg Business flash. Whats next . Battle of the charts, risk versus conflict. One index plunging, the other surging. This is bloomberg. Vonnie mark drum roll. To start this off well. Im taking a look at the city macro risk index. This is a measure of prices and move depending on risk aversion. Higher this goes, the more riskaverse people are. Every timets here, this reached somewhat of a low. Each time it hits this low you can see this index tends to people are not too afraid, and that it surges of people become riskaverse. I want to point out what happened recently. This yellow circle over here was may, when the index hit its lowest level in 7 years since 2010 which was the lowest ever. It is starting to lift up beyond that blue line i marked there. The question now is, is this index reverting . Will we see a surge in risk aversion . Something to keep a track of at g btv65. Mark vonnie, what have you got . Vonnie that is certainly a hypothetical, mark. Mine, however, is a reality. Mine, and obviously i missed a call. We will ignore this portion. Partisan impact conflict, i think that is fascinating. The Philadelphia Fed decided it was worth measuring this and coming up with something that is very nonbiased. The Federal Reserve bank of philadelphia coming up with this index. You can see it was all the way along back through the decades, its been pretty low. And you get to this debt ceiling debacle, when the government shuts down and so forth. The conflict index was up here. Its even higher than it was back then. I think that says a lot. You can see my chart in the chart library at 7350. Mark hypothetical versus reality, vonnie. Basically, its what it comes down to, even though vonnies mom was calling her there. I think that deserves extra points, if anything. Mark i did like the city macro risk index. Two gauges weve never had on be otc, botc, but by a whisker, the citi macro index wins the day. Well done to dani burger. Vonnie that was dani calling me, by the way. Mark very good ploy. Hypothetical beats reality today, vonnie. Coming up, you do not want to miss it Lloyd Blankfein will be live from baltimore to discuss the first of 10,000 business initiatives. Quick peek at what happens in europe today, european markets ended the day like this. First day of gains in four, starting august on a bright mark. Bloomberg markets continues. This is bloomberg. What should i watch . Show me sports. Its so fluffy look at that fluffy unicorn hes so fluffy im gonna die your voice is awesome. The x1 voice remote. Xfinity. The future of awesome. Vonnie im vonnie quinn. Welcome to bloomberg markets. From bloomberg World Headquarters in new york, here are that have stories on the bloomberg and around the world that we are following. The former fed chairman Alan Greenspan says he will worry about a stock market bubble, the actual bubble is in the bond markets. More on his warnings this hour. Under armour ashares getting stopped in trading today after causing its annual Sales Forecast amid sluggish north america results. How well the ceo falls investor concerns. Plus, u. S. Carmakers under pressure after general motors, fit chrysler, and ford see steeper sales declines than analysts estimated. We take a deeper look at the auto market slump. Usst, julie hyman is with halfway into the trading day and we are seeing some green on the screen. Julie enough green on the screen to push the dow to another record here, even if