Keene. Tom youve got that right. After that fiction, lets get to our top headlines. Vonnie thanks, tom. Markets are closed in china. European stocks are trading either higher. Futures indicate that u. S. Stocks will be higher at open. China marks the 70th anniversary of the end of world war ii by announcing the biggest military cuts in almost two decades. President xi jinping said he would cut 300,000 soldiers from the 2. 3 million on duty. The Republican National committee has issued a challenge aimed at donald trump. There are reports they have asked candidates to promise they would not run as a thirdparty candidate. The pressure is on twitter to find a new ceo. Dorsey,rim ceo is jack one of the cofounders of the company. At the u. S. Open, Serena Williams is one step closer to her goal of winning all four in one year. Ents topseeded Novak Djokovic won his second round match. He did a goofy dance with a fan after the match. Tom this is not wimbledon. [laughter] tom are you supposed to take an oath you wont run as a thirdparty . Brendan this is ridiculous. Party hasican absolutely no idea what to do with donald trump. Where is it that you are supposed to take an oath not to raise taxes . Brendan amen. Has the right answer. Tom american oil. Right on to the next screen. Vix is down. The dow, a little bit of an oompf there yesterday. Lets look at the challenge of the american psyche. This is one of the best confidence indicators, the Bloomberg Consumer comfort index , it is a weekly index. Up we go. Here is the average of that good ling of the late 90s 1990s. Here is the angst we are coming out of. Boy, this felt good. Brendan it did feel good. Herenk i quit a job once because i wanted a vacation. The description. This is a nice little debt. This is what a recession looks like. A financial crisis looks like. Tom we are going to have a vshaped recovery, that worked out. Ok. The confidence of bloomberg off the bloomberg terminal. First time in ages, the markets show consecutive days of relative quiet. Christopher whalen will join us in the next hour. We have smart, smart notes on the Global Economy this hour. The Global Policy and commodity and economics keep on ticking. Right now, there are challenges in emerging markets. Are we attached to them . That is a good question. Right now, the emerging market question is quite separate. Seeing, wes we are believe they are only just getting started. Has ahen vonnie photograph of malaysian shirts one day and others the next day, what does that indicate . There is volatility. Whichare political issues just increases uncertainty and reduces capital inflows. In indonesia, they are trying Economic Reforms and they are trying them a difficult times globally. Have these economies lost their window to liberalize . Atul absolutely they have. It is a simple fact of too little, far too late. They should have gone through whenliberalization process there was a lot of u. S. Capitol flowing in. Tom lets look at the snapshot on brazil. You see the rally moving down. Strong brazilian real. Was a great piece on the terminal today from Eduardo Thompson pointing out that market cap in brazil is down one . 2 trillion. Tom that is amazing. That is brilliant. Mohamed elerian was way out front on this says it has more to do with politics than finance. Brendan youve got to liberalize while sun is shining. Once the demand evaporates, you cannot do it anymore. , it is ah brazil further issue. You have the problems impacting all emerging markets. You have a significant commodities decline that impacts what they are producing in their economy. You have political instability. It is the intersection of all the worst parts of emerging markets in this one economy. Brendan can you bring up the one chart that shows trade from brazil . This amazes me. Just how much trade brazil does with china. Ow that we are looking at it tom i had nothing to do with that chart. That is brilliant. [laughter] what can the Central Banks do . Atul they are really stuck at the moment. If they raise Interest Rates to attract more capital inflows, they kill domestic demand. If they cut Interest Rates to boost domestic demand, it the capital inflows. Vonnie and they waiting game for Global Demand to pick up. Atul in part. Theyre just so reliant on capital inflows to boost their growth. Brendan brazil kept its rate steady at 4. 25 . Is there a concern about capital outflows . Atul absolutely. Particularly because of the instability in the political factors. What are you recommending in terms of emerging market investment . Atul we have been underweight on emerging markets for some time. We moved all of our clients out of emerging markets in june 2014. We want to zero weight on commodities, emerging markets, highyield credit, as well. I want to touch on ecb very quickly. Does that mean you go developed world and europe ever weaker benefits you . Atul absolutely. It is a very clear preference we have four developed markets. The u. S. Followed by europe followed by japan. U. S. Dollar index rise, which is negative for commodity prices. Tom is he from australia . Atul australia. Tom lets introduce our twitter question for the day. It is a smart one. How much wage growth will we see in tomorrows jobs report . It showed up in the beige book. We will see whether it shows up in the news. Tom in the beige book. It is bloomberg surveillance. Good morning. Tom good morning, everyone. This is aussiekiwi. New zealand is really struggling with their agricultural economy. Right now, lets get to our top headlines. Vonnie thank you so much, tom. Authorities in illinois are asking for the publics help to find three suspects in the killings of the police officer. Tuesdayhot to death on while running after three men in a Village North of chicago. He leaves behind a wife and four sons and was due to retire at the end of this month. Lasts money was taken out year after the departure of bill gross. Users can order goods by pressing a button with amazon. Brendan i think there was a diapers button. Vonnie im not going to ask why. Brendan there is a high demand for diapers in the Brendan Greeley household. With no transition whatsoever, atul was born and raised in sydney. Dollar is right isk Australian Dollar headed right back south. The water has receded. What is australia wearing . Atul unfortunately, not very much. When you take out the mining boom and you dont have much of a housing boom, there is not a lot left. There is not the breadth of the economy that we have seen in several other economies. Brendan was the pace of growth in china a curse for australia . Did it d diversified australia . Atul in one sense it did. There is an extent to which it did drag us away from other industries and concentrated the economy on mining and other commodities. Has with brazil, so much of it goes to china. We are looking at 90. 13 billion. Almost twice the nearest trading partner. That Consumer Spending numbers up from australia. Can the economy adjust . Atul it is a very painful adjustment whenever an economy is going through a transition. Is up to the reserve bank and the fiscal policy makers to try to smooth that transition as best they can. When you dont have the breadth in the economy, it makes it quite difficult. Especially when you have elevated house prices. Mentioned Julian Robertson and his commitment to new zealand. We are buried in stereotypes in america of your australia. What was the famous line out of planet of the apes . Take us away from our stupid stereotypes of australia. If you were sitting in a living room in new york city, you guys dont get it, this is the real australia what is it . Atul the australian economy is quite diverse, but they are dwarfed by other sectors. Is medical Sciences Field very advanced by global standards. On the economy is focused cyclical elements. Other high marks for adapting to the commodity collapse . Atul to that extent, they are changing their companies in the face of declining commodity provided commodity prices. But it is heavily cyclical. If commodity costs are going down, the share prices are going down. Tom what is the oxygen down there . Atul i think it is something in the water, actually. Brendan australians do make music. Tom that was a beautiful brief here. Coming up, we will look at the myths of too big to fail banking. Christopher whalen on the American Financial system. Chris whalen on brian monahan. On Brian Moynihan. Tom the number one story across europe and the world, the migrant issue across all of europe. Hungary. Udapest in. Igrants at the train station this is a train station going back to the 1880s. It has become the focal point across all of europe. We need to go to a morning mustread on this topic. Brendan before that, we are going to show you pictures that are truly distressing. We discussed whether to show them and we decided we would. Sometimes an image can change a nation. That little boy has a name. He washed ashore after attempting to reach greece from turkey. Mustread comes from. He Financial Times leaders and media need to start calling the situation what it is. A refugee crisis, not a migration crisis. Thethirds of those crossing mediterranean come from syria, or reach react, afghanistan, and other states where they are legitimately for liang fleeing persecution. We have hans nichols joining us from berlin. You have spent so much time watching negotiations about other things. How are these pictures changing the conversation . Hans in berlin, they are changing things a little bit, in that it seems the german public is united behind the idea that something needs to be done. This is important because it is on the back page. It is such a sad and awful picture. This paper which was very antigreek bailout is sort of on the side of the refugees, that is a sea change. In brussels, it is a different issue. We just heard the Prime Minister of hungary saying, this is not a european problem, this is a german problem. The whole thing is very messed up. These kids and their mother and father were trying to get to canada at some point. Why does berlin need to take the lead . Why cant it be a Global Response . Hans they are passing through europe and many of them do say their final destination is germany. Germany is expecting 800,000 asylum applicants this year. What europe wants to do and i think there does need to be a global answer to this what some leaders in europe want to leaders european in the east, they are saying, we dont want to take the refugees. In the east, they are saying, you need to have a distribution plan. Brendan it is fair to say that the war in syria is not europes fault, but it is their problem. About howhis change you can move from country to country without a passport in the European Union . Hans it is still intact. As a practical matter, hungary shot down shut down all nonstop direct trains from budapest to vienna. This is for everyone. All western bound trains to western europe out of hungary have been shut down. The trains are trying to get the refugees from camps two camps outside of the city. If you dont have trains making trips that they used to make, that is a problem of progress and commerce. Tom thank you so much. An issue well into 2016, as well. This is bloomberg surveillance. Tom quieter markets. A quick surveillance correction. , i failed to is the earlier, ac dc are comic australian band. Now, here are our top headlines. Vonnie tom, investors got a break from the markets today. Markets in china are closed until monday for a holiday. European stocks are trading higher this morning. Theyre are waiting to hear what ecb president mario draghi will say later today. U. S. Stocks will be higher at the open, futures indicate. Congress is expected to start debating the Iran Nuclear Agreement next week, but lawmakers will not be able to kill the deal. Senator Barbara Mikulski said she would support it. That gives the president 34 votes in the senate. Meanwhile, the president wrapped up his threeday trip to alaska. He visited a fishing village and later headed further north. Is one thing no american president has done before and that is travel above the arctic circle. [applause] i couldnt be prouder to be the first and to spend some time with all of you. Vonnie president obamas trip was designed to highlight climate change. Temperatures are in the arctic are rising faster than any on earth. Plot line forrgs dreamworks does not include disney. The companies will go their separate ways when the contract ends next year. Disney is moving away from adult dramas, the specialty on spielbergs production house. Usingchildren are already the force. They were first to open new star wars toys. Newhandise linked to the film will go on sale. Tom i know brendan is gaga about this. This is going to be jen or mess ginormous. Think the just rollout of the films has been masterful. Tom lets assume the movie is great, who knows, but the content wins. Brendan it is going to have han solo in it. Tom they just kill it. We are going to china, arent we . Vonnie peace is being highlighted at the military parade. China will never speak hegemony or expansion, the president said. This report from beijing. Im here reporting outside of Tiananmen Square and the heart of beijing, where the victory day parade is literally rolling by. We hear we have the tanks and artillery of the Peoples Liberation army as they celebrate the 70th anniversary of the ending of world war ii. For the president , this is his opportunity to show his grip on the military, but also to show unity to the chinese people. In addition to bathing the parade in nationalistic tones, he is also sending a message to the world and the region that china is a unified power and that it will be a force to be reckoned with. Society,the flat earth i have never seen a tie that lou n beijing. Blue i brendan it is a special color of blue they trot out. [laughter] vonnie that is some video, i have to say. Atul, do you have geopolitical concerns about china . Might . Ooking to show his atul it is a longterm plan. In terms of showing my, this is certainly one of them. Our focus on china is more economics and geopolitical. Vonnie you are not concerned thats bets with japan could if we areparticularly still seeing huge influxes of country folk into the cities atul that is the bigger concern within china. If you do start to see political unrest rise, that is the major concern in china. These pictures look 20th century. When we look at some of the investment projects china has on panama world, its canal through nicaragua, the one silk road, do you see these as economic projects are geostrategic roger projects . Atul it is some combination of both. On the one hand, it wants to have a more strategic residence. Round the world from an economic perspective, you are seeing china take an expensive currency and deployed it around the world. Tom Thomas Campbell has extended the china show at the metropolitan museum of art. Courage to talk about 1968 and the tension with taiwan. Nobody talks about taiwanchina anymore. Why is that . The concern is not so much china within itself, it is whether china represents a threat toward japan and other nations in the region. People the grouping of that came, the other asian leaders did not make it, you had north korea representatives, representatives from other communistleaning countries. It is interesting what alliances are being formed. Atul that is the real interesting point of the parade. It is who is actually there, who is present. They are forming complement the strategic alliances brendan was speaking about. Brendan lets talk economic power. At what percentage Economic Growth does the communist party loses grip . Atul it is more about employment. Tom lets bring it over to the equity markets. They are closed for the festivities in china. China boomed over the last year or so and then came right back down to normal. What did they learn from the equity embarrassment . Atul this equity market rally is liquidity driven. There was nothing really to it. There is no economic explanation. I think the lesson they have learned is you cannot shift liquidity from one part of an economy to another. If it is not meant to be there, it will shift down. Tom you get consequences that were unintended, to say the least. , maybe the uberbull. He has been waiting, waiting, waiting to do something with my double leveraged allcash fund. Coming up next. Bloomberg surveillance. This morning, Bloomberg Television, bloomberg radio, mario draghi, the announcement, the press conference. Eurodollar has been relentlessly weaker. Getting up to a 1. 09 would be a big deal. Here is Brendan Greeley. Brendan there was a more innocent time when currencies reflected trade flows and politics. That time is over. This piece is inspired by andrea wong. That is the spread between Interest Rate spikes in the u. S. And the eu. The yellow is the price of the euro excuse me, that is the quest of dollar quoted in euros. For this cross, the currency trade as become the Interest Rate trade. Tom this is the back and forth. Analysisfrom a yield over to that flow analysis. You wonder where we will be in 90 days. Brendan you run that chart back at little bit and you see almost no correlation between them. You are looking at the euro crisis. You are looking at growth of trade within the eurozone. Is this what we are looking at more broadly for currency dynamics globally. All we really just looking at global Interest Rates . Argumentis this flow of where u. S. And your liquidity flow is going. Thankfully, we are also moving away from a world that has crises involved with it. Brendan i have to jump in. Atul just said liquidity for the first time. Tom what you say is very british. N and a stock and flow analysis. Pros like you go, i dont care how much russia has. What are the flows of some of the tension countries . Atul that is the point that we make. It is the flow of the capital into or out of the countrys. When the capital inflows change brendan i would argue that malaysia is a better example. The flow looks awful. Atul when you start to see the , that isw out financial conditions. We put the money into developed markets and developed market equities. In technology, as well. Take it right down to the basic american. Is it flow into dollars good for americans . Atul it is good. It does reduce their prices. Ability tos their spend more expensive dollars abroad. A strong dollar is positive. A lot of parity calls. Have a long call even from when the euro is up. We still believe it is moving that way. Vonnie all right. Time for a look at our top photos. Here is one of the ones we chose. And Arctic Drilling protest. Bear was moved to the shell headquarters. Brendan i think it is a puppet. Is this like the french famous massive topic group . Im making this up. Vonnie is it a marionette . Brendan there is a famous performing group that has massive marionette. It is going to stay outside the shell headquarters. Tom the president should go to idaho. There were like for democrats in idaho. It would be great. [laughter] brendan the polar bear has a name. It is aurora. Tom aurora. How sensitive. Vonnie a baby beluga whale photobombed the Connecticut Governor during his press conference. He is a 13yearold male. He floated right behind the governor for his 18 minute speech. The governor turned around to see what was distracting the audience area a audience. [laughter] tom depressed people are going, yes, yes brendan beluga whales have resting be mused face. [laughter] it is a combover beluga. Vonnie we are finishing with president obama and coastal erosion. The pilots turned the plane around, so he could see it a second time. The residence of the town are hopeful this will prompt funding to build an evacuation road. Erosion will force them to leave in about a decade. Tom erosion. The ocean is getting higher . Vonnie yes, the coastline is receding. Tom one of the great images of this august 2015 was the National Geographic video of the arctic ice space changing and they hedged it. It was really something to see how it is shrinking right now. Brendan there is too much data and it is all too hard to think about. Tom those are very strong photos. Is our photo editor on vacation . Those are very good. Vonnie they do a good job. Tom they do. Vonnie the trump you dont know. Who is that guy . This is bloomberg surveillance. Streaming on your tablet, your phone, and bloomberg. Com. Tom futures up seven. It is finally somewhat a quiet market this morning. That is different and that is a good thing. Lets get to top headlines. Vonnie thanks, tom. Refused toclerk who issue marriage licenses to gay couples could face contempt of Court Charges today fortifying the supreme court. She argues that her Christian Faith will not permit her to issue the licenses. Hulu is giving in to requests from viewers. They will offer online tv without commercials. Hulu is coowned by nbc, disney, and fox. Billionaire Mikhail Prokhorov wants to consolidate his hold on the Brooklyn Nets and the arena the team plays in. He is close to a deal to buy the portion of the Barclays Center and the nets that he does not own. He owns 55 of barclays. Tom the new york islanders. Vonnie do they have fans left . Im curious. Tom that is a serious question. Nhlcommissioner of the said, i can get to brooklyn and the Berkeley Center faster than medication Madison Square garden. Vonnie our radio head of operations said, i can get to boston faster than brooklyn. From long island. Brendan that is absolutely true. I have a theory that if you can explain shifting allegiances, mets, yankees, giants, polo grounds, islanders, then you can explain new york. why does an donald trump doesnt donald trump do stupid sports stuff . Like pay 8 million 8 billion for the mets . Vonnie max abelson joins us now. In your profile, you say that his company is business. What do you mean . Max if tom keene were going to for president tom it is being considered. Brendan lord save us all. Max he would have to be prepared for the debates. The amazing thing about donald trump is that he has soared to the top of the Republican Party without anything. Tom could you do that in business . Max i started diving into the business. He is a businessman. Tom what is the major take away from your wonderful article . Max this guy today is just not a skyscraper builder. He does Something Else entirely. Brendan his businessman is playing a businessman on tv. Hes actually more than that. Just because he isnt what he says he is doesnt mean what he says he is isnt something. He is a landlord, he has golf. I toured the trump empire with some of his deputies. Then he licenses stuff, like buildings and products. He manages hotels. Vonnie is he a good deal maker and a masterful ceo . Max the fun thing for me is that his career is really complicated. He has ups and downs. He has fallen really low and has rebounded. Vonnie busy throwing darts at the dartboard . Ax he said that would be crazy plan. When you look at his career, he was really high in the 1980s. He had a sports team. The new york generals. Tom i did not know that. Max it was a nonnfl football team. The 1980s was a lot of money. He personally guaranteed some of his money, which became a problem later. But he survived. He did not personally go bankrupt. He pulled it together with a new type of business. Brendan now that you have met with him and talk to him and written about him, is he going to go after you want twitter . Max i feel like i did a fair job. Vonnie he is rising up the polls, he is getting great numbers. Max i think authenticity is the thing he has. Wrap on this guy was given to him by his father. There are people who were given things by their parents and then they do better and go further. Can you say that about mr. Trump . Max he inherited a lot more money than we did. What he inherited was this outer borough real estate empire and he brought it into manhattan. What happens afterward is complicated, but you have to give him credit for that. Vonnie thank you so much. It is a fantastic read in the latest issue of bloomberg businessweek. It will be on newsstands tomorrow. Tom thank you so much, atul. Particularly your briefing on australia. Real mystery this morning stay with us on bloomberg surveillance. Are closed askets the peoples republic of china remembers world war ii, the governor of alaska was not invited as russia, venezuela, and north korea celebrate. sb stay is upon us, Draghi Press Conference and opec has become a single nation, we consider the future of the royal family of saudi arabia. Good morning, this is bloomberg surveillance live from our World Headquarters in new york. I am tom keene. The video out of china is something. It is amazing to see a 20thcentury feel. Brendan i felt naive, i did not note countries other than north korea did that anymore. I have been checking this on the terminal, they paraded the missile known as the carrier killer. Vonnie because it again brendan take out a single u. S. Carrier. Tom right now our top headlines, here is vonnie quinn. Vonnie stocks are moving higher worldwide, chinese exchanges closed until monday for a holiday. Investors on the continent are upbeat after a gauge of the service and manufacturing sectors hit a fouryear high. U. S. Stocks will open higher, futures up and the s p 500 of 1. 8 yesterday. Chinas planning 300,000 military personnel during a major display of military power. They are celebrating the 70th anniversary of a world war ii victory. China would still have 2 Million People in uniform after the cuts, shifting from a Traditional Land units to more advanced sea and air forces. A republican squabble will be fought today behind closed doors , donald trump will meet with the National Party chairman, the party wants the candidates to sign loyalty pledges, aimed the party wants to make sure trump does not make an independent run if he does not get the republican nomination. Twitter is being treasured to find a new ceo. Its board will discuss the search today. The leading candidate is the entrance interim ceo. Their shares have fallen 22 three in three months. Serena williams is one step closer to winning all four of this years grand slam tennis tournaments, she needed 90 minutes to win the second round match. She put in at her work at the practice court. On a mincey, the top seed one on the mens side, the top seed at one. Won. Brendan he always reminds me of the movie gladiator. You must win the crowd. Everybody loves the guy. You are not allowed to dance at wimbledon. Vonnie things are working out. Equities, bonds, currencies, commodities, what a celebration, a quiet day, two days in a row, like late august or early september, a barrel it gives us reflection. Two consecutive days of relative calm. Mario draghi will try to maintain that and shared yellen will maintain calm. Outrageous volatility but what is the link between the markets and central bankers . Christopher is a Bond Rating Agency which describes his authority on the American Financial systems, this book would have been a sleeper a few years ago. It is a spectacular one volume history of American Banking sensibility and outright foolishness. Chris with us. Ago kers of 100 years if they read your book and looked at the ballet of monitored modern banking how would they respond . They would be horrified. Jpmorgan was the central bank in those days, the metaphor i used is what if banks had to stand in the lobby and waited to do business with the teller, they were never a member of the u. S. Clearinghouse. Tom is the volatility good for banks . Banks, notng side of necessarily because you do not know how things will work out. They are supposed to do Customer Business but there is a lot of risk. Huge risk and credit products when they have to make a market for a customer they goes the other way and the markets are less liquid in the wake of the regulatory changes we have seen. The buy side customer is without any assistance in the market in terms of liquefying things like treasuries and agencies. Thanks will stop during doing repurchase agreements on u. S. Treasuries and Agency Securities , factor that went into your thinking. There is stuff going on in the background that is amazing. Brendan we have heard as people get out of the business the markets in no securities are not liquid, should we change the structure of the u. S. Treasury market . Chris the vocal role was a complex thing, mostly about conflict, getting banks about the business of trading their own account for credit. Isnt it a conflict if you can change the credit by manipulating credit default swaps. You have to keep going and divide the house, the bank over here and utility and then some capital in the dealer that can trade for its own account. Tom we will talk about morning and later, ralph set in your chair yesterday and i look at lazard, ever or, 10 years out, which you advised mr. Altman, they root for the phillies and red sox, how do they make money . Will they win . Chris the too big to fail banks will disaggregate because they cannot keep businesses that do not make money, the whole industry is doing over 9 return on equity. Vonnie is it better if there are plenty of firms propping up to take that business . Chris i am in favor of a greater aggregation. I think its better to have more participants. You can break up a jpmorgan, a bank of america into several pieces, the fed historically has not done that, they have gone the other way and you see the results, large banks do not make money. If you look at riskadjusted returns they do not make money. Brendan doddfrank, legislation pending that would reduce backoffice cost of Smaller Banks associated with doddfrank , what do you think of the Alan Greenspan played to wipe the whole thing clean, 20 equity, good luck, you are on your own. Chris it is like a flat tax, it has a certain appeal. You want to have skin in the game but the real issue is enforcing existing rules on fraud and disclosure. The key part of the crisis is hello, we woke up and saw trillions of dollars of liabilities that were not there the day before. It was not capital. Tom if mr. Dimon was sitting here he would respect your opinions but he would say we need to project internationally. We see the festivities in beijing, we see four or five major china banks, lets guess it is a house of cards, should not we have an International Exposure of big apple banks . Chris our big banks are they seeing government sponsored entities. The political question is how do we preserve the dynamism of a banking market with thousands of players . Which is good, especially for small business, and at the same time enable our economy to be competitive. Tom the john adams movie, the guy who played Thomas Jefferson in game of thrones, theres something to be said. Brendan that was the most tom keene tom it was a war in banking, hamilton lost his life and this is serious. You have hamilton and jefferson who hated each other, they saw your world, how would they respond . Chris jefferson was a debtor all his life. Hamilton the other side, the banker, the big city advocate. Would probably be pleased that the power of the United States and the fact that we have dominant banks. Jefferson would be horrified because he preferred the agrarian locallybased society that is still the bastion of the Small Community bank. Brendan lets go back to enforcing is chris thing laws, should actual bankers go to actual jail . Chris if you commit fraud and put out false disclosure, that misleads investors you should go to jail. And respect to tim Geithner Eric holder, they are wrong, the way you keep us undocumented against doing stupid things is by Holding People responsible, not shareholders, why are we penalizing investors . They are victims. Porations tom let me translate that into wall street, white are bankers different antigo tyco . Chris they are not. Tom geithner and holder are saying and other relays, this is part of the american fabric, we cannot put these guys in jail. Chris fair dealing is part of the american fabric. That is how you keep a society sane and preserve a Civil Society is by ensuring that each party gets value out of a transaction. When you let people cheat to make the banks look profitable you have a problem. Aris a spirit tom spirited conversation to help you get into september. Our twitter question, how much wage growth will you see in tomorrows job report tom good morning. Our oldblended index of trading partners, not china, not mexico, but this is what wall street uses, the roulette wheel of the dollar, you need to know it has not moved. One of the mysteries of the last three weeks is dyx stuck. That gets us to our morning mustread as we turn to tomorrows jobs report we will go beneath the headlines on radio and television at 8 30. What a great conversation with dr. Elerian yesterday. Solid job creation but no meaningful ways recovery, the fed could decide to wait, choosing to minimize risk and stronger evidence the u. S. Economy is resilient enough to withstand external headwinds. That gets to the asymmetric nature of central banking. Chris whalen with us. A minimum game and they want to minimize risk. Chris only from the perspective fomc, which is almost socialist. If you look at the economy and a balanced since you will be an ocate the vonnie you are going a bit far when you say socialist. Tom lets back up. Is janet yellen a socialist . No, she is an academic economist, there was a lie but 20 between what is considered acceptable between the Federal Reserve system which dominate economics, they control the budget. How they set acceptability in terms of Research Publication is very important. Brendan there should be a balanced when we hear savers we are thinking about our own parents, living in fixed income, when you look at the bulk saving implies a moral good what we are looking at is investors, a difference between investors and savers. Chris going back to the question about risk, what is the risk you cannot do nothing anymore. You cannot leave policy where it is because the negative effects of removing trillions of dollars worth of income from the system and transferring it to someone deleterious to the overall economy, you cannot leave it at zero forever. They have to change but they are worried if we do then gdp will fall. Tom when do they raise rates . Chris not until next year. Movingen Goldman Sachs to december. Muchwitter question, how weight growth will we see in tomorrows jobs reports . Tom we are showing what has not moved, peso has not moved this week, a big deal, you think it would be at 17. 10. Interesting how it has stabilized as the brazilian reality has not. Lets go to top headlines. Vonnie authorities are asking for the publics help to find three suspects in the killing of a police officer. Hundreds came out to mourn an officer shot to death tuesday while running after two men north of chicago, he leaves behind a wife and four sons, due to retire at the end of this month. Pimco flagship Bond Fund Falls below 100 billion in assets. The total return fund a third of the managed the budget managed in 2013, shanking last year after the sudden departure of bill gross. Amazon is expanding its one touch system for buying household products, they added 11 brands to its futuristic dash system, you can order goods by punching a button. They are free for amazon prime. Update on the markets, we had to find somebody with an elevated opinion, tony dwyer is climbing a mountain this morning. He joins us as we look at the equity markets. I want to bring this down to the average investor, they have seen the turmoil and you are able and you say by now. Sell me on why i should buy shares this morning. Tony the market correlates to the direction of earnings which remains positive. The ism while it was weaker it is above 50. Even with the turmoil you are seeing positive Economic Activity in the u. S. That is driven by the yield drive thereates availability of money drive in by fed policy driven by core inflation. Until you see a spike of inflation, that makes the fed tightening to invert the yield curve and shutdown credit, the last thing you want to do is by sell it down 10 market, even if it looks wrong in the next few weeks. Over the course of the next 12 months it will be great. Tom as John Templeton was a shares are on sale, will we see increased Dividend Growth and increased share buybacks . Tony you almost certainly see increased share buybacks, when the market begins, they have raised a ton of credit, one issue the market has is the huge supply of Corporate Credit that the bank created and that went into the coffers of the corporations and they will buy back the stocks as they weaken. I think the whole thing that the average viewer listener should look back atf you any correction over the course of u. S. History, and unless you were going into recession, even if it was only halfway through the correction, for an investor, not an interest not a traitor, but for investor, you want to buy that weakness, it offers you liquidity as long as you do not go into recession. Vonnie if corporate earnings drive the market and they will be driven by gdp growth which is improving, do you sell a house in order to buy equity . Tony i would not do that, one of the problems, derivatives and leverage may not be the greatest thing. House, realsell the estate and the housing looked pretty good because there is Credit Availability. Vonnie tony if you are going to listen to me, unfortunately the Financial Media is full of people like me that come on and say my indicators say by tech, i am not saying that, i would buy the next take with the assumption that you have no idea what the next few weeks will look like buy 3, 6, 12 months out you will be happy you did, whether you can withstand the volatility which will stay high. Typically what happens when you have volatility to this level, we measure it you have your crash which we did. You have a sharp bounce and retest low and do what we are doing today, grinding sideways and eventually you retest. Tom thank you, i hear it is harder to come down the mountain that go up, the careful. Us. S whalen with the stock market is important to the country, Alan Greenspan date on that idea. What does a correction me to bankers, do they pull in their bankers for next year . Chris the chinese turmoil quieted things down, we were looking at a record year, 14 , 50 growth and corporate issuance. Whateal issue is to see happens in september, the new issue market comes back and we start to see volumes again and it will be ok. We lost august, china took august. Vonnie what was the fear . Chris fear of what they do not know. I have been saying for a long time that the chinese Growth Numbers once you start to shake Investor Confidence in what they think they know, the cognitive illusion we all have, then the markets get royal. Because the street cannot deploy liquidity none of the big banks can deploy liquidity. Tom i want to talk about which bank made the dumbest decisions 2004, 2005, 2006, who is the trophy holder . Chris the once not with us. They rolled their balance sheet. 2004 was the peak, 4 trillion. Chris countrywide. They were a quarter of that number. Tom coming up, important conversation on saudi arabia, opec, and oil. We will have a discussion on the royal family. Tom quiet markets before the jobs day tomorrow. Lets get to top headlines. Vonnie the deepening migrant crisis in hungary sparking a new round of political in founding as refugees pour into the budapest station when police left. 3000 migrants have camp out, midi from syria. The hungary Prime Minister says germany and the European Union are doing nothing. Nobody would like to stay in hungary, we do not have difficulties with those. Them would like to go to germany. Our job is to register them. Vonnie westbound trains to hungarys capital are not running and the Railway Company saying it has suspended them for security reasons. The Republicancontrolled Congress is supposed to reject the Iran Nuclear Deal but they cannot kill it. 34 democrats are now in favor and that is enough to support the president to veto the congressional votes. President obama wrapped up his threeday trip to alaska visiting a fishing village and headed further north later. There is onema thing no american president has done before and that is traveling above the arctic circle. I could not be prouder to be the first and to spend time with you. Vonnie the purpose of the trip was to highlight climate change, the government says temperatures in the arctic are rising twice as fast as anywhere else. Despite the diversification move, apple is relying more than ever on revenue from phones. The company will introduce its latest handset models in San Francisco in six days. A Japanese Company is saying preorders for the phone are high. Three children are using the force. In australia. On live tv they were the first to have the new star wars toys. Merchandise links to the new movie goes on sale at the movie hits theaters before christmas. You have been practicing. Brendan i can see 15 of them. Six in each room, i am really excited. Tom i am as well. The bloomberg terminal, looking at a chart i put together years ago. An approximate is asian, adjusted for inflation an approximation, adjusted for inflation. We are back to cheap energy. Rectanglehat red which gets the attention of all of opec and in particular the saudi family as we look forward to speaking with john sfakianakis. 1986 is not 2015, how different is opec now versus back then . John there are greater andamental challenges uncertainty in crude today than at any other time over the last year or decade. Think about the us certainty with respect to demand. Also keep in mind on the supply side, many dynamics in play. Evenilient u. S. Output and after one year you still have growth year over year of approximately 600,000 barrels. Not only are we making more we have a resurgent iran that will come into the mix. Tom they do not get along with saudi arabia . That enters into the calculus and you have a hunt for saudi market share. What is the sweat factor in riyadh . We think about a resurgent iran and a resurgent iraq, 7 Million Barrels a day of output. Tom they make 7 million. Combined. About 7 Million Barrels a day, iraq and iran, iraq growth is red 17 yearoveryear and iran growth has been 2 or 3 but look to that for 2016, that output will likely rise and you also have the function of the barrels in storage today, those estimates range from 20 million to 60 Million Barrels that can be introduced into the market in the near term overtime. The longerterm issue is the output growth at some point in 2016. Brendan we will talk to an advisor to king solomon, if he ask you how long will it last the pain will last . Vincent until the demand cadence kicks in. You can count the barrels, it is hard to count folks consuming the barrels. Tom are important conversation coming up on saudi arabia. A quieter market after the festivities of the past 10 days. West texas, 46. 21, brent crude 50 a barrel and the euro has done nothing since time began and futures up a nice six with a 10 year yield 2. 18 . Brendan this is bloomberg surveillance. I am Brendan Greeley. King solomon of saudi arabia will be at the white house on friday comments first visit to the United States until he took since he took the throne. John sfakianakis advises the king and joins us. Define success for the king. Things. Wants many on the political side, there has to be a understanding as to what happens to iran. Side and the gulf needs to be reassured that the u. S. , if it sees a violation, and the west, will act and will take measures. Then there has to be a security aspect, that the u. S. Will provide and protect the region, something it has done in the past so that needs to be a reassuring point. Brendan what looms larger in the kings mines, the political threat of iran or all of the barrels iran will bring online . John it has to mainly do with the political side and the extension of iran in these proxy uncertainties and civil wars that have been taking place in yemen and in syria and iran and iraq and beyond. Tom i look at the stereotypes arabians,n and saudi the reality is this is a royal city they a royal came to their knees in 1986 with the collapse of oil, how close are they today on their knees economically in 2015 . John it is a question, we are far away from getting saudi to its knees, government finances are strong, when you come. To nigeria or venezuela and it has one of the lowest debts to gdp ratios if not the lowest. High reserves, yes they have lost a lot of it and what they cannot do is continue to issue debt and that is something saudi arabia is different today than it was in the 1980s. King lookingis it for from president obama . John he wants hard commitments, that the u. S. Will no longer the this aloof, misunderstood and is conceptualized participant in the middle east. We do not understand precisely and is the role of the u. S. Many are concerned that with shale, the u. S. Will be distant from the middle east. Brendan the saudi arabia you talk about, reserves, low debt to gdp ratio is one that has somewhat of a window to liberalize the economy and diversify, they have been moving the work week and trying to get the domesticinto workforce, how far along are they . John what a lot of people do not understand because it is always a stereotype that defines saudi arabia and one needs to go beyond that. What is happening today with the new administration, the new king, and prince mohammed, we have a new economic reform agenda, privatizations will be taking place, the state would disengage from the economy and that will empower and enhance a more diversified economy over the next 10 years. Tom the theme today must be will be king ask of the president when they meet on the iranian deal . John you have signed an agreement and you seem to be pushing ahead with it, but if they violate and do not meet the criteria you have set, will you take actions, are you going to be president and direct or will you be distant. Tom thank you. Very close with the royal family and the politics of riyadh. I thought that was fascinating. It is a unique political experience. Brendan it was interesting for him to say they are launching on a program of economic reform, the question with any economic reform is how far can you get before you run out of reserves and begin to touch that debt to gdp ratio problem. Tom the first time we have talked to john without mentioning yemen. I would twitter put are jimter question, l gross to glassman giving us perspective on bloomberg surveillance in the 8 00 hour, how much wage growth will we see in tomorrows job report . Tom in a stunning beijing with blue sky, the pageantry of the chinese military. Brendan greeley, the forbidden city, 1420 was the establishment of it, ground zero of china. Brendan the president announced 300,000 people cuts from the chinese army, off of the terminal, these cuts will not hurt the fighting capability and it is part of the reform plan to make us more combative. He is saying, this cut that they are making to the trends army does not seem to be making a difference. A strange message. Tom our Stephen Engle is in beijing. Again. Any, here we go vonnie the ecb releasing a september Rate Decision in three minutes or less, the Federal Reserve says it is on its way but the ecb is a different centralbank animal and mario draghi and hans nichols joins us. Will the ecb respond . Hans they will respond verbally but nothing all the economist we surveyed do not think we will see a benchmark change. Get an update on the inflation outlook for this quarter, the last time we got this was in june and in some ways the inflation outlook, the Economic Growth outlook is more important. We suspect inflation will be revised downward. It was 0. 3 , hard to see how you are close to that, especially when you see the price of oil to 43 a 63 a barrel barrel. They will have to factor that in and what it means for quantitative easing and in the presser, china, china, china you are excited as i am. Brendan is mario draghi not the only game in town, is countries like italy doing the Structural Reforms as needed or are relying we relying on mario draghi . Hans some of the Structural Reforms in italy, spain has made them, what does mario draghi do . Will he actually announce something new on quantitative easing, a longer duration beyond the september 2016 deadline, the cutoff, a 1. 1 trillion euro program, he may talk about additional Asset Classes he could buy. Vonnie you are sticking with those. In 45 minutes you will have the press conference from mario draghi. Lets turn to chris whalen while we wait for the decision. Forward guidance, what will we hear from our own mario draghi . Chris it will ease because there is no political alternative. You do not see new leaders embracing Debt Reduction or restructuring. Vonnie what do you mean with continuing to ease . Chris they have bought on to the entire u. S. Program. The same thing we see here, no response in washington on the policy side whether you believe in a stimulus or believe we need to restructure and look at puerto rico. A lot of evidence we have too much debt. Some we lack the political will to deal with it. Tom what is the health of the european banks . Chris they lack capital. There is good Economic Growth to fund that. Leaving the benchmark Interest Rate unchanged at 0. 05 , the facility rate unchanged. The marginal rate unchanged. We will bring you any other actions that we get, we will not get the press conference for another 45 minutes where all of the news will come out of. Waiting on the forecast, looking for inflation forecasts. , thatate decision change is not where the big news will be today. Market reaction, the euro no change, markets had been higher. What are you hearing in terms of what reporters might be asking mario draghi . All china . Chris hans a lot of china, once we get outlooks, that will give us more sense on how many questions will be on quantitative easing. Probably a couple of questions about greece, whether he is concerned about elections, a september 20 election in athens, they could make things easier for greece by giving them a waiver that allows them access to a different funding window, not the emergency liquidity assistance. I suspect a lot of it will be china and durations of quantitative easing. Vonnie he just came back from jackson hole, spent some time with u. S. Central bankers, will that impact his view . Hans if that was to me i did not hear the question. The biggest news out of ecb land from jackson hole was victor, the vicechairman, indicating he did not think the china turmoil needed to force them to revise things, that is the latest out of jackson hole, he was the highest level official there. If you were in jackson hole you have an access to a better jet than i do. Vonnie you were not at jackson hole. Unchanged. Nd futures tom we will have more on the press conference, which is never a yawner. The euro not doing much. Crude 39 up tox 46. Good morning, bloomberg surveillance, i am tom keene. With meet Brendan Greeley and vonnie quinn. Lets catch up on our top headlines. Vonnie a marine is dead and nine others hurt during a training exercise, they were in a helicopter last night in north carolina. Officials say the copter made a hard landing and the identity of the dead marine is being withheld and the cause is under investigation. Willg in to request, hulu offer online streaming without commercials. They are owned by nbc, disney, and fox. Netflix and amazon prime instant video are commercial free. Russian billionaire michelob procure is of was to hold on the Brooklyn Nets and the arena where they play. They say he is buying to buying the center buying the part that he does not own. Headlines. He top tom lets look at the moment, for bank of america particularly, all of them too big to fail, thes debt the mistake is to blend them into one american giant yet each of our american major banks has its own distinct culture and tone set by a ceo. John and wells fargo is not jamie dimon of jpmorgan and none of them had the headaches of mr. Moynihan this september, Christopher Whalen is with us. The Brian Moynihan get to the challenge he faces, was it handed to him by ken lewis or selfinflicted . Chris selfinflicted. For some reason the boards and many ceos of Public Companies cannot accept the idea of separating the ceo and chairman role. It makes sense. I do not know why they make this fight. Today, thetunned day people who think bank of america was founded in San Francisco and has been this giant thing out of San Francisco, you and i know that is fiction. What is bank of america, is a nationsbank or the bank of boston . Chris it is all of the above and in many cases these Business Units thishow has that affected over his governments future . Chris i do not know if the operational issues over the lack of integration are factors, the bank has taken so long to address legacy issues, operational issues and investors i think if you look at the way a wells or jpmorgan is run, they are well ahead of bank of america in terms of dealing with legacy issues and it is a cultural thing, they did not want to spend the money. Ony were always very tight expenses. The predecessors he goes back to nc annb. Brendan we talk about how some of these banks should stave off consumer facing units and become fdic deposit banks, is that possible, to do all of these things without the deposit sitting there . Chris going back to the conversation you had yesterday with ever core, you cannot subsidize a part of the bank the retail piece, you have to effectively subsidize it with the wholesale peace and the trading. If you are jamie dimon, you go to the fed and say i would like to break up jpmorgan into a retail piece and an institutional piece, the negotiation would be how much of private banking, how much of institutional businesses do you have to leave with the retail piece to make it viable. It does not make that much money, credit card would stay with the retail banks. If you had that conversation with the fed, you have to prove you have enough capital in each pocket and a will be viable. The consumer is safer but they cannot get loans. Expectations for growth, job creation will be muted. Tom may i point out that bank of america and in the last 10 years have has provided a shareholder return of 7 . This is not jpmorgan. Chris and he causes the capitalization, fines, missed opportunities, Everything Else they had had to pay out. Brendan what is the difference between the banks we have been talking about, wells fargo, bank of america, and the Smaller Banks, less than 1 billion in assets . Are the Smaller Banks profitable and meeting expectations . Chris if the bottom 10 of the industry, 4500 banks is growing much faster. They are extending credit, acquiring other banks, issuing securities, we have been rating smaller institutions and they are the part of the industry creating much higher margins and value. Brendan and greater credit. Does america need the bank of america to be a consumer facing bank . Chris i do not think so, i think back to jamie dimons point, you need banks that can compete internationally. Iti that has retail offshore, that is expensive. Tom jamie dimon, 9 plus on radio, 9 plus, hans work on radio. Basis points a 1600 her year per your delta between those establishment, i am not blaming mr. Moynihan, i am stating reality. Vonnie where is the face coming from the faith coming from for those who do have faith in bank of america . Chris there is always hope, but if you are on the board, forget about with moynihan, how do you justify the lack of performance and change. The beef starts with the board, you have to talk to the chairman and outside directors and ask how do you accept this. Tom i have to go to radio. Vonnie you have great guest coming up and you will keep an eye on the mario Draghi Press Conference. We asked today how much wage growth will we see in tomorrows jobs report . First answer, nothing of significance, lower costs, which is good for u. S. Corporate profits and the u. S. World consumer. Brendan what is the consumer deed, does he need wage growth . Chris i think so, the lack of Credit Availability constraints put on that, i have i had one bank ceo said to me, he said, the concern is toxic, we cannot touch the consumer. Most banks we work with are shifting to a Business Loan formulation, multifamily real estate, staying away from singlefamily homes, they like commercial real estate. Because of the regulatory overhaul. Vonnie says big things about america that the average consumer is disappearing. Chris they are having a tough time getting credit, we have to regrow nonbank finance. We have to build Old Companies that were rolled up by the banks over the last 20 years, the household finance, the money store, and you are not going to see investors, Institutional Investors repo their securities with banks. That business go back to brokerdealers. Vonnie some largely driven by wage changes. A little bit in the service sector. The third answer, stagnant productivity and inflation equals four rates growth. Wage growth. It was said yesterday, you do not create wealth by printing money, that is the issue, had the week transition to something that will create prosperity . Where was the oil demand coming from . Vonnie keeping an eye on the jobs report. 218,000 st saying today the vonnie ism Services Expected to have a drop from the previous month in august, we will see if that is the case. Brendan i am looking at the refugee crisis in europe, it is not a migration crisis, many fleeing war, particularly the war in syria, south sudan and the terrible pictures of the threeyearold boy from this morning, turning into a conversation as french ministers are meeting today, that conversation will shift from the shores of turkey to brussels very soon if not already. Vonnie the border counties getting hit with the influx of people they are not able to handle. You feel like they have a great gripe. Brendan the thing we keep finding out is this is another problem the European Union was not designed to fix. Chris whalen, thank you so much for coming in today and doing a tour of banks and a number of other things. Bloomberg surveillance continues on radio, Market Makers on Bloomberg Television is up next. Good morning. Erik good morning. Its a thursday in new york city. Im erik schatzker. Stephanie ruhle is on assignment. We show you whats happening in u. S. Equity index futures. We saw a reasonably powerful rally with the Dow Jones Industrials rising almost 300 points this morning. That, a adding to higher open for u. S. Stocks. Not quite half a percent. In europe, we see some followthrough from what we saw on wall street yesterday. The european benchmark up one and a quarter percent and commodities inching higher. We are getting a reprieve from the volatility we have seen over the past couple of weeks. In china, markets are closed for a two day holiday. You will see some images we will bring you in some reporting live from the military parade taking place to celebrate what china considers its victory over japan in world war ii. Attention is shifting back