Transcripts For BLOOMBERG Whatd You Miss 20161013

Government Officials Say they were released in a swap for detained leaders of the islamic extremist. Nearly 200 girls remain captive but it is unclear how many may have wide. The u. S. Air force is accelerating efforts to increase its firewalls after escalating Cyber Security threats. They are said to be tightening algorithms for networks that control everything from navigation of work lanes to weapons systems. Global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Scarlet we are 30 minutes from the close of trading in new york. Im scarlet fu. Joe im joe weisenthal. Matt and im matt miller. Joe u. S. Declines hearing by more than half after the s p was brought back from a three month low, but the question is whatd you miss . Data isek chinese trade fostering new doubts about the health of the World Economy is the Federal Reserve is preparing to tighten. Chairmanwells fargo and ceo is out, marking a stunning town fall for one of the banking industrys most powerful figures. Discovered donald efforts to self opposition research, so how is he shifting course . Less than 30 minutes to go before the close. Take a look at where the major averages stand right now. Way higherding our with major averages still in the red but it has been a steady progression north with utilities and real estate reinvestment trust leading the way. The drives are financials and tech stocks. Lets go live to the nasdaq where Abigail Doolittle is keeping an ion those tech names. Abigail it has been a down day for the nasdaq but well off the lows. Earlier, the nasdaq had been down more than 1 and some of this recovery is coming within the tech sector. Apple coming down 1. 4 and now it is flat. One consistent drag is the chip space. Clear whats going on here but one Bloomberg Analyst says the week china export numbers could provide a macro headwind plus the fact these stocks are up so much over the last two weeks and months, valuations are high, you could see some profit taking. Gartner did say today that they expect Semi Conductor revenues for 2016 to decline by. 9 year over year. A little choppiness for some of the chip stocks. Are one of the bigger boosts today on a report that the epipen sales for the Third Quarter rose. This is a peak season despite the pricing debacle and even though it is a specialty pharmaceutical company, helping to explain why this down sector is higher and a bit of a boost for the nasdaq. Is a goodeing down way to put it. Biotech down 6 , on pace for their third down week in a row. Thinkre any reason to this may mark a turning point . Call that forto sure. But if we look at a oneyear chart of the nasdaq biotech index this has gone right back below its 50 Day Moving Average over concerns that some technicians and that 200 Day Moving Average, it speaks to the fact that longerterm investors are less interested in the space. Intelligenceberg analyst who focuses on biotech says this sort of volatility heading into the election is to be expected and it could he very positive in terms of medical and Regulatory Information and it could help the Biotech Sector snap back. Abigail doolittle, thank you so much. Joe matt whatd you miss . It was nearly inevitable that john stumpf would step down as the chairman from wells fargo. It was in response to the public outcry of millions of fraudulent accounts opened for customers who never asked for them and thousands of workers that book some who got the ax for them. Butsloan becomes the ceo what are the other details we need to know and what else can wells fargo possibly do to repair its image . Our bloomberg gadfly columnist, mike reagan joins us now. It is a start but they need to do more from here. This is mostly a pr crisis for wells fargo. Are tons of investigations and outstanding lawsuits but ultimately, is it enough to repair that image from a pr standpoint . It is a good start. Obviously they have a lot more to do. An internal doing investigation and i think it depends on how they handle that. They have to come clean to shareholders and say this is all we know. Here is who we are punishing. Millioney created 2 fraudulent accounts and fired 5000 lowlevel employees and you feel like one executive leaving is a good start . Guest it is definitely a good start. When he went to washington to testify, he was not repentant enough and did not offer enough solutions. This was inevitable and he had to do it. I dont think it is enough to regain all the confidence, but it is a start. Thiswells fargo prior to crisis was saying it was a good thing that the bank did not get in much trouble and he himself had a very folksy demeanor. Fargo brand is significantly tarnished by that, how did that effect investors . How much premium was in the market because of that appeal . Guest the stock was trading at a pretty big price valuations. Part of that was reputation and part of it was the reputation for not being in the riskier Capital Markets industry. Warren buffetts seal of approval is a big thing but theyve had some decent Earnings Growth in a have returns in the double digits. The doubledigit line is kind of the line in the san analysts look at if they are not returning above their cost. Matt was buffet at work in this resignation . Guest we dont know. He has not come out and said anything on the record. You assume hes talking a lot behind the scenes. He said hes going to speak about it in november but so far he has not said much publicly. Scarlet the other big news is that you have tim sloan taking over as ceo. He will be ceo but not chairman of the board. Citigroup is the only other bank that has split the ceo and chairman role. Is this a new normal for the banks . Guest i think they will have a hard time trying to justify that. Its going to be an uphill battle. Matt i did a survey among my friends who are obviously laypeople but what did they think he was going to get as a goldman as a golden parachute . I dont think he gets anything extra on top of what hes got. He may walk away with 150 million. Paid 250 he has 41 million in compensation clawed back and theres a good chance there will be discussions about more clawbacks going forward. Do people think we will see more of these types of scandals where theres a similar culture of crossselling and up selling . Is this a wells fargo thing . Guest wells fargo was the poster child for crossselling. They were the most aggressive that it. Other banks do the same thing. Tomorrow, jpmorgan reports and we have some other banks next weekend thats horribly going to be one of the main questions analysts want to know. Do you have a problem like this lurking and what do we need to know about it . Matt thank you very much. For more commentary, go to the bloomberg and as mike mentioned, we are going to be talking Bank Earnings all day tomorrow as we get the big financial kickoff or Bank Earnings. Joe coming up, nobel prizewinning economists Joseph Stiglitz on why he thinks the ecb has failed. This is bloomberg. Joe im joe weisenthal. Whatd you miss . A number of developments on brexit today. The plaintiffs are saying article 50 cannot be triggered without a vote in public. Earlier today, vonnie quinn discussed the issue with nobel prizewinning economist Joseph Stiglitz, an economics professor at Columbia University and chief economist at the roosevelt institute. As a new book out. The European Central bank has failed. Mario draghi said they would do whatever it takes and he has done a lot but the danger of the single mandate was evidenced so clearly in 2011 when jeanclaude treacy a jeanclaude trichet a raised Interest Rates twice as europe was going into a doubledip recession. Any economist would have said thats very foolish he would have said my mandate was focusing on inflation. , it didntmmer happen, but i saw a glimmer of inflation and my job was to make sure that glimmer did not become a reality. That is one example. It has to be focused on employment, on economic growth. to get a mandate changed governed by european laws, thats not going to happen. It could happen, it should happen but my view is it is not likely to happen because the dominant power is germany and germany sees inflation as the problem. Doesnt seem to be worried about the massive unemployment. Use unemployment of 50 for years and years, what is destroying and it seems to be unconcerned or not doing anything about it and so, given germanys focus on austerity and lack of concern about unemployment, i dont see how its going to happen. Vonnie the unemployment that sprung up as a result of that has led to changes in governance with liberal governments failing their electorates. Centristsse supporting the eurozone. Vonnie we are into the fiscal arena. Thatere an argument Central Banks need to be a calmative to fiscal plans like not selling off not government that an amateurs . They have tok support the fiscal policy, but as they themselves have said, Monetary Policy itself has reached a limit. Theyve called for more fiscal policy and they have to be supportive of those kinds of expansionary policies. Selling off the bonds and perhaps even buying additional governmentsonds as need to issue bonds to finance expansionary policies. Lets move to the United States and ask what d. C. In terms of Corporate Tax policies under a Clinton Administration. I know you dont like races to the bottom. Guest she has been very clear about putting forward a more progressive tax policy. One of the things that has happened over the last 35 years as more and more money goes to the top and that means even a small increase in taxes at the top can get a lot of money. But one of the real problems we have been having is this race to the bottom in taxation in which ireland and luxembourg have played a key role. The recent revelation that apple was paying almost no taxes globally illustrates how bad things have become. Vonnie how should a Clinton Administration combat that . It may be britain next that puts in their own Corporate Tax rates. U. S. Corporations paying tax here dont necessarily paid u. S. Corporate tax rate. Guest the countries where the activities occur ought to impose taxes on that activity. A lot of what is going on is what we call profit shifting. The production may occur in one country and they are trying to say a few people in ireland are the source of all of that and its nonsense. Correct tax is the rate to both bring corporations back home and have them not reach enoughnd that would benefit u. S. . Corporations will be operating here. We are the largest market in the world. Sellare going to want to in the United States, so this corporation that corporations are not going to be operating here is nonsense. Vonnie what rate should they be paying . Guest they are not paying the tax rate today, the effective tax rate is very low. So Many Companies like apple and google have a good out how to avoid paying taxes. In my mind, the real issue is lets impose a tax rate and make sure they actually pay it. 12 . E 10 . Be higherhink has to than that. It probably needs to be discussed with other countries because there needs to be some degree of cooperation. The european tax rate is 15 . 20 or 25 isink an appropriate rate. Its also how you combine various taxes. If you have a withholding tax on dividends, that changes what the Corporate Income tax needs to be. Joe that was nobel prizewinning economist Joseph Stiglitz. Bloomberg business flash a look at the biggest business stories in the news right now. Matt in a rare display of investor dissent, shareholders are protesting James Murdochs return as chairman of the paytv company. They are concerned about a previous phone hacking scandal. Castthan 20 of the vote today oppose his reelection to the board. Apollo Global Management and Ethical Energy could close on a deal to buy anglo americans australian coal assets according to people with knowledge of the matter who declined to be identified. The deal may value the assets of more than 1. 5 billion. Anglo is said to extend its final negotiations after the price of a form of coal used to make steel more than doubled. Energy has struck a deal with missouri regulators over its takeover of westar energy. The move brings those companies neared to completing their merger. The agreement would require great plains to keep it capital structure and separate to increase inseek and the retail rate as a result of the purchase. That is your business flash update. Scarlet have some breaking news cabinet oil and gas and williams shares are plunging. Williams is the Pipeline Company and this is after the the federal Energy Regulation commission is perhaps going to delay the atlantic sunrise pipeline. The actual headline is the u. S. Is evaluating alternatives and new rights that involve landowners as not part of the review. And theyll in a filing are requesting comments from landowners and traders are concerned there will be a delay in the pipeline and we see a lot as they continue to sink in late trading right now. We will keep you close it keep you posted. Theres a shortage of marmite. How the slump plays into that in whether what other products are at risk in the u. K. This is bloomberg. Scarlet im scarlet fu. Whatd you miss . Brexit is still brexit. Marmite and a host of other things were not Available Online from tesco. The big reason is a drop in the pound. The drop in the pound value has made imported goods more expensive. The orange line is the euro versus the pound. As the line goes up, the euro is appreciating versus the british pound. Food. Ue line is imported both had been rising but shot up right after the june vote. It is a rate of change everyone is adapting to. This is why unilever, the packaged food giant decided it would raise prices by 10 . Tesco, which is just rebuilding its reputation as a lowpriced chain did not want to pay for that and pass the cost on to customers. Joe says they have resolved this in the last couple of hours, so for marmite fans, that is a relief. Im looking at a concerning chart in the u. S. That has fomc officials paying attention. This is the percentage of nonfinancial debt to gdp and its on the rise. It is not quite back at the levels are on the peak of the crisis, but it is up there. Signs that right at sector leverage our creeping back in and maybe there has not been as much deleveraging as evil thought. Something to keep an eye on, something the fed is watching. Im looking at another brexit chart as well. Ive been looking into a lot of soft commodities. This is the Brexit Effect on wheat. You can see the pound in white and another big leg down. Is a tonbrexit led to of exports from britain. The french are buying as much as they can because their crop got what it in a are worried they might see tariffs go up on wheat, so they have to get it while they can. Joe some good things are happening for the u. K. Matt a lot of good things are happening for the u. K. They got their sovereignty. Scarlet three minutes to go before the major averages and their trading. Kleins across the board and the dow off i 58 points. This is bloomberg. Joe we are moments away from the closing bell. Stocks flowing to their lowest level since july. Japanese yen and gold are concerned about weakening. I am scarlet fu. Joe i am joe weisenthal. Matt i am matt miller. Welcome to viewers turning live in twitter. You can watch it live every day from 4 00 to 5 00 eastern. Scarlet we begin with the market minute. The u. S. Is trying to stage a late rally over the last two hours, but they ran out of steam , going back into the red. They were never out of the red, but we have stocks falling before the beginning of Bank Earnings season tomorrow with financials the biggest lighters. Laggards. Joe kind of an ugly morning, but in the end of every moderate selloff. A very moderate selloff. Matt if you zoomed in, would it be a mirror effect . I am looking at the imap, and financials were done more than 1. 5 . You see a breakdown Industry Groups on the s p. The only real gainers are the real estate. Others Like Health Care and industrials were little changed. More movers to the downside than the upside. As far as stocks, it was interesting. You can use it mov on the bloomberg, arrange them by index points rather than percentage. Berkshire hathaway was the biggest loser for most of the day, after the resignation of john stumpf. Maybe because he has done well for the stock during his tenure relative to his rivals. More to anybody since he took over. The stock was up 500 . Name you cosmetics, a may not know, but it is a 16 billion company that owns brands cross it has been incredible. They own burts bees, a lot of different cosmetics. I was on their webpage. Raise up 11. 4 as they their fiscal year 2714 forecast. Joe two and 10 years yields barely quiet fairly quiet day, but we are seeing declines across the board, not dramatic. Not a big day. Chinese trade at what trade data was weak also, and the yen was strengthening. Below 110,iefly hit now above that level, and that chinese went to a 10 year low against the dollar. Baat had been tumbling along with taiwan stocks because the royal palace had said the kings health was unstable, but traders priced in the uncertainty, and is stronger. Movers, copper falling 2 . We will talk more about it later. Chinese trade data is pretty mediocre, hitting copper which is sensitive. Nicely. Nsend back it had tumbled after production numbers bigger than expected. It erased its losses, and oil hanging in at 50 on the west texas intermediate. Take a deepwill dive into the bloomberg. You can find these charts with the function at the bottom of your screen. We will stick with commodities. We mentioned a beauty oil, and is approaching a Goldman Cross trading pattern. That does inspire a lot of oooohs. It is fast approaching the 100 Day Moving Average, which is the purple trends line. It is. See how close the last time this happened was in april. After that, wti rose 27 before again. 30 to reverse once maybe seeing another leg up in oil prices after this golden cross is achieved. Joe i am impressed. Matt we love this. I am looking at wells fargo stock relative to goldman sachs, Morgan Stanley and city. Citi. This is from the day he took over at the bank, wells fargo and white, goldman in blue, citi in pink, wells fargo is trounced by their wall street rivals. Citi is in the bottom at pink. And the 16 billion salon cosmetic company, this is ulta versus the s p in orange, and the Consumer Discretionary in yellow, it is up 1400 . Not bad. Joe initial jobless claims comes in amazing. I try to find a different way to show it, i go back this chart. The fourweek moving average inverted at the highest level since the crisis, meaning the lowest since the crisis. The s p 500, i want to show this because people say, the market is not based on anything real. It is just a phase. But look at it. There is fundamentals in the economy that have are improved remarkably since the crisis, and it has tracked well, so these are not bad. Defensive sectors brought the s p 500 index back from a three month low today. They are concerned mild growth will weigh on the s via u. S. Economy. Our next guest is not optimistic but is bullish certain industries. Ise for an intake on this the ceo of Berman International equity fund. They beat the benchmark for the oneyear period by 108 business points. Basis points. What do you think about the news out of china this morning or late last night depending on your time zone . Is the concern for Global Growth , or is it something we could have seen coming . There is a couple things, the domestic situation which is posting longterm challenges, chinese exports clearly reflect the health of the global economy. The u. S. Is in ok shape, but not spectacular. You were talking about the. Hallenges of brexit if i am an importer, it is tougher for me to have the same when at demand as i did 150. So the weekend export weak export is not great for china. Joe i want to talk about trends in the market. Through the first half of the year to late summer, there was a voracious appetite for anything for safety, low volatility, dividends that has really come up. People are selling off, getting back into cyclical and financial. Is this the start of a new trend that can last for a while . What is your take on these . Is that popular going to go out of fashion . Benjamin we have seen a time this year as you mentioned we had different phases. We were looking for defensive and bond proxies. At some point it is recovery and banks, hoping Central Banks and the forward fed raise rates. Rises areing for rate going to struggle. You may get a quarter of a point. You will not get anything of the bank of england or the ecb or the boj, so that would be a fools quest. At are offensive names Like Health Care and staples have been a safe haven. Maybe some of the fundamentals in the u. S. , health care doesnt look so great. For us, you have got to be opportunistic. What we are trying to find is names that dont look defensive but actually are. Materials names that are more likely cosmetics name you were talking about earlier. Selling in to those, not selling chemicals into petrochemical plants. I am selling cosmetics and consumer goods products, which is great. We have some exposure there. One of the names we have for a ,ong time is a Swiss Company and in the u. S. International flavors and fragrances is a similar name. Matt you are more specialized. Benjamin absolutely. They do the business but more commodity stuff. It is the neat part of bas. From in the area another area, as Technology Companies have migrated customers to the cloud, they have taken people off license sale and the recurring license fee into an ongoing subscription method. That is more Stable Revenue stream. Scarlet there is a lot of sectors to go through. We will talk about banks later on. I wonder how much conviction there is in any one investment theme. You have so Much Division with analysts and inventors investors if they should raise when it comes to brexit, the election. Big split. Such a even the latest survey on gold shows those who are bullish and bearish. How much is out there . Benjamin it is not very much. The bulls will take on the beater, the bears will short the beater. But the bears are winning because those stocks are under pressure. It any rate rises are miniscule and will happen rarely. It is a struggle for the banks to make money today and for investors to see higher rates to three years from now which will bring about greater earnings power from the financial sector. Joe the market seems pretty confident there is a rate hike in december. Do you care . Does that matter to you in your outlook whether it is december or march . What do you want to know from the fed . Benjamin i want to see a stronger underlying the economy. Im assuming we will see one in six months. If you dont get one, there is nothing for the next five months. If it is later, you get it at the end of the six months. We are looking at sustained increase for the end for the economy. That would allow greater earning power from the Balance Sheet driven banks. So for the financials, we are looking more at the Balance Sheet banks, advisers, the fee driven rather than the spread driven. Matt so that is pretty much a wash. What about the election, where you are probably fairly unsure what will happen . Do you invest on that, or do you stay neutral . Benjamin you are talking to a guy that was confident brexit would happen, and it did. I am not about to stick my neck out and say, you know, i want to skew the portfolio to one election outcome or the other. I dont think that is the smart way to play a portfolio. Clearly a democratic president might not be so great for the financials, might not be so great for the health care sector, but staying pretty neutral in both areas because anything can happen. She may have a public position and a private position there. But donald trump, is there anything you would be good for . Is he too unpredictable . Benjamin i think it is too unpredictable. Whether he has convictions around a certain point of view, would govern as a mainstream republican or more of a populist republican, which we have not seen for some time. It is an unknown, and we are talking about this is a small disability. Small possibility. Joe Portfolio Manager of the newberger Berman International equity fund, sticking with us. Mark lets get the first word news. Donald trump is denying allegations of sexual assault. He told a rally in florida the media and the Clinton Campaign are engaged in a coordinated attack against him. Donald trump these vicious claims about me of any appropriate conduct with women are totally and absolutely false. [cheering] know it, andons they know it very well. These claims are all fabricated. They are pure fiction, and they are outright lies mark . Trump said he has evidence to disprove the claims and will release the evidence at what he called the appropriate time. He leaned secretary clinton in utah but i am much smaller margin by it van other president ial elections. Ernie percent support him, 28 secretary clinton. 28 8 percent support him, secretary clinton. 20 they they would vote for independent mcmullen, born in utah and graduated from Brigham Young university and serves as a mormon missionary in brazil. Syrian activists say 65 people have been killed in the last three days in shelling and airstrikes. And the Russian Foreign minister and u. S. Secretary of state john kerry will resume talks on saturday in an attempt to end the violence. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am mark crumpton, this is bloomberg. Citigroupp morgan and and wells fargo will report thirdquarter earnings before fridays opening bell. Jamie dimon said the fed should raise rates sooner than later. Lets take a look at the numbers dont lie. Here is a picture on the business side. Analysts estimate that combined income fell 16 from the year earlier. One big reason is persistently low increasing rates. As you can see for jp morgan, it is yellow, the return on equity is blue, both falling with the 10 year yield. On the stock side, there has been a disconnect between weights and jp morgans earnings. Out that rates dont have as big an impact on stock as investors think. After earnings and revenue, this could mark the third time in six rters jp morgan supported adjusted net revenue is the blue bars. You see the gain right there. Fixed income trading is driving this. They will post yearoveryear , whichith fixed income is the white line, which had a surge last quarter. During this heiress era of low growth, mobile banking, whih is the white line, which had a users for jp morgan. According to bloomberg intelligence, they may be able to reduce the number of branches as well as transactionbased employees. Jp morgan surpassed wells fargo as the most valuable bank. They are benefiting from this rise in stock as opposed to the downfall of wells fargo. Jp morgan hit this despite lackluster economic growth. Jamie dimon saying monetary and fiscal policy need to be coordinated to spark growth. We will be all over the earnings released on friday. Scarlett, we have breaking news on mcdonalds, the company expecting to incur 130 million in pretax charges or . 12 a share when it reports its earnings on october 21. Just about eight days from now. You can see mcdonalds shares in the down, 0. 1 afterhours. Lets go back to Benjamin Segal from newberger Berman International equity fund. I want to go back to the banks as they kick off earnings to tomorrow. Would you expect to be the biggest winners . We were looking at john stumpf, his stock has trounced Morgan Stanley, citigroup. Good afteris be earnings . Benjamin there are the spread driven banks that take the lending, and rates so low that wells fargo could make that connection. And you have Investment Banking in particular, the need for capital in Investment Banking to be really challenging. They have come under pressure with unusually strong management teams at wells fargo and jp morgan that have navigated that very well. Going forward without great prizes, is difficult to see this Getting Better for retail banking. More fees driven higher spread Credit Card Companies within financials are probably going to be more interesting than the very balance heavy banks. Have all kinds of problems in europe whether it is italian banks with their own issues, Deutsche Bank is there any hope for european banks for recovery . Benjamin the short answer is no. On thosety cautious areas of the banking market where there is a fundamental shortage of capital which is not the case in the United States. Global portfolios are more skewed towards the u. S. In a banking portfolio. There are pockets of strength in europe. There are places in the nordic region. There are places with shortened capital, fragmented competition and really somewhat draconian regulators really adds up to a challenging time for banks in europe. Joe Benjamin Segal, Portfolio Manager at newberger berman. Scarlet hewlettpackard plans to cut 4000 jobs. Billionannounce a 3 Stock Buyback Program and releasing the Quarterly Dividend by 7 by 2017. Fiscal year, free flow from 2. 6 billion. Matt chinese exports unexpectedly strength the most the most since february. In the deep dive, we are looking at the Ripple Effect of Slower Growth in the second largest economy. Lets take a deep dive, and you can find all of the following charts using the function at the bottom of your screen. Scarlet i am looking at etcr go. Relationship of trading. It is interactive. It shows the u. S. Is chinas biggest trading partner, no surprise. China buys 174 billion worth of goods from south korea, which is down from 190 billion the year before. That shrunk a bit. When it comes to the number two, it is the United States, 144 billion. If you look at net exports, there is a line of shares to the u. S. , which is 337 billion worth. Hong kong is number two at 248 billion followed by mexico and the netherlands. Thati love the way visualization another great way to visualize what is going on is exports by region on a yearoveryear basis. You can see the big decline on the right. As we zoom in i think maybe we cant, but it is very negative. Trade exports to the u. K. Are particularly bad. A real sense of where the weaknesses. Matt if you look at the broader view, trade balance is a very positive one. I have chart number 1495 that shows you that. It has imports in white and exports in yellow. Although there was a decline, it is still a positive trade balance. Scarlet more details on the breaking news involving hp, plans to cut up to 4000 jobs years, a stock buyback and Quarterly Dividends increase. When youre on hold, your business is on hold. Thats why comcast business doesnt leave you there. When you call, a Small Business expert will answer you in about 30 seconds. No annoying hold music. Just a real person, real fast. Whenever you need them. Great, thats what i said. So your business can get back to business. Sounds like my rides ready. Dont get stuck on hold. Reach an expert fast. Comcast business. Built for business. Matt ap is coming up to 4000 jobs over three years. The company will limited positions across the board. Joining us for more on this story is manny singh of bloomberg intelligence. Equity, thishpq shows you a stock and circles points where there have been firings. This is the most i have ever seen. This is a company that has cut 174,000 jobs since 2008. This is nothing new for them. Thep, inc. In particular, businesses are in structural decline. The only thing they can do it this point is to shrink it, trying to make it more profitable, return cash to the shareholders, and that is precisely what they are doing. I think they have to make the businesses smaller. Windows 10 is a big launch. And that is what you are seeing, getting ready for the new product and revamping their lineup, trying to matt i see the 12 month dividend yield for the company is 3. 27, which is kind of a lot of money. Is hat sustained is that sustainable or is it shrinking that people cant be sure . It is sustainable for the nearterm, just because hp is a very Big Companies still. It can continue with the cost cuts, it can make sure operating margins are stable. As long as they can do that, the Free Cash Flow was maintained. They should be able to do that in the near term but they will have to find new drivers. This is something they are looking to, samsungs business early in the year. Thats one way they can grow sales. Alix so this might be a dying business, but in terms of projections for what we can do strategically, are they looking to selloff parts of the business . But can they really do besides manage the decline . Pc is currently at 60 and printers that 40 of the business. Cleary, they are moving more towards printers, just because they have less competition, and they should be able to roll out printing as a growth rival. Be able to balance the Business Segments and grow their way out. Matt i looking at another screen, the bloomberg dividend forecast. This team at bloomberg is shockingly accurate. Theyre looking at dividends that will increase over the coming years. Is this Company Going to be able to pay more money, or are they going to pay more of the money they make . They are going to keep following the script in the nearterm. It will be restructuring, cost cuts, making operations lean, focus on the new products, and at some point the printer business is stable. It is an structural decline, it is in structural decline but they just acquired a lesser unit. That will make the company more w. An and try to grop matt mandate saying mandeep singh. Hewlettpackard will cut another 4000 jobs over three years. Alix lets get you a recap of todays market action. A down day from the start after the disappointing deal, but we did see indexes pare their losses through most of the session. Financial shares with the big losers because of a rally in treasuries that sent bond yields lower. Joe what you miss . Fomc good verbs there will of the way to the path of normalization. Today petra karger spoke at the World Affairs council of philadelphia. Normalization happens sooner rather than later. I think the economy can withstand a slow, gradual path, and it is important for us to move further and further away from zero. Joe lets bring in the head of global rate strategies that td securities, whos calling for a december rate hike and one hike next year. Hike this year and one next year thats not new. Fourfed is calling for and we got one. They are struggling to normalize while the rest of the world is still extremely weak. We are dealing with poor fiscal policy, other thanks are realizing that more negative rates are counterproductive. They are struggling with how do i think every fed hike is resulting in a multiplier effect. As much as they would like to normalize more, they get normalization through the dollar and anything more than one hike will be a struggle for the economy. Alix lets define what normalization means. Last december we saw the Interest Rate increases, and now it means one or two. Is it still normalization of what constitutes normal keeps taking a by . Good point. Doneost wish they had normal as 2 of the funds rate to what we are seeing is a slow capitulation. I think the minutes are interesting they tried to explain why, and i think to some extent they dont know what the extent is. They are looking at the fact that people are reentering the labor force, which suggests that is still slack. Theres also some question about how much to overshoot. Were all talking about intangible things, things we dont observe that the fed is having a rich debate as to how much we keep normalizing, but as long as i hike once a year. Matt one of the things we were talking about a lot in the beginning of the year is inflation maybe 2016 will be the year people really realize that inflation is coming. Story hasnt played out the way some economists predicted. Nonetheless, if you look at a lot of indicators, it is still going out. Early nextw, cpi week, is there still a chance at some point in the next several weeks people could wake up and inflation,there is maybe the expectation of the super easy glide path isnt realistic. I would take your question in two parts. I think inflation is moving higher. Look at Core Services cpi. It has been very broadbased, gradual. It is running about 3 . What has been weak has been food,look at Core Services cpi. Energy, anything important. Cpi. S have kept headline whats going to happen is the base effect. Headline cpi, assuming no core,r pickup anin should be above 2 . When that results in a faster normalization, that is where i struggle, because with the fed wants to see is side that Wage Inflation is picking up. I dont think the fed puts on the brakes here, because its a very small and almost alix ok, so we are waiting for the Federal Reserve to raise Interest Rates, and in the meantime we are seeing other this iseep higher, and because of the money market reforming implement it tomorrow. First question how much higher will this go . Does this mean the end of the increase . I think it will be the end of the increase. Interestingly, the markets are pricing it is almost a cliff effect. We have reached the deadline and that all the money will start coming back. I dont think a lot of money will come back. If you look at the difference between crime and government funds, thats not enough pick up with the risk you take for liquidity fees. So i think the money will stay in government funds. Libor will probably stay here, because i think yf is going to rise as the fed hikes. Libor should continue to rise. But i dont think the markets are expecting from next week on i think this is a structural shift that they have engineered the money market. Joe do you expect at some point inflation to rise to the point where it gets out of control . Ben bernanke famously said, its no problem, he can deal with inflation no problem, unlike deflation which is a bigger issue. Is that certainly has a lot of tools. What they might struggle with is that if you get headline cpi moving forward with that Wage Inflation, how do they convince the market that they are still focused on inflation but still raising rates matt my question is the same. Isossiblet they could it possible they gigabyte the ball and and freak out . If possible. I think we would be talking about a faster pace of hikes. If you look at inflation expectations, we are so much lower than where we were even on a normal basis. For get are getting behind the curve on inflation. I think we have a long way to run before the market starts getting worried. And there is no discussion around inflation risk. They are talking about imbalance, but i think the fed is more concerned about inflation. Right now the market is not concerned about inflation. Lets look at the data suggesting cpi is moving forward. Then i think the fed will be more in a bind. Alix lets button up your comments on libor. Any increase in libor is a tightening of financial conditions. Does that feed into what the fed will do next . , think so. I think this libor increase was of consequence. When the sec and the fed put forth its money reform. They knew this was going to happen. His is one of those things it, thatas known about has come at a time we expect. Where the fat would be concerned as if banks are raising mortgages, or if you see Senior Loan Officers pulling back the fed will say the higher funding costs is making banks step back of lending. Financially, conditions are extremely easy right now. For now they are going to ignore it. Banks bring this up as a big risk to their bottom line, something that will make them rate change . Matt lets talk about the long end. Rates on u. S. 10 year yields are back up to where they were from the middle of the summer. But its a global thing. Can this run for long . That is the trillion dollar question. I love the fact that you are bringing it up because its a big move. Theres an Inflection Point where it will take off. Im not a buyer, heres why. The argument for this Inflection Point, Monetary Policy is largely ineffective and Central Banks will start scaling back what they are doing. I can buy that. You can see the boj struggling with not allowing the slackening, but that is the only form of stimulus. Id get a lot more positive on the economy, but i dont see much stimulus globally. Canada, alsoan, disappointed so until we see fiscal stimulus, i think Central Banks of the only game in town, and now all they are doing is debating with the ecb and i think thats really the are the german bund debating whether to buy 80 billion per month or 60 billion per month. Alix that the ecb. What about japan . There is talk that japan will have to taper bond buying because there isnt enough supply. Right. And i think thats why they have to do something. The ecb is in a similar situation where if you dont have enough bonds, what do you do . I think the boj did a brilliant thing they said instead of targeting a quantity of buying, we just target the 10 year jgb. We talk about centralbank credibility. As a bond person, they have complete credibility. T they can expand or contract the i think they, and have credibility on that front. What they said is they will feel volatility and if i am a jgb investor, why am i buying jgb . If the nikkei ever falls, id buy treasuries. Matt the head of global rate strategies that td securities, thank you for coming in. Trumpsp, why Donald Campaign has been caught unprepared for the recent barrage of claims that he mistreated women. This is bloomberg. Matt what an you miss . Quite a lot if you are inside Donald Trumps campaign. The republican president ial nominee refused to let his political aides researchers own past. Here with more details is Bloomberg Politics reporter from washington. Why would you do that, considering they are on his own team . Wouldnt it help his campaign to shares much information as he could . It would. This is a customary thing that campaigns do when a candidate decides her of her office, not even on the president ial level. Its customary for the candidates to dig into their past and understand past comments and to be repaired for them. This is one of many things that is nontraditional about Donald Trumps campaign, things that his campaign didnt do. And as we see now, clearly unprepared. The response is that of a candidate who is caught flatfooted and he has threatened to sue the New York Times, and essentially said see you in court. Hes attacked these women coming out, attacked the stories, saying they are fabricated. A candidate that is grasping for a response to a difficult story. Alix so if his team cant prepare for these revelations, who was driving the strategy . Is donald trump improvising as he goes along, or is the team coming up with how to proceed . There are people in his campaign most notably his campaign ceo stephen bannon, formerly of Breitbart News who want him to go scorchedearth, to be aggressive, to bring up bill clintons infidelity and portray Hillary Clinton as an enabler, as someone who has gone after women and accused bill clinton of these things. So he wants donald trump to go extremely aggressive and that is what we have seen since this access hollywood tape. Joe in the wake of the new allegations reported by the New York Times last night, trump spoke in florida. He said i take all these slings and arrows gladly for you, speaking to his supporters. I knew this day would come. Is the trumpet campaign taking on a new, messianic theme, the day has arrived where i take the paper you . [laughter] there has always been a little bit of that in his campaign. I think it has elevated to an apocalyptic level in recent days, since the tape came out. This is the direction his advisers wanted him to go in for, and now the goal is to supercharge the base, to depressed Hillary Clintons base, and hope against hope that he can pull this thing out. He is definitely the underdog, and yes, he said at the convention i am your voice. Matt we just got some fresh polling at 4 00 from washington ohio, downc, up in in North Carolina. Despite all these horrible headlines as a possible she cant put him away . But i think its possible that he loses ohio sorry, that hillary loses ohio and still wins the election. The fact that she is this competitive in North Carolina is surprising, because he needs to run the table in the states, nevada and iowa and florida, and then win more beyond that. Hillary clinton has many paths to victory and our poll founder doing well in pennsylvania and virginia. She is in a good place right now. Much. Hanks very scarlet coming up, the former fdic chair discusses the latest moves at wells fargo. This is bloomberg. Scarlet what it you miss . As chiefpf resigns executive officer and chairman of wells fargo. Earlier, cheryl bear waited on his departure. I think its unfortunate. He dramatically mishandled the whole situation. It has certainly taken its toll on the bank share price. On the other hand i think it is ironic. I think of all the ceos who didnt lose their jobs after the crisis, after the libor scandal. This is serious, dont get me ut according to the cfp be report, it was egregious conduct, but in comparison to other pieces of activity and misconduct that did not lead to resignment think its because hes a banker, and its easier to understand. Its harder to explain Mortgage Backed securities. But its easy to understand. Longstandingwith problems with large banks, that is why he ended up losing his jobs. Although if we didnt have something to compare it with, bab maybe we would be asking different questions. I think there was accountability. The market was imposing accountability, and there was a lot of political pressure too. But it was a serious misstep in culture, in management, in setting goals and supervising them. Wells fargo will pay for some time, but i think john stumpf was a class act that he initiated this. They had a successful plan already. Overall there are still a lot of great people and it has been a strong franchise, so they will survive this. They are now getting suitably contrite. I think they learned their lesson. Scarlet that was the former fdic chair, sheila bair. Tomorrow kicks off a big day for Bank Earnings, including jc morgan, citigroup, and others. Matt coming up, what else you need to know to gear up for the trading day, next. This is bloomberg. Scarlet u. S. Stocks fell today on disappointing trade data before banks earnings. Tomorrow, dont miss this the new the market will go into effect after a long wait. And dont miss this Economic Data tomorrow. U. S. Retail sales come out, huge for the economy. Out. Omes ae mark im mark halperin. John and im john heilemann. And with all due respect to rudy giuliani, youre not the worlds best headline writer, but you arent the worst. Front page of the times Hillary Clinton admits she is a liar. Subtext for 200 point 5,000. Its the end of the world they know it, but its a little long. The doomsday falls flat as spent the finest evening in a park. Evening in a park