Transcripts For BLOOMBERG Bloomberg Surveillance 20170825

Are on this planet, you you can watch this fight. Francine good morning. This is bloomberg surveillance. We are getting breaking news out of germany. The Current Assessment for ifo, 1. 2416. This is the latest figure we got. We will bring you any breaking news. We will be speaking to the president of the ifo institute. In the meantime, this is the picture i am looking at on your asset markets. We are seeing a little bit of pause. A lot of currencies, a lot of stocks are drifting a little bit before janet yellen take to the states. Conviction inuch a lot of these european stock trading. This is what we are seeing overall. The euro falling. There was a little bit more Decisive Action in commodities where most Raw Materials climbed. 48 below 40. Thats get straight to the bloomberg first word news. Convictedlee has been of bribery, perjury, and embezzlement and sentenced to five years in prison. He was found guilty of conspiring. He says he will appeal the verdict. Hurricane harvey has strengthened to a category two hurricane. The National Hurricane center says that means it will have dangerous wins and extensive damage. Many Oil Refineries in the gulf coast, which is hope to have of the mining capacity has halted. Japans key measure of inflation rose slightly last month. The central bank struggles with inflation. The president of the ultimate fighting championship says conor shouldnt write up mcgregors chances of beating mayweather. He will face the boxing legend tomorrow night that should set sales records. The boxing people are saying he has no shot, he will be annihilated. When two people square off that know how to fight, start throwing punches, anything is possible. Conor mcgregor has knocked out power knock out power in both hands. He can win this fight. Nejra global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am nejra cehic. This is bloomberg. Francine thank you so much. As we await for the jackson hole speeches from janet yellen and mario draghi, to fed officials are offering opposing views on the inflation to be. Esther george says another rate hike is feasible this year if u. S. Data holds up, but the telling has robert a different view. Havent lost faith that inflation will get back to 2 . Historic cyclical forces in the models that would have suggested what the cyclical forces, what the impact they should have are being offset by new forces, which we have which we can aterstand mainly by looking industries and talking to ceos. I think those are having an effect on inflation. Francine Kathleen Hays joins us from jackson hole. Lets start with Janet Yellens speech. Kathleen it depends on how clearly she wants to make a statement about where the fed is in terms of inflation Interest Rates and how much she wants to sit back. She has been saying for some pullback is probably transitory, although the last couple of months she has a little more room to say maybe this isnt quite what i thought. Also, remember she is speaking about Financial Stability. To speak about Financial Stability is not like talking about a broken phillips curve. , on how determined she still is to try to lead the fed towards one more Interest Rate increases your. We knew the fed is going to start its Balance Sheet reduction in september. They have told us that in more than one way. Could leadtability janet yellen to talk about this question of keeping rates too low to long. Too long. That would lead investors to push up stocks. Frenkelrenkel jacob was arguing today on Bloomberg Television that it is time for the fed to start raising rates now. He says there is inflation in asset prices. It remains to be seen what janet yellen intends to say. Does she want to duck the whole issue of inflation and Interest Rates by doing a broad topic . Will she get more specific . Maybe despite inflation being away from target, the fed is still seeing reasons to want to normalize and take more stimulus at of the economy. Talk to me about mario draghi. We spoke to an ecb spokesman. He says he will speak to the theme of the event, which is fostering a dynamic role Global Economy. It leaves room to address some of the factors that could influence the Ecb Governing Council when it meets in september. Kathleen we know what markets would like to hear. There are a couple of things. We would like him to be more explicit and say, the broadest blueprint for people what people are expecting. , theapering process starting gate, etc. , and move towards that step and start it. That would be really easy for mario draghi to do. I think the more interesting question is what he might say about the surge in the euro. Bulls say they are most of care what he will have to say because they know they will have to taper. Will mario draghi expressed concern and will that put a whole other spin on where he is and how aggressively the ecb will move ahead . Said, yes, he agrees. Mario draghi is in a tight spot. The ecb is not in the same position the fed is. The recovery isnt quite as strong. The inflation is still far from target. Alans point was, looks, why would mario draghi, believe all the way to why would mario draghi come all the way to jackson hole if he is not going to send some kind of message . Kathleen, thank you so much. Oining us now is ed shing first of all, good morning. Good morning. Francine this is the inflation chart for the boj. And white ishe boj the one that is struggling the most. If you were to ask question to any central banker in jackson hole, who would it be . Ed mario draghi. I would ask him if he is really concerned about the euro. Clearly, it is having an effect. If you look at the asset prices in the eurozone, they are coming off. You are a pound investor, youre very happy. If you at what point is this going to hurt the economy . Therefore, does the work of tightening francine if you are a german exporter, you are ok, i presume, with the euro level, but not if you were a french or spanish exporter. Ed i think we shouldnt exaggerate too much. It depends on the way you are exporting. Basis, then year trade is 5 . It is not that dramatic yet. Even if you look at eurodollar, there was a time when we were at 145 against the dollar. We are still a long way from the 117 levels. Francine what does it mean if he goes there and mentions the euro . Ed i think he much try. I suspect he might fail. I think the markets wont care, because innocents, when you look mythe eurodollar rate, colleagues are the experts, but i would say it is a twoway gain. The euros getting stronger, but the dollar is getting weaker. This is just as much as trump failing to get policies through, gdp growth in the u. S. And the fed raising rates. It is as much about the weakening dollar and the ecb doing anything to the euro. Ecb almost in a corner that they have to start doing something . How much does it have to do with strength or technicals . Ed a lot of technicals. They have to taper. For several months, they have not been able to buy german enough german bonds. Its a tradeoff. The are not going to change rules again. To y are not, they half they have to cut the program sooner. A dont want to do that. Francine there is a jackson hole bingo game on the bloomberg. I think my favorite is risk premium. I quite Like National coordination. Stay with surveillance. Plenty coming up. We will have the latest from seoul. Ofs, we speak to the founder Jd Wetherspoon. This is bloomberg. Floyd mayweather is making well over 100. It depends on how many payperview buys. This is one of the most distribute combat sports ever. Boxing guys are not real big digital guys. We are very good in the digital space. It is the biggest digital of and have ever been involved in. Event we have ever been involved in. That was about the big fight between mayweather and mcgregor. Nejra amazon will begin flashing prices on groceries slashing prices on groceries on monday. That is the same day the 31 7 billion takeover deal is set to close. The move will inflame and already raging price war in u. S. Groceries. Apple is planning to unveil a renewed focus on the living room is an upgraded tv set box that can stream 4k video. The device will be revealed along new models next month. Two Societe Generale bankers have been charged. Forcing accused of subordinates to fake information. That is the Bloomberg Business flash. Francine as we discussed yesterday, autumn has historically been a period when european stocks perform at their best. Dampen her. Put it does euro strength become a problem . Ed not at this level. Say above 120 people start to get nervous. Ok this ist to say, getting serious. If you look at earnings forecasts for 2018, they have stocks down for european companies. Francine if you look at germany, yesterday we had strong numbers. Today, we are seeing corporate confidence we can slightly in august. I dont know whether they are nervous or not. Ed if we look at the general trend, confidence and pmis are strong across the eurozone. Slight lift inr germany, but i would put it down to the auto sector. There is a little bit of turbulence. Apart from that, when we look at europe, things are going great premuch. Going great pretty much. Do you go to an Industry Group that is less disruptive . Way is buying small and midcap companies. Line not the u. K. When you look at the confidence, the answer is these companies are more domestically focused. Francine why not the u. K. . This is something we are seeing time and again. If you look at the ftse 250 come it tends to outperform the bigger index. Ed the problem at the 250 at the moment is it is domestically focused. That typically is a good thing, however, now with inflation rising, real Consumer Spending negative, huge presser on that huge pressure on the retailing sector, you have particular pressures in the u. K. Economy. Why would the 250 benefit . Francine what does it mean for the companies in countries where we have elections . Big click aably the risk in the next 12 months. Ed italy is a risk, but if we draw from the trends across the eurozone, what do we see . We see a decline in the relative popularity of the extremist parties. If we look across and apply that to italy, that would suggest peoplee is lower than thought previously. It is still months away. For mainstream parties to get back to the fore in italy. I think that would call nerves. Francine think you so much. Ed shing stays with us. Jay y. Lee is given five years for bribery. This is bloomberg. This is bloomberg surveillance. Has been sentenced to five years in prison after being found guilty of perjury, embezzlement, and bribery. His lawyer says he will appeal. Is it what was expected . Rosalind they got five years. They would looking for 12 years. They were looking for 12 years. We grabbed one of the people coming out of the verdict room earlier and asked what they felt about this verdict, the sentencing that was given. She said she thought it was rather liked cap rather light. At the same time, we have protesters outside who are saying they believe that jay y. Lee is innocent and that he should be freed. Park geunhye was involved in this scandalous love. We heard from her just a few minutes ago. And theung ruling when government business collusion. Government business collusion in south korea has been an ongoing issue for many years now. It may go toward some steps in helping president known in pushing forward president mood in pushing forward reform. Francine what are the wider implications of this trial . Rosalind president mood has been missing civil reform. Economic growth has been one of the issues as a result of higher employment and lowwage growth. He has put into place some key characters in his government, his administration. One is the head of the center commission. He is also known as the troubled sniper in the public press. The white implications of the samsung case will be underlining his reforms the wide implications of this mk in the samsung case will be underlining his reforms. Francine up next, the pound at an eight year low. This is bloomberg. Francine welcome to our weekly brexit show live from london, im Francine Lacqua. Lets get a roundup of the news. Britain stepped up the pressure to get the European Union to shift brexit discussions towards a trade deal. Thats when teresa mays government published papers ahead of talks that will resume later this month. The european justice law will influence the country long after leaving the block. Meanwhile, islands Prime Minister said britain seems to be suggesting it wants all the advantages of being in the e. U. But none of the responsibilities and costs. They spoke to bloomberg. Where were confused and puzzled is the premise of your question. What trade agreement does the United Kingdom want with the European Union. At the moment they have the best trade deals possible and best imaginable which is a Customs Union and access to the european markets and the European Economic area. The pound suffered the weakest close in eight years against the euro wednesday and fell after a survey found u. K. Companies were increasingly cautious investing amid brexit concerns. The following day it showed Consumer Spending barely grew and business stagnated and trade added nothing to growth. And net migration to the u. K. Fell to a threeyear low after an exit of european workers following the brexit referendum. Rivals outnumbered departures by 246,000 in the 12 months through march, down a statistically significant 81,000 a year earlier and also was the lowest figure since march 2014. Global news 24 hours a day powered by more than 2,700 journalists and analysts and more than 20 countries. Francine . Francine lets talk to the global head of strategy at bnp paribas. Emma, welcome to the program. Boris johnson has finally spoken out on brexit. Emma weve been wondering what hes been thinking and where hes been and hes now said that britain will meet its obligations when it comes to the famous brexit bill. Now, of course johnson led the Brexit Campaign and is credited by many for winning the brexit vote and said the e. U. Could go whistle if it wanted money from britain. Part of the campaign was the u. K. Was going to claw back all the money from the e. U. And spend it all on hospitals. Weve already seen key members of the cabinet falling into line with the hammond views, the transition is good for business and all the rest of it and taking a slightly softer approach to brexit and boris said not only will they pay their obligations but if a transition lasts three years, thats ok, too. Interesting rhetoric from Boris Johnson speaking about what businesses need and that businesses want an orderly brexit and coming into line with the consensus weve seen building up over the summer. Francine what does it mean in a negotiating position, you have a cabinet that a, speaks with one voice and they seem to be talking from the same hem sheet, does it make negotiations easier . Emma it should. The criticism weve heard from the e. U. Is the u. K. Is negotiating with itself. Weve seen it also with the position papers this week, you know, the u. K. Still isnt engaging with the issues the e. U. Wants them to engage on which is the irish border, the bill, and the terms of the exit, if youd like. The u. K. Is still pushing towards getting on with the trade deal. Well see. Talks start next week and well see whether they do engage on the issue of the bill, the settlement. Francine well go through the papers in a second. What would move sterling, is it blow by blow, the response of the e. U. To the papers or is it the tone from the cabinet or do you just look at the inflation figures . Ed i would actually say if the e. U. Were to sound a more conciliatory note towards the u. K. In terms of getting a deal done and moving forward in the negotiations, i think that actually would be pretty good for sterling. One of the problems with sterling at the moment is not so much the inflation which is a byproduct of the weak sterling itself but more important is the lack of g. T. G. D. P. Growth. Weak sterling should boost exports. Actually, its not. Its not. The uncertainty is creating more trouble and offsetting any possible benefit from trade groups. Were not getting the trade growth, Consumer Spending is going down the plug hole. Its all pretty bad news at the moment and the government needs to get itself out of this as quickly as possible. Francine the g. D. P. Figure was a 1 4 of what we saw the last four years. Is that what the government is looking at to soften the position or does that change in their psyche . Ed i think it does change their psyche because it puts pressure on, the reality is hitting home the economy is slowing and they dont want that to continue to happen because it will become increasingly painful so they need to take vacks now. Look at action now. Look at the business action. Theres no way theyll know what will take place in two years. How can you be surprised the businesses wont invest in the u. K. . They need the certainty to get the g. D. P. Going back up. Francine we went through the papers in detail. Will we get a response next week when they sit down on the 29th or will it take much longer . Emma the e. U. Said the papers dont really change anything. A lot of the papers that came out this week were about the future relationship rather than the exit issues. The e. U. Continues to say we need to sort out the exit before we talk about the future. A theme that emerged this week from the position papers was the u. K. Seems to want not much to change, whether that was about data protection, they said we want unprecedented collaboration on Data Collection and they want something that doesnt exist at the moment. And likewise, the irish border, they want no change. So cherry picking. I think thats what the response from europe is probably going to be. Theyve been very clear the u. K. Cant cherry pick. The irish Prime Minister was saying in the interview earlier this week, you know, the u. K. Approach does seem to be one of cherry picking and the u. K. Has, as he said, the best deal possible and how will you better that . Francine whats the probability of the u. K. Crushing out of this and what would that do not having a transition agreement, this is a worst case scenario. Ed yes. Francine whats the possibility of that and how will the markets take it . Ed its low but not zero. The markets will take it incredibly badly. Not only for the u. K. Financial markets but also for europe. Europe in general. It would be very bad news because its unwanted turbulence at a time when things are going actually quite well. Francine thank you both. Our London Bureau chief Emma Ross Thomas and ed shing from bnp paribas. We speak to the business worlds most vociferous financiers. That up next. This is bloomberg. Francine welcome back to our weekly brexit show, live from bloombergs European Headquarters in london, im Francine Lacqua. Lets check on your markets with mark barton. Mark jackson hole, wyoming, is the center of our attention today and comes as equity markets and credit markets are continuing to go from stagnant to strength. The Global Economy is enjoying the first synchronized swing since 2007. Meanwhile, central bank as we talk about normalization policy or actually continuing to expand by about 300 billion a month. Theres a lot of work, a lot of money being put to work in markets worldwide. The white line is global, stocks the msei and the world country index. Look how its smoothed. The g. D. P. Balanced sheet is the blue line and the fine line is credit and bond markets, all headed in the same direction since 2009, francine. Hurricane harvey is strengthening on its path before and towards the texas coast forecasting to become the worst storm to strike the region in more than a decade. Prices of commodities from gasoline this is gasoline surging, gasoline futures, soy beans rallying and threatening to wreak havoc in the heart of Americas Energy sector. Futures in new york surging to the highest in four months in intraday trade up by 9 over this period and the weci is pairing the fourth straight weekly loss, worst run since mid june. B. O. J. Keeping an eye on inflation in japan, the key measure of price changes in japan rising ever so slightly in july, well behind gains in Economic Growth and the Central Bank Still struggling to disburse significant inflation and c. P. I. Excludes fresh food, up by 4. 5 and marginally up but well below the 2 target which is why the b. O. J. Keeps pushing it back, compare it to the feds key gauge and the e. C. B. , still 2 but well below the e. B. J. You see the problem central bank has in trying to boost inflation. Apparently theres a big fight taking place in las vegas tomorrow, francine. Dont know much about it, mcgregormayweather. Ticket prices are 1,494. These are the last few days. You can still get a plane ticket to vegas, francine, if youre quick. Francine come on, mark, you know about it. Even i know about the fight. Everyone knows about the fight. I even know what time it is on sunday. Great charts. Thanks so much. Its probably fair to say breast sit a hot topic for pub conversations across the u. K. At the moment and many of those discussions, or perhaps arguments, will be taking place in wetterspoons watering holes. The chain has more than 1,000 pubs, employing hundreds of people and the founder is one of business communitys most vocal braxetteiers and has been for it before the referendum. J. D. Joins us now. Thanks for coming on. Yesterday we had g. D. P. Figures and werent great, a fourth what we had in the past. Are you worried brexit will hurt the economy . I dont. If we are sensible and increase the definitely of democracy and stick to free trade credentials, all the evidence is that works, democracy and free trade together equal a successful economy and of course there will be ups and downs and g. D. P. Figures will move about. A few months ago people were saying they were worried consumers were taking on too much debt. Theyve eased back on that and it will slow the economy a little bit, probably a good thing. Francine all right. Do you see people drinking less or fewer drinkers in your pubs, wage growth is really not there yet. Tim we found in our pubs that people are still going out for a pint and weve produced some figure as few weeks ago which suggested our trade was pretty good. I think trade across the pub and Restaurant Industry is up from last year, which was a good year. Overall, i think things are going ok. People still have a pint in brilten. Its got to be pretty bad for them to give that up. Francine do they talk about brexit when they have a pint . Do you speak to your patrons . Tim i think the level of debate about brexit has reduced. Theres been a huge outpouring of angst from the remainders who dominate in the media who dominate, the economists who dominate the boardrooms who say we are at risk of going to hell in a hand cart. Francine the risk is 50 50. Come on, tim. Tim im saying the media generally at times, the financial times, c. B. I. , 89 of the economies francine im not fighting to you about the media. Tim not just the media, overall. Francine the tabloids, a lot of them are pro brexit. Lets say 50 50. Timea. Tim yeah. Francine what surprised you the last 12 months in the Brexit Debate . Tim the real interesting thing in an Economics Program or Program Based on business is that everyone, from the i. M. S. , the oecd, the treasury, even president obama said the economy is going to be very bad in the immediate after math of a lead vote a year ago. Whats happened . I think our g. D. P. Is up 2 , our sales are up. Generally weve create 3d00,000 jobs and things have gone very well. The pundits have almost been universally wrong about that point and were wrong previously about their biggest prediction wed go to hell in a hand cart and didnt join the euro. Funny things are going on with europe. Its the new financial religion. Francine youre not wrong on the immediate aftermath. I was just concerned yesterday when you look at, for example, Consumer Spending growth, right, the slowest since 2014. Is that not going to get worse . Tim it would be a bit like saying we were in the e. U. In 1973 to 1975. We just joined and had a massive recession and we went from 1980 to 1983 and one in 2009 along with the rest of the world. A bit like saying thats because of the e. U. So i dont think that many people seriously believe theres a slight slowdown in a year of overall growth can be blamed on brexit. Theres a lot of people. You just had some on your program who said when anything goes bronco francine the debate, correct me if im wrong, i dont think theyre getting whether brexit will happen so you dont have the brexiteer out of the remainders. How do you make a success out of brexit . Tim the key thing for negotiation and the former governor of the bank ofening landed got it right the other day, you have to be willing to walk away. Benjamin franklin said necessity never made a good bargain. What you cant say is what some of the guys on this program have been saying, we must have a deal with the e. U. At any cost. We dont have a free trade deal with america. Theyre a huge market for us and were a huge market for americans and that works very well under World Trade Organization rules. Same with new zealand, australia, etc. World trade Organization Rules will apply. Thats fine. So if the e. U. Wants a free trade deal, thats great. If it doesnt, we shouldnt have these apocalyptic warnings. Francine do you not think wed be worse off in the u. K. If there was no transitional agreement or trade deal . Are we boxing ourselves and saying its better not to have a deal than make the most of a success . Is that being too dogmatic about actually wanting to hurt the e. U. . Tim i dont want to hurt the e. U. Theyre as much victims of the oligarchy which runs europe from the unelected people running it from brussels as we are. And i dont think its being too dogmatic. Wed love a free trade deal. Its better but not essential. Francine do you worry about currencies, the people drinking in your pub, do they worry that they feel that theyre a lot poorer when they go to europe because of the fallen pound . Tim its hard to say because in my career since i left school in 1973, theres been billions of words written about currencies and theyve gone up and down during that time. I dont think its connected to brexit. Most people said that the pound was overvalued. It come down a bit. Its pushed up the price of some things you buy. Its not been too bad. I think its a good adjustment, an automatic stabilizer that the pound has gone down a bit. Francine thanks so much. I want to ask you in a pub how much you import some of the glasses and well talk a little bit about the mechanics of some of the pubs that you founded. J. D. Wetherspoon, founder, well have more on brexit next. Stay with us on bloomberg. You feel a certain responsibility as a woman c. E. O. To mentor other women and speak out on issues related to women . You also want to be noticed and rewarded for what you did, your contributions. Francine welcome back to our weekly brexit show live from bloombergs European Headquarters here in london, im Francine Lacqua. We have the founder of pub chain Jd Wetherspoon tim martin. How would you regulate the governments response to how theyve done so far regarding things . Tim if you look in democracy here and elsewhere in the world, you think its so chaotic, how can they possibly work . But the process of debate and the analysis by the media, eventually it produces an intelligent solution. I think so far as im aware, theyve done quite well and are in the negotiations and if someone wont negotiate with you if youre trying to buy a house and someone doesnt want to sell it, theres not much you can do. So i think a free trade deal is in the interest of both parties. But there may be some bad blood there that makes it difficult to agree. Francine right. And also the length of it, the problem with the trade deals is it could take youre talking about the u. S. , the dufment, it could take five u. K. , it could take five, 15 years . Tim and in the meantime you have these Organization Rules which hugely helped increase trade throughout the world and arent a bad set of rules, actually. Francine talk to me a bit about the pub business, how does the pub business get affected by brexit . What gets imported and what will be more expensive for pub managers are the people that put the pubs together . Tim nothing will be more expensive unless the u. K. Government is completely within their control decides to impose tariffs on the e. U. So if it decides its not going to impose tariffs on the e. U. Or anyone, nothing will go up in price. For example francine if the euro drops in value, it means if you buy with your pounds, for example, i dont know where the glasses are made, if made in france, it will be much more expensive now than it was 15 months ago. Tim well, i think thats lost in the roundings, really. You can say if a currency goes up or down in any country, its going to have an effect. But looking overall, i think that most beer and food is produced in the u. K. And ireland, actually, which is in the e. U. So it will have an impact if the u. K. Decides to impose tariffs, if a free trade deal isnt forthcoming. Im suggesting what the u. K. Should do is have unilateral free trade, dont impose tariffs on anyone in the world. And i think it will bring prices down and increase purchasing power and i think thats worked in other countries. Francine depends whether currency keeps dropping or not. Talk to me about the talents, the people that serve the pints and work in pubs, how much of those are e. U. Nationals, you worry you lose the people that work in pubs . Tim i worry about it because weve got some excellent staff from the e. U. I dont think anyone is suggesting those here now go back. I do think you need a gradually rising population in a country, north america, singapore, australia, britain, have done well with the rising population. I think that continues. Theres no reason why we cant have a continued, reasonable level of immigration after brexit but a more controlled immigration. Francine have people left . We heard anecdotally of the e. U. International saying brexit doesnt feel right for me. Have you had people in your pubs deciding to go back home . Tim some of them go back home anyway. No one said to me this brexit thing is an outrage, im off. I dont think thats going to happen. I think what will happen over the next five, 10 years anyway is that the former eastern block countries which have become more democratic and more free market will become more prosperous and thats happening now and a lot of people will gravitate back home anyway to an extent. Francine all right, tim, thank you so much for joining us today, the Jd Wetherspoon founder. Bloomberg continues if the next hour. Im joined by david greg and we have a great lineup of guests, including the c. E. O. Of the loids of london. Well ask them about brexit, pound weakness, and well can them about the news risks including cybersecurity and a look at jackson hole which is definitely driving the currency markets and asset checks. This is bloomberg. Rancine watching wyoming at jackson hole. The fed said they Vice President lost faith in inflation. Hurricane harvey. All trades in positive territory. A category 2 storm bears down on texas. And lee gets locked up. The samsung vice chairman jailed three years for bribery. What next for the biggest conglomerate . Im Francine Lacqua in london with david gura in new york. Its clear the market is directionless and theyre waiting for draghi and janet yellen and things going on in brexit with Boris Johnson coming up. But a lot of the talk will be on the fed. David and yes, jackson hole getting underway and we hear from the fed chair at 10 00 a. M. And mario draghi speaks at 3 00 p. M. And well have updates on Bloomberg Television and radio. Francine lets get to the news with taylor. Taylor as you were talking, were starting with samsung, the billionaire heir faces five years in prison. A court in seoul handed down the sentence to jay y. Lee after finding him guilty of embezzlement. He says hes innocent and plans to appeal. The ruling casts doubt whether hell return to the conglomerate his grandfather founded. Hurricane harvey strengthened overnight and is taking aim at the gulf coast of texas and the energy industry. If forecasters are right, havey will be the worst storm to hit the states in a decade. Offshore Oil Platforms have been evacuated and commodities being shut down and commodities like soy bean are rallying. Harvey is expected to make landfall late tonight or early tomorrow. Core Consumer Prices rose one half of 1 in july. If you factor out fresh food and energy the prices were up. 1 . Japan havent geten inflation above the 2 despite years of monetary easing. The u. S. Will unveil more sanctions on venezuela today, according to people familiar with the matter. The administration wants to punish the government of Nicholas Maduro who is called a dictator. Theyre focusing on the financing channels. Global news 24 hours a day powered by more than 2,700 journalists and analysts in more than 120 countries. Im taylor rigs, this is bloomberg. Francine and david . David lets look at the data this friday morning. Things are a bit slow and sleepy in the late summer. Indeed, theyre looking at futures pretty much unchanged in new york ases market opens at 9 30 wall street time. The dollar weakening a little bit here. Were watching the dollar as jackson hole gets underway. Gold at 1287. 82 an ounce and on that news, Hurricane Harvey headed towards texas at oil 47. 80 a barrel. Francine stocks rising a touch but its difficult for america to take a Firm Position because theyre waiting for braggy and yellen to speak in jackson hole. But commodities are showing more conviction than the currencies and stocks. Most raw terms are climbing and crude oil is up a touch but below 48. Following of us are with whats happening with the hurricane in the gulf now. You see it headed towards Central Texas and its supposed to be make landfall late tonight or early tomorrow and may be a category 3. A very cool chart, a map here on the bloomberg. You see where the Oil Refineries are across the gulf coast and see indeed the track of this storm because its squarely in the path of a lot of them on the Central Texas coast. Francine a great, great chart. Very cool. Mine is less cool but something we keep on talking about. Its less cool and if youre a central banker, this probably is the thing youd like to be coolbaugh you want to see it up. Its a very, very simple figure. You look at the b. O. J. , the key inflation gauge. This is in yellow and in blue you have the e. C. B. And the fed in white. This is a main concern for a lot of these Central Banks. And yesterday we had two officials offering opposing views on the inflation debate and we spoke to george and Robert Kaplan and you have more diverging views when it comes to the e. C. And ill push it out to social media for our regular listeners. Central bankers kick off their symposium in jackson hole. On the eve of the gathering two fed officials offers posing views on the debate. The fed president Esther George said another rate hike is feasible this year if u. S. Data holds up. Dallas fed president Robert Kaplan called for pashe independence waiting for prices to go higher. Robert i havent lost faith inflation may well get back to the 2 target but you have to under the historic cyclical forces and the models that would have suggested what the cyclical forces, the impact they should have, are being offset by new forces which you can understand mainly by looking at industries and companies and talking to c. E. O. s, and i think those are having an immediate affect on inflation. Francine joining us to discuss this is bloombergs market life strategist richard jones, joining news a second is Robert Harrison from black rock. Richard, first of all, the overarching picture i think is asking yourself why mario draghi or janet yellen to choose jackson hole as a forum to give us more clues to what they do next . Robert i expect with draghi and the council having a meeting in a couple weeks time and still a moving parts to be determined in what the next move is, if either draghi or yellen would say something, i would lean more towards janet yellen. Balance sheet is the focus when it comes to the fed and that fairtive is quite well advanced. Weve been talking about it six months. If we were to get something from one of the two key central bankers, i think were probably more likely to get something from yellen than draghi. Francine right. What kind of something . Robert i expect if we do get anything and i dont think its nailed on by any stretch. I think well probably get maybe a little bit more detail on the timing of Balance Sheet reduction, the form its going to take the medical obviously the fed obviously as to discuss it at the next meeting but if we get something from her it will be on the Balance Sheet reduction side and it has become the primary focus. David do you see how mr. Draghi regarded the euro and if he does jawboning in jackson hole, indications seem like he wont but give us a sense what the e. C. B. Has made of the strengthening euro over the last few months . Robert david, i think the level is not what bothers them. I think if you look at the history of the euro, were not at particularly strong levels against the dollar. What i would say is the pace of the assent is something that may be worrying policymakers. If you think about it, we were very, very bearish in general before the French Election about the euros prospects. I think the fact we had a market friendly result in the French Election it looks like well have the same thing from the german election. Politics as the driver of currencies flipped on its head. We have a positive situation, very market friendly situation in europe and in the u. S. , maybe less so. And i think given the pace of the move, thats something that will worry central bankers psms but at the end of the day, the narrative is quite positive and the euro is going up for the right reasons and therefore while probably temper it a bit. Francine thanks so much, richard, or bloomberg market life strategist richard jones. Joining us is Rupert Harrison from black rock, the portfolio manager. When you look at jackson hole, the markets are a little freaked out and dont know how to position themselves. If anything, what would you think could come out of jackson hole . Rupert interesting, i think i take the opposite view of where we might get news or certainly where we ought to get news. If im sitting in Janet Yellens position, you know, september for Balance Sheet reduction is pretty much baked in and think the market is very well prepared for that and theres different comments around inflation today capture the fact theyve got more data to come until september which is the earliest for a Rate Decision where well get a little more information whether this inflation weakness is transitory and what holds up. I havent seen anything to shift the debate by janet yellen and think shes happy where it is. Draghi is facing a different problem and fundamentally his problem is hes running out of ammunition and he doesnt want the market to realize the extent to which hes out of ammunition and i think he should be very worried about the euro. Appreciation, weve already seen is enough to knock. 4 off core inflation in the euro zone and easily could see forecast of the core inflation back below 1 at a time when they are basically forced to taper q. E. And is a big problem. Francine how does he position himself, does he talk about the factor that influence his thinking in september or does he just talk the euro down . Rupert the government hates it when he freelances at these solo shows but he has a bit of freedom because now the minutes have referred to concerns about the euro. If he even just repeats that sentiment, coming directly from him would be information from the markets equally. But if he chooses not to say that i think it will give the bureau further permission to go higher. I think he has little wiggle room on the q. E. Because assets have to prepare the ground for the beginning and therefore, its difficult to talk down the euro, the expense or credibility if the market thinks you have no ammunition behind that and all he has is Forward Guidance behind the shortterm rate and policy rate. And i think if anything thats where hes heading. David how big a concern is scarcity at this point and what has the e. C. B. Learned from the feds experience of tapering a couple years back . Rupert i think the market is complacent about the assets industry and i think people assume in the end theyll find a way to extend, whether thats by kind of loosening up the way the capital key is applied, finding new corporate assets to buy. I think that actually weve done the math and if you look at maybe theyve got enough to do 40 billion for another nine months next year, but that would be really taking you to the absolute limits where you can buy under current rules. My judgment is to kind of really it will create more flexibility in the rules, particularly the capital key and youll have to be in a much worse situation for the politics to get over that hump because its a significant rube confor the germans in terms of financing. I think the market is assuming the e. C. B. Can echo the feds taper thats going to be extremely cautious and the markets can absorb it. I would be much more worried about the credibility of the e. C. B. s inflation target beginning to erode and Inflation Expectations in europe starting to roll over the next six months and financial conditions tightening. In essence were back to a period the e. C. B. Is politically constrained, which is we got used to treating the e. C. B. Like a political constraint and it has been relatively normal for a couple years but now were back in the political constraints. Francine thanks so much for now. Well be back. Coming up later today well hear more from Robert Kaplan live from jackson hole at 9 00 a. M. In new york, 2 00 p. M. In london. This is bloomberg. Francine this is bloomberg surveillance with francine and david. Lets go straight to germany and Angela Merkels poll, leading in the campaign and interviewers are already asking her to preview the next government. The chancellor is persistently avoiding the question and business confidents say the institutes came above estimates. Joining joining us is mr. Hughes. Thank so you much for joining us. At what point does the euro strength become a problem for the German Economy . Mr. Hughes it looks like it hasnt become a problem yet but clearly if that continues it might become one. Generally german exports is less price sensitive than exports from other countries, d thats because it often is different products but even if quantities remain the same, at some point the stronger euro will have an impact. The vent seen this yet in news but if the euro raises it will be a problem. Francine im looking at the german confidence. It weakened slightly in august. What are the underlying reasons for this . Mr. Hughes two reasons, i guess. First of all were at a very high level at the moment so it wouldnt increase forever. And the other issue is that we see a decline in confidence in the car market. So we dont see it in the car industry but car dealers report slowing businesses. And this is probably related to the Diesel Scandal and all these things so it looks like consumers are irritated by this debate and theyve obviously hesitated buying new diesel cars and that seems to result in overall sales declining. David those are the drags, those two things you mentioned there. Whats driving the German Economy at this point . Mr. Hughes so we have a very strong reading in the Construction Industry so construction has been booming for some time. It continues to boom. And then, you know, across the board, domestic consumption apart from the car markets is strong and exports continue to be strong, and thats what companies also expect for the coming months. The reading in terms of expectations in german industry is at a record high so the overall outlook continues to be very positive. Francine do businesses carry about the Upcoming Elections . It seems a lot of commentators are saying no matter which way coalitions are formed its just in the center which would be fine for businesses. Clemens it doesnt look like businesses are very worried about the elections. It seems to be the case that everybody expects merkel to win. The only question is which coalition will it be, will be a repeated coalition with the democrats or will it be a different one but nobody expects any major shift in Economic Policy as a result of the action. Francine our guest host Rupert Harrison has a question for you. Rupert two questions, on the German Economy, it seems to fire on all cylinders and the level of confidence is frequencyly high. What scope is there for any additional acceleration, can we go higher or are we at peak . The inflation outlook, secondly, are there cost pressures coming through, are German Companies raising wages or will we be waiting sometimes for that to happen . Clemens this is an important question. So is the German Economy at the point of overheating . I think we see it in the Construction Industry but we dont see it across the board. We dont see massive price increases across the board, and of course the higher rate of the euro will dampen inflation and also dampen costs for importing companies. So i dont see the German Economy overheating in all sectors but we certainly are moving into that direction. Rupert i think that brings home this question if youre not getting cost pressures coming through in germany where the economy is growing so strongly and unemployment is low already, where in the euro zone will you see cost pressures and comes back to the dilemma for the e. C. B. And is a key issue. Francine what do you think it would take to kick start inflation . What are the underlining causes of this lower, persistent inflation . Clemens you know, one factor is clearly wages. So we have an increasingly tight labor market in germany but still we see relatively moderate wage increases. It seems like trade unions are kind of looking back and factoring in the low inflation rates of the past and that is a big problem for Monetary Policy, if Monetary Policy cannot change expectations, wage growth will remain low and that will keep inflation in check. Francine thank so you much for joining us, the e. F. O. President talking to us and Rupert Harrison, the portfolio manager. Stay with us. Coming up later on bloomberg tv and radio, a conversation with mr. Hubbard. This is bloomberg. Francine this is bloomberg surveillance. A few companies symbolize chinas global ambitions like h. N. A. , in three years the private conglomerate invested 45 billion around the world. Its a remarkable run of dealmaking including acquiring multibillion stakes in Deutsche Bank and hilton worldwide. The question gaining track is how the group is financing these groups as they work to fuel debt in washington. We join one of the reporters behind this story, Rupert Harrison from black rock is with us. First great reporting but how oes h. N. A. Pay for all this . Glenn thats what our story looked in to. We started looking into the unlisted units of h. N. A. And found that many of the units had shares pledged and in many cases, they were pledged to trusts or other nonbanking institutions which is a common way of shadow banking in china. Francine is it too big to fail and is that why individual investors are piling on it . Blake h. N. A. Is very big. As you mentioned, 45 billion in acquisitions over the last three years, and as you know, theyve picked up assets like stakes in Deutsche Bank and hilton, but tear also very big in china as well. So right, one of the ways that some investors will approach this investment in china is by basically making a bet if things do go sour, there may be some sort of a bailout for h. N. A. David as francine said, this is a masterpiece of reporting by you and your colleagues. Talk about the complexity of reporting in a company like this and how you dug into the data you ended up finding . Blake basically it started out by digging into Company Filings and it sort of broadened out from there. From the Company Filings we found that there was this really clear pattern of share pledging, which we reported on in the past. But we notice with the unlisted companies, there was a lot of share pledging going on to trusts, which looked like shadow banking. And as we dug into it further, we noticed there were other signs of shadow banking as well as pure platform that h. N. And some entities have used for financing. Francine thank you so much, blake schmidt, reporting on h. N. And well have plenty more on the story i imagine through the next couple weeks and months. Rupert harrison of black rock is with us and well talk about brexit. Coming up, we speak with loids of london c. E. O. About brexits impact on her business. This is the main story we really want to get out of the brexit conversation. First of all, is it really pound weakness or euro strength . A couple houses were calling for parity when it comes to euro pound. Interesting because 18 months ago we were talking about parity with the dollar. This is something we need to keep an eye on and also jackson hole, mark carney the only big central banker that is unexpected in jackson hole but arguably has one of the toughest jobs ahead after we had also g. D. P. A 1 4 of what its been in the last four years. This is bloomberg. Got you outnumbered. The dinosaurs extinction. Dont listen to them. Not appropriate. Now im mashing these potatoes with my stick of butter. Why dont you sit over here. Find your awesome with the Xfinity Stream app. Included with xfinity tv. More to stream to every screen. David in for tom keene, im david gura. Lets look at the news with taylor rigs. Taylor next week President Trump will kick off a campaign for tax reform but he wont be pushing his own plan or setting fortney specifics according to an administration official. The president will advocate middle rate tax cuts and simplify the tax code. Hes leaving it up to congress to actually come up with the legislation. The u. K. Has kept quiet on one of the issues likely to derail the brexit deal. Thats how much money it will have to pay the European Union. Analysts estimate the e. U. May demand 120 billion based on how much the u. K. Has committed to the e. U. s budget. Britain believes the payment could be determined partly by how much access it gets to the e. U. Market. And is long bank considered the crown prince of the samsung Business Empire . The companys billionaire vice chairman jay y. Lee faces five years in prison. The court imposed the sentence after finding him guilty of bribery. Prosecutors say he spent 6. 4 billion bribing the government and he plans to appeal and raises doubts whether hell return to samsung, the company his grandfather founded. Global news 24 hours a day powered by more than 2,700 journalists and analysts in more than 120 countries. Im taylor rigs. This is bloomberg. David and francine . Francine thank so you much, taylor. David, when you look at samsung, we didnt have news this week of the new galaxy that it was dishing out and trying to compare it with iphone, but think of this, sometimes in our western countries, its difficult to remember as a percentage of g. D. P. Or a percentage of the chunk of the market in korea, samsungs are around 18 . You see any swings in samsung actually affects the whole index. Its bigger than the b. P. Is on the ftse 100, for example. David guilty of all five charges, jay y. Lee guilty of all five charges he faced and interesting to see how it will shake out within the company and the conglomerate and a Pivotal Moment in south korean politics as well as you see a conglomerate coming under the scrutiny its come under. Francine david, also in the news Hurricane Harvey strengthening overnight and taking aim at the gulf coast of texas and the energy industry. If forecasters are right, harvey will be the worst storm to hit the states in a decade. Apart from natural disasters like earthquakes, hurricanes, businesses today face more intangible risks such as cyberattacks and Climate Change. How do you ensure such risks, and if youre a investor, how do you trade them [joining us is inga beale for harrison and black rot, rupert is still with us. Thanks for coming in to the studios. Youre going through quite a change in terms of Administration Costs and youre trying to downsize some of the back office and youre dealing with brexit. Given also the change in the risk of things, whats your biggest challenge for the business as a whole . Inga several are on the radar at the moment. And obviously you mentioned brexit and perhaps you want to come on to that later. The thing is when we see all the risks that are out there, and you mentioned changing nature of risk and going to more intangible risks. Of course, were in the risk business and what we want to then do is businesses are facing all these new risks, we like to come up with products that can take that risk off their Balance Sheet and help them have the courage, the confidence to invest in the future. So while the world gets riskier, and theres a lot of risk out there, perhaps we should even touch on the geopolitical situation that there is around the world and that gives jitters to people, perhaps they dont want to go and invest in new countries or do new things. But were here to actually take those risks off their worry list and promote them some insurance. Signer with, for example, the Global Market cyber, for example, in the Global Market, its an interesting situation that were in because we actually try and solve peoples risk problems. Francine youre not unlike investors in many ways because you have to hedge and figure out where the next unknown comes from. What is the most difficult thing to insure . Were talking Driverless Cars at some point and you look at the new technology, a. I. , what models do you use for everything like that . Inga anything we dont have data for is difficult to insure because we dont know what were going to charge. Weve been doing this hundreds of years. Were not the first satellite that went up in space and insured it we didnt have data to go on, we had no experience. This is what were faced with, all these new risks. And cyberis just one of those. Were trying to get as much data as we can, weve heard about recent attacks and we have instances where we know, and one company came out and has given a number, 700 million, about what theyve lost out of a cyberattack. The more data we gather the more we understand the impact and the best we can assess exposures and get the pricing right. Its a tough business when you dont have the historical data. David we talked about the cyberattack one company faced. Do you sense more companies are willing to share data with one another, more willing to talk about the attacks they face and are the attacks becoming more devastating or just more frequent . Inga certainly an increase in frequency. It doesnt necessarily mean they will be more devastating. It all depend how much the business has protected themselves. A lot of what we do when were trying to go and sell cyberinsurance to businesses is say look, these are the steps you can take to make yourself more resilient because nobody, even if theyve got insurance, actually wants to suffer from an attack. A lot of what we do is help them mitigate and make themselves more rekill yen. But its certainly on the rise. What were seeing in some jurisdictions is data is being made available to governments because governments have come in and said youve got to report breaches. Weve seen that in the u. S. And theyre the biggest buyer of cyberinsurance, businesses in the u. S. Europe next year has its new data regulations coming in and will force companies to put it on the board agenda to start reporting breaches and start informing customers. That we anticipate having a major impact because nobody will be able to hide from this, from the impacts anymore and keep it quiet. That will enable us as a insurance sector globally to gather more data. David were watching the hurricane in the gulf of mexico off the u. S. Coast going towards texas and we heard theres more natural disasters as a result of Climate Change and the like. Are we seeing an upistic then in insurance opportunity as a result of that, are more people pursuing opportunity against natural disasters like these . Inga thats one of the risks, a hurricane risk, that were quite used to. Weve been monitoring, and importantly, modeling those risks and we have stacks of data that are very sophisticated that do quite good forecasting and modeling on that. Thats sort of an experienced area for us. But the impact of Climate Change is of course the unknown element. What will rising sea levels do, what will the impact be . We know from the Superstorm Sandy in 2012 the rising sea level caused a monumental disaster in Downtown Manhattan where people wouldnt necessarily have expected it. And for us the difficulty is how do we factor in that Climate Change into risks that weve actually been modeling and we thought we understood for many decades. Francine rupert, what is your biggest risk and how difficult is it to model . Rupert the biggest risks are those hardest to price, catastrophic geopolitical events, in the sense that the insurers are the ones that have the harder problem because theyve got to try and find a price. Markets in the end i think markets tend not to price a lot of these unknowable risks until theyre staring them in the face and when you get these corrections where people wake up to things. Its the insurers who actually are operating in a market you have to find some kind of price to clear that market. Thats the way we think about risk is the no knowns and then theres the francine the famous unknowns and knowns. How are the job cuts going . You said in june basically because of price pressures and because of brexit huh to cut 10 of staff. Inga yeah, thats underway. Were following all the right employment laws here in the u. K. So were doing a full consultation with all the people affected. That will be coming to fruition the next few weeks. Were following the time lines. We will be making those announcements within the next few weeks. Francine thank you so much. Ill have you come back. The c. E. O. Of lloyds of london and Rupert Harrison of black rock strategies stays with us. The cover story looks at the Silicon Valley warriors and how players in nba are taking on big stakes in tech. Thats bloomberg. I think you should pick up this issue. In europe and asia we look at the survival of global democracy. So visit businessweek. Com and subscribe to the analysis to stay ahead of the competition. Up next we talk brexit. This is bloomberg. Francine this is bloomberg surveillance with david and francine from london and new york. The u. K. Spent a summer publishing an avalanche of documents on brexit but stayed silent on the topic to derail the deal and thats how much money theyll pay the European Union. Despite some confessions in position papers, sterling fell to the weakest against the euro on monday. Negotiations resume next week. Lets go back to lloyds of london inga beale and set to open a office in brussels and with us Rupert Harrison from black rock, Asset Strategies and is a former chief of staff of George Osborne of nine years. Thank you both for staying with us. Rupert, first of all, it seems like we finally heard from Boris Johnson and we were waiting for something on boris on brexit. Are the brexiteers softening their stance in general and what does it mean for negotiations . Rupert the difference between boris saying a few weeks ago they can go whistle and ask for money and on a radio interview this morning theyll meet their obligations is the difference between off message and suddensly on message and signals a kind of fundamental change. I think the interesting developments weve had over the last couple months is of increasing coming together of the cabinet and most of the conservative party behind agreements around, ok, we have to have some kind of transition, the brexiteers are effectively happy as long as their instate is belonging in a Single Market and not under the jurisdiction of the ecbj, theyre happy to make the transitions. Despite the positive moves and we can get into the negotiations. I think the negotiations are progressing smoothly despite some of the noise. The markets arent really reacting to that. Sterling, as you say, continuing to fall but its not just a strong euro story but also sterling falling along with the dollar and even falling against the dollar. Its interesting that were no longer trading with the political news or either the macos become the driver or the markets dont believe these positive developments and still think things must be going badly because thats all the noise. Francine i want to ask you in a second if the e. U. Will perceive these papers as cherry picking but did you take a view you need to prepare for the worst and why youre opening a subsidiary in brussels and going at it your own way . Inga its partly driven because we run a market and therefore we have nearly 60 Different Companies operating within our market and we need to give them the surity of a future. Because 11 of our business comes from the e. U. 27. Its an important element, the portfolio of the mark, and we need to reassure them. The regulators are asking all of the companies to come up with robust contingency plans and we want to be a contingency plan where they say actually, lloyds is doing that, so we know we have a future and future access to that business secured. Francine are your members freaked out about brexit or are they taking contingency plans . Inga it varies if theyve already got a presence in the e. U. 27 and all are varying business models. Fundamentally weve been working with them and communicating with them a lot and theyve been involved in designing what were going to produce or set up. They feel comfortable weve got our arms around it and despite what happens at the negotiations, were moving ahead. We want our subsidiary in brussels up and running by 2019 so we can issue policies to all our customers and provide the continuity rupert mentioned which is so important. Francine rupert, when you look at the position papers, will the e. U. Just look at them and come back and say this is cherry picking, we said you couldnt do this. Rupert all the position papers are about the future relationships and the e. U. s position were not talking about it until we make progress on the financial contributions. When it comes to the content of the position papers, i actually think that they will be seen as relatively positive. In particular the position paper around the role of the e. C. J. , i think were heading towards some kind of a version of an after cost, the after court governs the free trade area, the countries outside the European Union but many in the e. E. A. , for example. And i think it should rightly be seen as kind of a sort of slight blurring of the red line teresa may set out in january about no jurisdiction for the e. C. J. And would make it very difficult to have any kind of deep Free Trade Agreement between the u. K. And rest of the e. U. As long as thats becoming a little blurred well have a court that will keep, as one minister put it, half an eye on e. C. J. Judgments and opens the door in the longer term for a much deeper Free Trade Agreement. I think that should be seen as a positive. The issue is when do we start actually discussing these in the negotiations . And that comes around to progress around financial contributions where i think the issue, from what i hear on financial contributions, is the two parties arent that fall apart on principles but the main point is on choreography. If the e. U. Concedes to a set of principles, theyll be very quickly to come up with a number and the government doesnt want a number coming out in the way it cant control. Thats the issue in the short term. David whats your sense of the economic weight of all this, the way its weighing down the u. K. Economy and you look at Consumer Spending and trade and how its affecting growth. How much is the uncertainty dragging down the u. K. Economy in your estimation right now, rupert . Rupert the uncertainty is a drag. We certainly see that in while the Investment Intentions are coming out of the business surveys have bounced back from the extreme lows they were at immediately after the referendum. They are still a little bit depressed. I think from what we hear from the u. K. Companies, its shortterm investments to kind of replace, you know, aging stock in something that is going to get the goahead. Longer term investments, maybe a 10year horizon are pretty much on hold. In the short term, in terms of the real impact on consumer data, its been around the inflation shot coming out of the currency depreciation. My sense is that probably peaked and that a lot of the gloom around the u. K. Economic momentum is a little overdone. Were not going to be booming in the same way the rest of europe is booming but id be surprised if we saw further downside from here. David inga, let me ask you about your role, lloyds role in the conversation weve been having about brexit here. With these policy papers getting a streamline sense what the government wants to do, for a market like yours, are you satisfied the government is listening to what you have to say and what you think is important at this process goes forward . Inga weve got very, very good channels into government, into treasury. Phillip holland is very, very aware of the particular issues of the Financial Services and weve gathered ourself with a fairly unified voice which always helps because the last thing they can cope with are all these different demands and weve been very clear with our demand as an insurance sector and Banking Sector and we are being listened to. Its just whether they can actually be negotiated, whether we can actually continue to have some sort of mutual market access. Thats the greater unknown. I dont think were able, the government, and those doing the negotiations, able to give us any clarity around that at the moment. Francine inga, does a weaker pound impact peoples appetite for insurance or does it make little sense . Youre a big congromrit, foreign conglomerate, do you say you want to insure more in london . Inga it means where theyre putting their assets. If the pound is cheap and they can invest here cheaply, then theyre likely to have a greater demand for insurance in this economy. If not, go somewhere else. But of course were global so wherever theyre investing, we tend to be there for them. For lloyds market per se, a good proportion, nearly 50 of our business comes from north korea. Over 40 of that from the u. S. The darr, the pound, thats the Critical Exchange rate we monitor. Francine thanks for your time. Inga beale lloyds of london c. E. O. And Rupert Harrison of black rock stays with us. If you have some obscure questions you want to ask rupert, go to tv go and click under the video screen to see inga speaking and watch back to a lot of our great interviews with c. E. O. s. This is bloomberg. Taylor this is bloomberg surveillance. Im taylor rigs. Lets get your business flash. Shoppers will notice the difference right away when amazon closes the acquisition of whole foods on monday. The company will cut prices on a broad section of whole foods groceries. Amazon plans to combine the e commerce and delivery aspects with the physical location of whole foods store. Venture capital from benchmark escalated its fight with the uber cofounder. They asked the judge to keep him from filling two vacant seats. They argue that hes hampering the search for his successor as uber c. E. O. A sponsor for kalanick called the tactics shameful. David and francine . Francine thank so you much, taylor. This week the Billionaire Hedge Fund manager joined investors saying its time to look at gauges of sentiment because the market is already getting the message. Lets get more with Rupert Harrison of black rock. Ray said it he was worried about the government paralysis in washington. Is this the right time to take off risk . Rupert its the right time to think of small hedges. The temptation is there are people in the market looking at equity valuations, looking pretty rich and the fact we had a long rally and the fact we havent had a significant correction really all year and thinking, therefore, we must be due something. If you look historically at the data weve done at black rock, these periods of low volatility, the longer they go on doesnt make it any more likely you get a breakout or a correction. Its not pathdependent in technical terms and you can say in the low regimes for a long time until you get some kind of external reason for a change of regime. It could come from u. S. Policy or Government Shutdown or concerns over the debt ceiling. But those are familiar concerns for the market. Weve been through Government Shutdowns before and they havent been catastrophic. What weve been doing is staying relatively long risk in general but looking for kind of smart ways to hedge, particularly in volatility and trying to find those asymmetric relatively cheap hedges that will protection you if we get a 5 drawdown. Francine hedges like what . Rupert weve been playing vicks options and looking for gold volatility is extremely low and there are interesting ways, kospi variance, its an interesting way to pick up protection in ways that youre not paying too much and kind of eroding your returns. David Rupert Harrison, thanks so much. We appreciate your time. Rupert harrison of black rock on bloomberg surveillance. Great speaking to you. Well hear more from Robert Kaplan live from jackson hole, the economic fed symposium kicked off last night with a threeday conference with interviews on Bloomberg Radio and the president of the dallas bank will speak to Michael Mckey at 2 00 p. M. In london. A quick check of the data, this is bloomberg. Francine watching wyoming as we stand by for yellen and draghi in jackson hole. Hurricane harvey, oil trade in positive territory as the category two storm bears down on texas. The samsung vice chairman is jailed for five years. What now for the future of koreas biggest conglomerate. This is bloomberg surveillance. I am Francine Lacqua with david gura. Tom keene is off this morning. When i look at the market, there is not much conviction. Everyone is trying to position themselves and waiting for what we hear from jackson hole. David you have janet yellen scheduled to speak at 10 00. Then you have mario draghi scheduled for 3 00 wall street time. Both of those speeches right here on Bloomberg Television. Francine lets get to first word news. Taylor the billionaire vice chairman of Samsung Electronics faces five years in prison. A court in seoul, south korea, handed down the conviction. He says he is innocent and plans to appeal. It casts doubt on whether he will return to the conglomerate. Atricane harvey taking aim the gulf coast of texas. If forecasters are right, it will be the worst storm to hit the state in a decade. Refineries are being shut down, and commodities are rallying. Hurricane harvey is expected to make landfall tonight or early tomorrow. Japan is stuck in the inflation doldrums. If you factor out fresh food and energy, prices were up 0. 1 . The bank of japan has not been able to get inflation near its 2 target despite years of monetary easing. The u. S. Will unveil more sanctions on venezuela today. The Trump Administration wants to punish the government of president Nicolas Maduro who is called a dictator. Targetings venezuelas financing channel. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. David thank you. Lets do a quick check of the data on this friday morning. Futures up if just barely. We had into the real deal with jackson hole for these next couple days. 1280. 14check of gold at an ounce. Francine currencies are drifting before the Central Banks speak. Conviction in the commodities. I grew up in the american south. I am a sucker for hurricane coverage. This is a function on the bloomberg. You can see the path that Hurricane Harvey is expected to take into the Central Coast of texas. You can look at the refineries in that area highlighted over. You can see the status and capacity of those. Tracking that category two storm that could affect several refineries in texas. Jackson hole, wyoming today. Kansas city fed president and host of the event said another rate hike is feasible this year if u. S. Data holds up. Dallas fed president Robert Kaplan calls for patients. Patience. I have not lost faith that inflation could get back to 2 , we have to understand cyclical forces, the models that understand those are being offset by new forces that we understand mainly by looking at industries and companies and talking to ceos, those are having a mediating effect on inflation. Struck as i read about the previews for this conference how many of them downplayed specifics of the policy effects from this event. What are you listening for as this conference gets underway . I follow people who do not have high expectations. Has been a lot of buildup over the summer. Ishink what people hope for greater insight into what janet yellen is going to do with the Balance Sheet. Given the setup of different views on inflation, im not sure how different they really are, i think patients could mean a december rate hike. I am not so sure a december rate hike is rolled out. I think people want some color on that and some color on the ecb. Many expect in early december they will announce they slow their purchases at a slower rate. The ecb has certain limits of country exposure. They will be bumping up against those early next year. David i am struck by how global this conference has become. Janet yellen, mario draghi, governor kuroda as well. There has been a conversation about coordination. What does that mean for Foreign Exchange . You have all these countries embarked on qe getting out of that. Yearat it has meant this for a lot of people, that is why i have been long the dollar, many people are focusing on what they think is a new convergence rather than divergence. I think we are jumping the gun a little bit. If you think about the next nine months, the Federal Reserve is likely to shrink the balance billion byybe 180 the middle of next year. The ecb is good to be expanding its Balance Sheet still into next year. In addition, the Federal Reserve is slowly raising Interest Rates. The ecb deposit rate 40 basis points. Is two or three rate hikes by the Federal Reserve before the ecb hits zero deposit rate. People are still betting on this convergence. That is what they are hoping to get more signals from. Francine is everyone going to shop in jackson hole . Are they going to try to talk down there currency . Is that going to once again be a race to the bottom . Markets get, and these currency war stuff. What should be an analogy and metaphor he comes reality itself the ecb has been clear. Spokespeople have been clear, they are watching it closely. It is not reached a level that is problematic yet. This week there were flash pmis from europe. They showed that despite the rise in the euro, export orders in the eurozone remain strong. No real reason the ecb would express a lot of concern about the euro. This would not be the forum for that. Thatine they mentioned specifically. At the last ecb meeting, someone asked mario draghi about it specifically. My sense is, there is also a very tame you of the currency. They talk about what it could do possibly in the future rather than something urgently that needs to be addressed. Thecine we will go back to meetings minutes, which is one of the first time they suggested there are limits to the banks currency coloration limits. Toleration limits. Let me bring you to my bloomberg terminal. This is the difference between the boj, the fed, and the ecb. The ecb is around 1. 3 . How do you explain this . Ton if they are trying figure out if this is a worldwide problem, is this enough ammunition for investors to figure out their next move. Here is my caution about looking at those kinds of charts. We talk about inflation, and you put up a number as if they are the same thing. We know that what goes on in the u. S. Cpi basket is dramatically different from what goes on inside the bank of japan inflation measure and what goes on inside the ecbs inflation measure. The ecb targets the headline rate. E does notre rat exclude all food or energy, just fresh food. What they are measuring, the quality of what they are measuring is completely different. I think those charts that try to compare u. S. And eurozone inflation and japanese inflation that is not use the same methodology is flawed. David what can these banks learn from each other . What can japan learn from how the u. S. Or ecb are trying to tackle inflation . Are there universals . I dont know about the universality of getting into the problem, but getting out. The Federal Reserve has power in communicating qe at tapering, stop the purchases or raise Interest Rates before the purchases are done. What we could learn from each other is not so much that kill liar things, but what works and what doesnt. David to my mind, unwinding the Balance Sheet, they have laid out a broad outline of what they expected it. There is speculation it could be announced in september or december. Are you happy enough on what the fed has outlined for normalization . I think it is very clear. Months,ast couple of the Federal Reserve has laid out a pretty specific plan even though the unknown for a lot of people is what is the terminal point. How big of a balance is the new normal. Is its is sort of like a rolling startu,e. Very slow pace. 10 billion on a 4 trillion Balance Sheet is not even a rounding error. The fed Balance Sheet, that is what we are talking about. Francine where do you see dollar from here and the dynamics between eurodollar . I am concerned about what happens in september between the Central Bank Meetings. It is not just macroeconomic data. In the u. S. We have a problem with spending authorization and divideded congress a congress. The Majority Party itself is divided. I think it is going to be difficult for the dollar to get much traction. I expect the debt ceiling to be addressed. I think that will drain liquidity from the system just like addressing the debt ceiling early on ended up injecting money into the system. It becomes clear that the Federal Reserve is going to raise Interest Rates in q4, well ahead of other Central Banks. David Marc Chandler is going to stay with us. Later today we will hear from Robert Kaplan. Mike mckee wasnt down with them in jackson hole. Will sit down with him in jackson hole. This is bloomberg. Taylor this is bloomberg surveillance. I am taylor riggs. Apple is making a new push to be in your living room according to people familiar with the matter. Tvy will outline a new apple able to stream for gay video and news and sports. There is speculation Rockwell Collins may be moving closer to a deal with united technologies. Bloomberg news reported that United Technology has made an initial offer for Rockwell Collins. A challenge to boeing and airbus, make your new model able to sustain the longest route in the world. Nonstop fromfly sydney to london, 18 hours. The new planes will be able to do that. That is your Bloomberg Business flash. David in washington, tension continues to boil over between the white house and congress over the debt ceiling. President trump has been blaming the gop, calling out Mitch Mcconnell and paul ryan in a series of tweets. From our bureau in d. C. , lets start with this extraordinary exchange of tweets from the president. The House Speaker and Senate Majority leader to include the debt ceiling with a bill for veterans, and they did not do that. How likely are we to see a clean race of the debt ceiling in the coming months . This administration has gone all in on trying to get that. House caucus members are trying to advocate for some sort of budget cuts or entitlement cuts to accompany any raising of the debt limit. That is where this gets interesting. You have a situation where House Freedom caucus member is going to have to work with mick mulvaney, his former caucus member who has gone all in with the administration. Scarlet david lets talk about the david lets talk about the process for shutdown. Something feels different this time around, in part just because of the political composition of this government. You have republicans in both houses of congress and the white house. There is a real chance we could see a Government Shutdown. Yes and no. There is frustration on capitol hill. They are in recess. Suggest aent would Government Shutdown would happen, i can tell you i spoke with one source who worked on tax reform who said there would be speaker of the house nancy pelosi in 2018 if they were not able to get tax reform done. The first job to do that is reverting a Government Shutdown. The wall funding being wrapped up in that, typically this could pose significant political risks for republicans if there was a shutdown. Francine talk to me about Jared Kushner. He is coming back from a middle eastern tour. As he was meeting with the egyptian president , americans or the administration were having a go at what was happening in his country. We got a Public Statement from the white house saying the meeting between Jared Kushner said it was aent productive meeting focused on how to begin substantial israelipalestinian peace talks. What is interesting is Jared Kushner facing scrutiny over the rush investigation is still trying to continue and accomplish other parts of his role. The president has tasked him with middle east peace talks. He is doing it. David Kevin Cirilli joining us from our bureau in washington, d. C. We returned to new york. What do you make about what is going on around the country as we see social political tensions rising around the country . How is that anxiety translating to the markets . I think the markets are watching closely. The message of the health care rocess have soured many people on the legislative agenda, tax reform specifically. I think the debt ceiling and spending authorization, often people confuse the issues. The debt ceiling issue does not lead to a Government Shutdown. That leads to missing debt payments. Authorization, that leads to the shutdown of government. My understanding is what Congress Wants to do is link the two issues together, spending authorization tied to the debt ceiling as opposed to what the president proposed on the v. A. Issue. It is a different tactic. Whether it is a clean bill or not, this is a problem republicans are going to have. I am being persuaded that the real challenge comes from the primary season and whether trump has candidates that run against these moderate republicans giving him a tough time. Furman, the former chairman of the lead tax advisors is coming up. He is moderating a panel in jackson hole today. This is bloomberg. This is bloomberg surveillance. I am Francine Lacqua in london. David gura is in new york. A beautiful picture overlooking hong kong. Pulled thetral bank most funds from the Financial System in almost two months this week. Lets get back to Marc Chandler of Brown Brothers harriman. What is going on in china . Gdp, they have managed this difficult task of stopping outflows in the country by restricting certain investments while keeping an eye on reserves in the currency. Marc in many ways this year was going to be one with the u. S. And President Trump and all that, but one of the big surprises this year is china, the strength of their economy, the success of their maneuvers. What strikes me is at this moment, Different Countries are cracking down in Chinese Foreign direct investment, their controls grow to include investment on the outside. This is a happy medium, instead of being fired, they are quitting at the same time. David what is the role of congress coming up later this year . Are we seeing good economics . Is politics governing where we are going . Marc it is important to realize that even though they are a oneparty state, they have politics. This will set up the next five xar span for president i. Marc chandler will stay with us in new york. Coming up later today, conversations with Glenn Hubbard , possible future fed chairman. This is bloomberg. This is bloomberg surveillance. Look at london. Beautiful. We heard from Boris Johnson, conceding that britain will have to pay to leave the European Union, maybe at the end of september. Lets get straight to first word news. Texas Oil Refineries in have two big fears about Hurricane Harvey, floods and power outages. It is expected to be the worst storm to hit texas in a decade sometime tonight or tomorrow. Refineries already shutting down. Next week President Trump will kick off a campaign for tax reform, but he wont be pushing his own plan. According to an administration official, President Trump will advocate middleclass tax cuts, but he is leaving it up to congress to come up with the legislation. The u. K. Has kept quiet on one issue likely to derail the brexit deal, how much money it will have to pay the European Union. 120sts estimate up to billion. Britain believes payment could be determined partly by how much access it gets to the eu market. He has long been considered the conference crown prince of the samsung empire. Jay lee faces five years in prison after being convicted of bribery. Spent 6. 4 say he million bribing the government. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. David thank you. Today is the day investors will have one thing on their mind, the Central Banks speak. Janet yellen and mario draghi expected to speak from the jackson hole economic summit. Joining us is Michael Mckee in jackson hole, up early this morning. Let me ask you about the agenda for this conference. There seems to be a lot centering on trade. There is a panel on the bounce of shortterm fiscal stimulus, how much nearterm policy information do you think we will get over the next two days . That is the real question. Jackson hole is going to transfix traders this morning, but will it hold their attention . We dont think janet yellen is going to make any market moving news this morning. She is talking on Financial Stability. Create aof how do you longerterm growth path that will work for the world. Mario draghi finishes by speaking about the same thing essentially. Is this a policy prescription or just about the theory . The conference is set up to be about theory. There is always the possibility of surprise. David we have heard from Robert Kaplan, and we will hear more from him later this morning. Outlook forwith the the path forward specifically with inflation. Inflationbeen the hawk for quite some time. She knowledge is inflation has flowed and does not quite understand why but thanks there is scope for rate cut. I dont think Robert Kaplan is that far from her. He urges caution on interpreting the details. In general, the fed would like to get a rate increase in before the end of the year and get closer to neutral. They emphasize they are all watching the data on prices. David listening to both of them, or seems to be agreement on the Balance Sheet unwind. Is that representative of the committee as a whole . From thed we see committee on timing . I dont think anyone has said they are against the idea of starting the taper in september. I think that is a done deal. The markets expected, and they are not going to go back on that. We will not hear anything specific today, but the fed has done so much prep work in advance laying out the parameters of what theyre going to do them there isnt much more for them to say. It is really a question on Interest Rate path at this point. Francine when you look at jackson hole, half the people we speak to say they are not expecting much, the other half are saying mario draghi is the person of the moment. He could still address some of the factors that influence the next decision of the ecb, right . That is correct. That is why there is some uncertainty about what he is going to say. Some of the Ecb Governing Council members, and they emphasize they are doing better and it is time to start withdrawing stimulus from but how you deliver that message the markets has people concerned. There is this division among people here about whether he will risk that by trying to lay out the parameters for the way the ecb goes about conducting business for the rest of the year or whether he will stick to the same topics of theory of Monetary Policy and what the ecbs role is Going Forward to gets past the extraordinary face. Francine one item on the radar is the strength of the euro. 6 thislimbed almost year, 12 against the dollar. Is always an issue, the value of the currency and what it means for the inflation rate and Interest Rates. The people i was speaking with last were not overly concerned. Their view is currencies move up and down, and it is hard to ascribe any particular reason to it. The euro is going to be a little stronger if they start to lower the amount of stimulus putting into the system. If the fed continues to raise rates and we get any kind of Market Reaction to the balance will even outhat a little bit and the dollar will get stronger. They are not overly concerned at this point. David thank you. Michael mckee joining us from jackson hole. Marc chandler with me in new york from Brown Brothers harriman. Kos fromined by dino cls bank. How concerned is janet yellen at this point about Dollar Strength or weakness . I dont think it is a big issue. I dont see why it would be a big issue. The fed has taken historically a more laissezfaire attitude toward the currency. Makerre less of a price when it comes to the currency. I dont think it is a big issue. That it is more talk of mind with mario draghi and the ecb. Even there, not much. There are concerns about other issues, how is the economy performing and inflation. Why is inflation so low . Why are Central Banks struggling across the board to get Inflation Higher . That is such a turnaround from where we were not that long ago, for Central Banks getting inflation lower. It may not be on the panel at jackson hole, but it will be the subject of discussion. You can be sure of that. Euro, on the issue of the from what you have observed of mario draghi, would he feel the pressure of the strong euro in jackson hole . He is a crafty operator. To jobbeen less prone jawboning. You will remember the socalled brutal moves in the euro, mario draghi is much craftier. View,ay have a different but that is not something i see, and certainly not at this venue where this will be more of an academic venue about technical aspects as Michael Mckee was just talking about. It would be an unusual place to do that. Francine this was the form he chose three years ago to make that conversation about the Balance Sheet. Talk to me about inflation. What charts do you use to understand why it has been a puzzle . Dino this is the question of the moment. Why is inflation so low . I have not seen a convincing explanation from anybody. We are late in the cycle. The u. S. Economy is eight years into recovery since the mid2009 trough. We should be seeing some response on the inflation side, wages going higher. You are not really seeing that. In other countries, japan, europe, etc. , Central Banks are struggling to get Inflation Higher. Why is that . We dont know. At least i dont know. I have not seen a convincing case. That makes the central bank calculus that much more difficult. At a time when they are thinking stimulus,to withdraw that should coincide with rising inflation, but you have the conundrum that inflation is sort of pressing down, or in the other direction. That is making the calculus a lot harder for the Central Banks. Francine give me your favorite currency pairing. What would you buy into right now . Marc that is a tough question. I hesitate about doing stuff ahead of not this event, but next weeks jobs data. We were talking about the Central Bank Meeting some the ecb, Federal Reserve, bank of japan, elections in new zealand and norway, it will be tough for the dollar, but im more optimistic on it in the fourth quarter. David stay with us. Marc chandler of Brown Brothers harriman and dino kos of cls bank. Check out Bloomberg Business this week on newsstands, the first time steph curry has appeared on the cover of Bloomberg Businessweek, how players in the nba are taking a big stake in tech. We will take a look at the survival of global democracy. Aheadbusinessweek to stay of the competition. This is bloomberg. Taylor this is bloomberg surveillance. I am taylor riggs. Records stand to fall in tomorrow nights fight in las vegas. Least 100s worth at million, and a record 72 million worth of tickets expect to be sold. Obviously the boxing people are saying he has no shot. He will be annihilated. When two people square off that know how to fight, anything is possible. Conor mcgregor has knockout power in both hands. Taylor that is your Bloomberg Business flash. Francine thank you. Lets talk tech. Amazon will begin slashing prices on groceries at the newly are acquired whole foods stores on monday. Unveiledset to the new settop box. Thank you for joining us. Lets kick it off with amazon. Clue have a much that are on what amazon is doing with all foods . This is happening much faster than people thought. The government gave it approval without much problem. Amazon is moving quickly to show us what they are going to do with it. They put out an announcement saying the deal will close and they will cut prices and start integrating amazon prime in new ways and pointed to other ways in which the companies will be more closely integrated. It shows how quickly amazon is moving and their ambitions in grocery. You are seeing as a result stocks and other Grocery Companies seeing chill through the rest of the market. David there are big plans on amazons part for this acquisition, how quickly should we see the grocery landscape change on the u. S. Side and globally . You will see it in the u. S. And europe at first. I think they wanted to come out with a big splash at first, so they are cutting prices and trying to get rid of this reputation of whole foods costing your whole paycheck. How it will shake out in the long term, i think it will be months and years ahead until we can see more of it as they tried to do more delivery and things like that. That will take a longer time to finish. The amazon whole foods deal was announced, i was sitting next to the former ceo, and he thought amazon was vying for the supply chain to feed off to the online delivery service. Is that still possible if you water down the value of whole foods by cutting prices . A few Different Things you get with whole foods, one is the brand and recognition. That is a name many people know and how to use. Amazon has tried to do grocery delivery for years and were never successful. It is a tough business to get into. This is an aggressive attempt to use the physical stores as your base and grow from there. Francine we also found out that apple will plan this for kate tv reveal. K tv box apple has been trying to do Television Year after year. More and more what you are seeing is that in television the big differentiator is not going to be the technology. It is the content. All thesetflix, hulu, other companies are producing their own shows, and apple has been reluctant to do that. Now they are showing they will. They have hired executives from sony behind shows like breaking committedhey had to spending close to 1 billion on original content. You will see more and more from apple what you already see from netflix and amazon. David let me ask you about samsung, a big story today, the conviction in south korea. What does this mean for the company and leadership succession in samsung . Well, that is a tricky one. The company has largely been operating without leadership because of this case that has been going on. They have a Leadership Committee that is managing the company. They had control of different es of this sprawling business, and this has been expected to a certain extent, but over a longterm he could even come back, but so far we will have to see how the business does. They have a new handset coming out. The consumer is going to say im not going to buy that because of the trial going on. David thank you for joining us. Check out tv on the bloomberg. You can watch the program live, see all the charts and data we cite. Later in the day, Rupert Harrison of blackrock. You can ask questions from the guests. This is bloomberg. Gura in new york. Francine lacqua in london. Labor force is patient in the u. S. Among the cohort of 50 to olds. Ar year you have been looking at this, with the fed has been looking at rit large. What effect is that crisis, and it is one in the u. S. , having on the labor market. It is hard to tell for sure. Justes look like it is not the opiates, but between suicide, alcohol, and drugs it is killing a lot of americans, roughly four times the rate in western europe. Janet yellen in her testimony before Congress Last month mentioned this is one of the labors keeping the market loser and wages lower. David your comments on how loose this labor market seems to hole,we head into jackson as you look at the labor market, give us your sense. We are not really difficult situation because of some of these factors. Economists look at models and past history. You have a new element like this justs that marc mentioned. How do you model that . We dont know. The Unemployment Rate is in the low fours. The labor market is tight. If you have a lot of labor on the sidelines, it is loser. We just dont know, the opiates, how do you model that . How do you bring that into your forecast . It is very tough to know. The question about what is going on with the potential growth economy, the overall we used to think it was in the high twos or low threes. It is now probably less than two as the activity rate has come down and the quality of labor is an issue. That laborffect is force, those two factors, i will be interested in what marcs v iew is. We see that across other economies as well. It is a problem as far as fostering global growth. The title of the jackson hole conference. Francine how much do you look unemploymentad to explain this lack of wage growth and inflation. Dino that is absolutely something we need to look at and understand. I think there are some new elements that probably cannot be captured in looking at some of is notharts because it just about quantity of quality. What has happened to the quality of labor, especially as the lower end of the labor, and i would be interested in what marc thinks about that. David weigh in on that if you would. Marc if you would write down some of these charts as far as Labor Participation rate, they break this down to the education level. It is clear there is a big discrepancy between those with College Education and those without a college degree. What we expect to see in a lot of different parts of our social and political lives now. It is primarily in the u. S. , we dont have the other side, which is a large and highlevel social safety net for people. Without that, this is part of the result when people become less needed in the economy. And dinocosts kos and Marc Chandler. This is bloomberg. Joanathan markets are bracing for speeches in jackson hole. Draghi this afternoon. Republican lawmakers will be hashing out details on tax reform. Hurricane harvey heads for the texas coast. Oil refiners begin halting operations in good morning. Withjonathan ferro along david westin. Speeches, it is 1 on the s e 500 appeared the dollar is weaker. Treasuries,on in that is the yield. David its time now for the morning of the. Durable goods orders will come hole, robertackson kaplan. At