Transcripts For BLOOMBERG Whatd You Miss 20161014

Improvement in the market. The Prime Minister has said he will resign if voters do not approve the referendum. The state Department Says if you want a passport or visa, you will have to take off your passport your glasses for the photo. Hey can cause glare the new policy takes effect november 1. Global news 24 hours a day powered by more than 2600 in 100ists and analysts 20 countries. I am mark crumpton. This is bloomberg. Scarlet live from bloomberg World Headquarters in new york, i am scarlet fu. Matt and i am matt miller. Joe the question is, what did you miss . That the boston fed conference, janet yellen said there are plausible ways that a the economy hot for a while could fix some of the by the recession. Over sales tactics. A scandal that led to the departure of the ceo of wells fargo this week. We will speak to the cfo right after the markets close. Plus, the greek financial crisis is still at the top of investor minds. The country is still struggling to write an economy that has contracted in aid of the last nine years. As we head toward the close, lets get you a look at where major averages stand. Gains across the board, but we have come off our highs for the session. For the week, the markets are poised to close down. By the financials after j. P. Morgan and citigroup reported better than expected earnings. Lets go to the nasdaq, where Abigail Doolittle is standing by with a Bigger Picture look. The day, the nasdaq is closing unchanged. On the week, as you alluded to, its anything but unchanged. Week n for its work worst week in five weeks, the losing streak since the brexit. Definitely things are bearish on the nasdaq. Lumina biotech stock is down more than 20 on the week after was aboutter revenue 4 off the previous level and from consensus estimates. We have a few downgrades on the street. One firm says this is a buying opportunity. Pharmaceuticals are down sharply. Earlier today, Bernie Sanders was at a price control rally. This seems to have pressured stocks down sharply on the week, certainly on today. Rally, Bernie Sanders articleand cited an about pricing around leukemia drugs. We want to keep an eye on that, especially considering pharmaceuticals are up 82 this year, but we saw what happened to my land. Perhaps this move against drug pricing will take a chunk out of the gains. Scarlet a bit of a cautionary tale. Looking at the worst weekly decline since late april. What can you tell us about that . Been down three weeks in a row, the longest losing streak since the brexit. Go into the bloomberg, blue is the biotech index and white is the nasdaq. You can see they are highly correlated. There is a little bit of divergence. Now, withestion is the much bigger divergence, is riskier biotech some sort of tell for the nasdaq overall . Abigail doolittle reporting live at the nasdaq. Thank you so much . Joe greece is still looking to merge after an historic crisis. ThePrime Minister said country would demand a debt relief deal from bailout lenders by christmas. What will negotiations with the strength of the euro zone as a whole . Mike mckee is standing by at a conference where some of those questions are being asked. Lipsky is the former first managing director at the imf and he is now at the John Hopkins School for danced and are. Mike indeed, john spent a lot of time dealing with the crisis of the imf. We are talking about debt relief and trying to negotiate that with the institutions. He wants something by christmas. They have to wrap up the second review. These things dont move that fast, do they . It depends on if all of the socalled performance criteria have been fulfilled. Then things can move forward rapidly. Mike a lot of people, including christine lagarde, have said that greece cannot succeed. The ecb has been exempted. What are the odds they get any kind of debt relief . John its being contemplated within the ec program, as i understand it. Been involved in negotiations for a long time. , there isre fortantial stock debtholders to cut outstanding debt. Or there are ways to arrange other changes in debt. My is madame lagarde right . Do they need something substantial in order to pull out . Theres nonk question that this process of reform will involve some restructuring of the debt or some arrangement that will make the burden of the debt sustainable in the longterm term. Everyone sees that. Mike why has greece been in trouble for so long . John its a difficult story. One way to look at this is that the external circumstances were less favorable than anticipated. The external environment more difficult. Many elements of the greek feld,m have not been for especially the structural toments that were designed improve the longterm performance of the greek economy. Reviewed the status. They published their concluding statement. You can see a long list of important measures that would need to be taken in order for a sustainable improvement in the economy. Here we are six years after the process began, and there are still a lot of very basic measures that need to be taken. Much of the world was frozen over the last five years by what greece in the markets. Mike kendrys still bring the World Economy to a halt or have removed can greece still bring the economy to a halt or have we moved past that . John we have moved long pass that. Is held widely within the european banking system. Does not have the power to infect the entire system. There has been a lot of Institution Building since that time. All of which means greece does not represent a threat to the stability of the system, but there is still a lot to do to complete the architecture and to fix greece. You leave greece out of it, you still see the markets freezing over european bring european banks. How worried should we be . For there is a clear road the european banking system. Some of it has already been put in place, the single supervisory mechanism, the resolution to , with eventually more to come. But individual banks, many of them still need the imfs Global Financial stability report shows there is still a need for cleansing Balance Sheets and strengthening capital. Mike do you see a lehman moment . John i dont think so. One of thely, we saw largest german institutions cause a lot of worry too a lot of investors. Sheets are clean, and if the supervisory mechanism continues to gain credibility as think ween, i dont face anything like that. Mike the imfs most recent outlook was relatively sanguine. In some cases, a revised higher for 2017 and 2018. Do you think we have come out of the new normal where we couldnt grow very quickly . The overall growth projection for the next year or so is still below the medium average, which is not good enough. Considering it fell into a hole we never filled that back in is not great. A shortfall in Business Investment over time will damage potential growth, so this is a problem that still needs fixing, even though, as you point out, the outlook isnt terrible. Its not wonderful. But it could and should be better. Can Central Banks address this shortfall . Janet yellen was speaking , but sheally today said you can let the economy run hot. John again, there seems to be a consensus that there is a need for fiscal adjustment or some fiscal expansion where its onsible, a bigger focus Structural Reforms that would encourage improvement in productivity gains in the mediumterm, and appropriate monetary policy. Lets call it threepronged. Its a balanced policy and it can help. The important thing is we need to get Business Investments and virtually all of the advanced economies to improve productivity. One of the uncertainties, since the economy fell into this whole and hasnt filled it back in, is trying to figure out how much still remains. Its an important question for central bankers, and there is not complete consensus on the answer. Mike thank you very much. Back to you. Joe thank you, mike mckee and john lipsky. Coming up, wall street reported today and none was more anticipated than wells fargo. The scandal, the new ceo addressed the leadership reshuffle. Stumpf week, john announced he was retiring from wells fargo and the board. He made this decision because he believed his leadership had become a distraction and the best thing for wells fargo was for him to retire. Matt we will have more on the performance of the bank in the Third Quarter and on all the banks. From the cfo of wells fargo, John Shrewsbury. This is bloomberg. Fu. Let im scarlet big banks began reporting thirdquarter earnings today. Topped analyst estimates, as did j. P. Morgan. The most anticipated reporting was wells fargo. The bank tries to recover from its scandal. Profits Beat Estimates partly on mortgage banking revenue. In a conference call, the new ceo said earning back trust is paramount. My immediate and highest priority is to restore trust in wells fargo. Today, paullier miller joins daybreak america by jpmorgan anduss wells fargo. A we were very cautious on couple of things, and we are still looking for decent guidance about what 2017 is going to look like, but top line, i think both companies came out with decent loan growth and interest margin, which is the spread they make on the balance sheet. And the fee revenue for both companies did very well. Especially jpmorgan, their principal assets on the fixed income trading desk blew our numbers out. Across the board, they did very well today. As you said, the net margin for both did pretty well. Do you expect some relief if the fed starts moving up . The fed startsif moving up, you will get some relief. Commercial loans were repriced up. However, we are still concerned about the shape of the yield curve. That has bounced a bit over the last couple of weeks, but it is still relatively flat. Steepen, itrts to is going to put pressure on earnings into the future. Talking about the rates business and the change of money are we still continuing on the market side of the business . I think it probably does continue. Backis coming a little bit into the system, and i think thats what helps those training desks. There has not been a lot of risk or volatility in those trading lines. Headlines coming in from the cfo saying they are doing a big review in the wake of wells fargo. There a discount being applied because of the . Ells fargo scandal not yet. I think for wells, there is a discount, but it hasnt bled out to the other banks yet. We are concerned that regulators are coming after the banks little too aggressively and finding things that are really there. In their sales culture, i think they have some pretty good checks and balances in place. Wells, we are shocked the compliance side didnt have better checks and balances. We hope other banks did a better job with this. That was paul miller speaking to bloombergs daybreak america. Matt time for a look at some of the biggest business stories in the news right now, starting with the u. S. Government. It is expected to ban all Samsung Galaxy smartphones from airlines. Aan is significant significant expansion of restriction on devices that have been burning or overheating. The devices will be not allowed aboard any aircraft even if they have been shut off. Is contemplating a merger between its top to Chemical Companies that would combine more than 100 billion in assets. According to bloomberg news, the goal is to create an oil and chemical giant. The deal could complicate cam could complicate another takeover. Libyas lawsuit over sovereign wealth fund. The 68 billion Libyan Investment Authority sued an investment banker saying it was misled into signing derivative deals it never properly understood. A british judge today ruled there was no evidence goldman had excessive profits on any of the deals. That is your business flash update. Scarlet coming up right after the market close, John Shrewsbury will be joining us to discuss wells fargo. This is bloomberg. Scarlet when asset prices are aspectsund, technical matter. 2120 is a key line here. Yesterday, the s p 500 dipped to 2119. Saw that happened twice previously in midseptember. It dipped below that level before it came back. , it did so again. It is now back above 2130 five, but what important to know is that we have been stuck in this range since early july, and that has become a critical level for the s p 500. At the u. K. Ng because Something Interesting has happened. We know about the sterling selloff. Thats not the only selloff going on. ,ight after the brexit vote people piled into government bonds on the safety trade. Thats starting to reverse itself. Just had itsield highest jump since 2015. Its starting to make people nervous. Ofthere are any signs capital flight, keep an eye on that story. Matt, over to you. Matt i am going to paint a global inflation picture with a triptych. Definitely stay tuned. This is the factory crisis in china. It factors in costs like transportation. As you can see, it has been negative for the last five years. We got a 0. 1 gain this time. We were looking for a drop, which is better than we had been looking for. Keep in mind, we are going to talk about this for the rest of the program. Joe people dont necessarily get excited about chinese producer prices, but there is so much talk about china exporting inflation, that could be a big deal. Closes next. Market we are Still Holding onto games right now. The dow up 63 points. This is bloomberg. Scarlet we are moments away from the closing bell. U. S. Stocks finishing lower. The fedllen signals will be deliberate and raising Interest Rates. I am scarlet fu. Joe i am joe weisenthal. I am matt miller. Welcome to our viewers tuning in live on twitter. You can watch our coverage every. Ay from 4 005 00 i did it yesterday, and i think its even more interesting than watching us on tv. We are on twitter. Watch us on twitter. Scarlet u. S. Stocks falling for the week, although they did finish the day with modest gains. Six of the 11 groups in the s p today, health care and utilities were the laggards. When you look at it on a week over week basis, this is the second straight decline for the s p 500. On the day, but obviously faded quite a bit. Matt we are down for the week. Lets bring up the imac from the bloomberg terminal. Were the laggards. Are about toople lose their coverage because of humana pulling out of the obamacare market. News yesterday on this program. Hp is going to fire up to 4000 people. People all the time. But they are going to fire 4000 more. And they are going to buy back shares. They were working on a new operating system with alibaba. Alesforce no longer making bid for twitter. Investors like that. Or salesforce shares are up. Twitter shares are down. Joe lets take a look at the bond market. Interesting news today. P. M. , janet yellen gave an assessment of the economy and policy ideas to revive it. In the immediate wake of that speech, her talk about letting run hot for a while got people thinking they might do a lower for longer thing. Lets look at the 10 year yield because the chart looks similar. One thing to notice is it actually climbed, which means curves steepening. Hey have the same shape today a little curve steepening on there. You have to bring attention to the two year yield. The oneyear chart really climbing higher. Lots of people paying attention to the postbrexit vote environment and whether inflation in the u. K. Will be a cause to dump u. K. Bonds. In terms of currencies, the dollar is the story today and for the week. Chinese yen had its worst week since january, losing about 8 10 of 1 , 9 10 of 1 versus the dollar as mainline china continued trading. , the line of 6. 7 is no longer the case. The yuan has been trading above that all week long. Joe a quick look at commodities, read across the board. E are looking at gold futures commodities are not where the action is today. Those are todays market minutes. Matt breaking news. The u. S. Budget deficit as a share of gdp widened for the First Time Since 2009. The shortfall compared to revenues was 587 billion. 439 billion was dollars in change. As a portion of gdp, it was 3. 2 compared to 2. 5 last year. Maybe a turning point. Joe austerity may finally be coming to an end. Matt i dont think u. S. Voters are necessarily unhappy about it. What did you miss . Ohio Governor John Kasich is borrowing wells fargo from state wellseals is barring fargo from state bond deals for a year. Earlier on the week, california john changs boat chang spoke to us about the decision. When you put 12 and our employees under that kind of you dont care about taking responsibility, sustaining financial health, protecting investors. Asked for stumpf to step down, which happened earlier this week. Wells fargos cfo John Shrewsberry joins us. Let me ask you about the issue with states. Didnt see a terrible effect on your earnings in the reported quarter because of this scandal. Are we going to see this effect year earnings Going Forward . Handfulll, there are a of states, as you have heard, and you mentioned a handful, that have put us in the box as we go through our review and the rebuild trust with them. Because of the diversification of our overall Business Model and what that means to overall revenue or bottom line, its not going to have a meaningful impact. We love their business. They are good customers. We worked hard to get their business in the past and we will work to do that again when this one year is over. Have you spoken with Warren Buffett since the Management Change . And if you havent, why not . We speak to all of our shareholders. We just had our Earnings Report this morning, so it has not been a good time to have substantive discussions in the runup to a public event like earnings, but we have been in consultation since september 8 with all of them. We have all the largest Asset Managers in the world helping understand our commitment to transparency, understand fixing the problem we had. We get it and take responsibility for what happened in our retail bank. Those discussions will be frequent and ongoing, but thats true with all of our shareholders. Joe matt mentioned the breaking news that john kasich has said he is barring wells fargo from state bond deals and contracts for the next year. How big a hit of what has been announced already and possibly other states down the line, how much does this impact your business . As i mentioned, that business is very important to us. We are a wholesale bank. It is not likely to have a Material Impact on the bottom line, but the important part is that we reestablish our relationship with those customers. We do a lot of business with government issuers at the state, fed, county, municipal level, etc. , and we want to continue to do that business. Fraudulent account openings means higher expenses at a time when Interest Rates are very low. The return on equity for Third Quarter. Is that the bottom . Definitely will have some expense pressure. Investors ask about that on the call today. We forecast where we would be expense wise in a range called efficiency ratio. 9 de people to 55 50 59 . We have been above that range. We are telling investors we are likely to be at the high end of that range in this rate environment. As you guys just discussed, while it is possible that we end up with a move in the short end, it doesnt feel like the long end us moving anywhere. Focusing on expenses is important. The marginal impact on expense is likely to change the return on equity. There are other changes we will next year orer the two, but the foundations of wells fargo, the balance sheet, capital returns, there are not a lot of banks of our size that as weeen able to produce have for a while. We have strength to operate from and we can spend what it takes and take the time that it takes to fix what was broken and rebuild trust with people. Matt you have been the most successful of the banks. Under the tenure of john stumpf, you far outperformed your wall street rivals. But you do have the cost of litigation set aside. Do you have a number in mind, any amount to renew rate the 5000 or so employees that you meet for not being able to crossselling targets, or is not the kind of thing youre thinking about doing . John we have a variety of inbound inquiries and pieces of litigation to sort through, including what is going on with team members. Each one is going to have to be measured on its merits. Its way too early. We are just reviewing what the amounts are going to be. It will take a couple of years to settle through all of that. We will be discloses. We are committed to transparency. As things become estimable and are coming into focus, we will share it. But there is no amount to point to today. Taking a look at your peers, citigroup and jpmorgan, would now be a time to invest in growth and fixed income and shift resources to Investment Banking . John we love the Investment Banking and trading side of our business, but we also love the very balanced Business Model. We get about half of our revenue about halfst income, of our revenue from noninterest income. From a risk balance perspective, we like where we are today. We are not likely to tilt strongly in any one direction beyond having the balance we have today. Have a great quarter in the same business. All of our fee generating businesses are operating at five quarter highs, all the big ones, anyway. Want to get your take quickly on the economy, particularly Consumer Credit. Are you seeing any signs of the Consumer Credit front, slowdown in payment, delinquents that would give you . Yellow flag for the economy john not right now. The, nation of what has been happening in jobs and disposable income combination of what has been happening with jobs and disposable income growth, alans Balance Sheets repairing meaningfully over the last few years, have converted to a good picture on the Consumer Credit side. Both first lien and second lien loans are performing as well as they ever have. Credit card is performing well, and auto, which is something we have all been looking at because there is so much more inventory out there over the last couple of years and a lot of credit available, we have been waiting and weething to happen, have tightened up our underwriting standards to make sure we like our riskreward, but it has performed in line with expectations. That is the most fascinating piece to hear about the auto loans. , wells fargorry cfo, i for your time. Thank you for your time. Has raised its outlook on international reserves. It sees russias general ernment death or sit deficit as 1. 5 of gdp. In terms of growth projection, it sees russia growing 2 in 2018. This year, however, russias economy is likely to shrink. Once again, fitch ratings, the last Rating Company to rate russia just above junk, has raised the outlook from stable to negative to stable from negative. Joe janet yellen says there are plausible ways that running the couldy hot for a while fix the damage caused by the recession. Lots of fed talk today. Lots of economic data. What caught your eye . A few things. The first is that longterm Inflation Expectations fell to a record low. Its the opposite of what the fed wants to see. Joe i have the chart right here. Lets bring it up. Joe this is for 510 years ahead and you can see it goes back to the mid80s. It is absolutely diving. Didnt janet yellen say we dont really understand what is driving expectations . She wasnt speaking about the current policy outlook that we might not of gotten. It goes to show that this is an issue because they dont really understand how much they should be paying attention to this, but its the only data we have on Inflation Expectations. Matt i list a showing that ise factory inflation was to showing the chinese factory Inflation Numbers earlier. Fromlk about deflation china. Is this the end of that . It finally looks like we are that. We are seeing some signs that inflation is starting to pick up. The thing to know about actual inflation versus Inflation Expectations is that in the fed models, they put a higher weight on Inflation Expectations than actual inflation. Matt interesting. Even though janet yellen told us today they dont really understand how these things are created. They put more weight on the gas. Guess. Scarlet you should tweet that out. Lets talk about another future the report, worse finance feature in the report, worse financial conditions than a year ago. A good indicator, i think. The blue line is what . The blue line shows you the percentage of respondents in the university of Michigan Survey who say they are in a worse worses chew asian than theysituation were a year ago. This has been quite low, but it has kind of flattened out, just like the Unemployment Rate. We talk about why is the Unemployment Rate flattening out . Is it because the labor force is growing or market momentum is slowing . Are talking about their finances getting worse. Joe if the stall our just about people coming back to the labor force, you would expect to see some improvement. Thats exactly right, and that is the theme we have been talking about for a little while. We talk about brexit. You have a chart for guidance getting back to brexit levels. This is probably the most exciting development. After brexit, there was a big drop in Interest Rates. Now you are seeing some life in the yield curve. The white line shows the number of rate hikes priced for the next five years. You can see it has fallen a lot over the course of the year. Lines what the two white show. The redline line is zero. You can see that vertical redline is where brexit happened. Sayingket is basically we are over that now. This is the first time in several months we are finally back to that level. To askal quickly, i want you about Janet Yellens speech where she talks about the possibility where we could run the economy hot for a while and add productive capacity for the economy. Do you think we will be doing that for the longterm . It something that has kind of been in the background of the debate for a while but not really cold front and center. We are talking about that today. Happenedthing that has today. Thank you very much. Scarlet coming up, correlation is the theme of the week. We are going to tell you how to determine the direction of assets. This is bloomberg. Scarlet what did you miss . We are going to take a deep dive into the bloomberg. You can find all of this on your screen. On gold. Gold, as everyone knows, has been falling as bond yields rise. His reasoning is that gold will break down because of real rates versus nominal rates. White line is the Raw Materials index. Kevin uses this because it is less prone to speculative positioning. Since last november, you will see that it has been rising. It is up about 15 . The dollarne is index, but it is inverted. As the dollar rises in value, the line is going down, and what we see is that since may, you have seen and we have highlighted the dollar strengthening. There has been almost no effect on the commodities index. There is no real reason why gold and Precious Metals need to stay correlated to the dollar. So happy kevins back. He takes the longest Summer Vacation ever. If you have not seen his blog, its fantastic. He puts things out almost every single day and he always has bloomberg charts there. I highly recommend checking out the macro tourist. I am looking at Inflation Expectations we were talking about a few minutes ago. This chart came from neil at renaissance macro. Is inflatione expectations. An alltimed to low. The blue lines actual inflation yearoveryear. It gets to what were talking about a minute ago. Sure, Inflation Expectations are in the doldrums, but there is signs of life in the actual cpi. Maybe we should look at the data instead of just what people tell us. Janet yellen was talking about transnational statistics. Evans on ouring to daybreak program. He has a chart showing chinas ppi yearoveryear. Coal prices are in blue. Are seeing factory prices come back to positive from negative. This could be a sign that china is going to start importing or, we are going to start importing inflation from china rather than deflation. Joe that brings a full circle to my triptych. We are going to talk about the nobel prize in agronomics. This is bloomberg. Mark a woman has come forward claiming donald trump groped her in the 1990s. Kristin anderson was in a crowded manhattanites but when she claims trump touched her inappropriately. Anderson is one of a number of women who have come forward who said trump made unwanted sexual advances. His Campaign Said anderson is making the whole thing up. President obama says mockler see is on the ballot in the election. He is calling out donald for claiming the election is rigged. He said that some nations rigged elections but they are tierneys. The Florida Supreme Court has ruled that a s a death sentence requires a unanimous jury. Be there are now over 300 inmates on floridas death row. Governor pat mccrorys is death toll from Hurricane Matthew has risen by two, bringing the total number of fatalities in the state to 24. It left the governor and emergency crews frustrated by therefusal of some of residents to evacuate despite multiple notices. A day news 24 hours powered by more than 2600 journalists and analysts in over 120 countries. This is bloomberg. Scarlet lets get a recap of todays market action. 162 pointsdow up at at some points. We closed marginally higher. Little change in the s p and nasdaq. The retail sales data seems to indicate that the fed is likely to the on track with december rate increase. Matt a little bit of steepening on that janet yellen speech. We saw utilities lagged today. Overall, kind of a quiet end of the day. What did you miss . Write apossible to contract. George Mason University explainedtyler cohen to the theory. Born in great britain. They did contracts and corporations. If you were thinking about a merger, if you are asking about vertical integration, if you are wondering how much to pay the ceo, that is the issue i handle. Joe contract law, the natural thing for most people is too rolled her eyes. It does not seem exciting. It is everywhere and at the heart of some of the big controversies that are going on right now. Whether it is ceo pay or how to design the Health Insurance contract. Where are the big areas in our life where we can see, or to put it better, where we can apply that work . Businesses, when they think about future decisions, they use ideas that have stemmed from heart and holster on the and holstyrom. The whole framework for thinking decisions came from these economist. Joe when you go through it, it does not seem boring at all. Lets talk about the ceo pay. What does the work imply in terms of ceo compensation being structured versus how it is structured today . What kind of gap is there between theory and practice . Lstrom worked on this in particular. It is impossible to write a fully efficient contract. Tooideal contract would put much risk on the worker or ceo. As you work to protect them, you create a distortion somewhere. It is impossible . It is impossible. He argues that good contracts for ceo should be simple, consistent, and transparent. He sees a lot of todays contracts as open a can and he is worried that there is privilege grabbing going on. Joe if you go to the filing and look up ceos a package, there are different moving parts and there are third parties brought in to give their opinion and so forth. Why though . If the ideal contract is a simple, clear, transparent pay system, why has this more complicated system been in favor and corporations . Opacity is often therefore a reason. Some people understand the opacity better than others. Lets talk about some of the other applications of contract laws. One of the other areas that is very popular right now is private prisons. We have seen the stock of private Prison Companies collapse as the government pulls back from using them. It comes down to an alignment question. Theoretically, private Companies Run operation better but might not have the proper incentive structure. What would their work say about what we should drive it ties . Should privatize . We typically think private companies are better at cutting costs. That is true. In the context of a prison, cutting costs can mean not treating prisoners well enough. The social goal is better than is Something Different than the private goal. What about a state Electricity Company . You hear countries are privatizing their Electricity Companies or basic infrastructure. People think those are good ideas. Beinge a merchant markets recommended to privatize state owned companies. Sometimes it is a good idea, right . There is a problem. You are privatizing but not bringing in competition. A privatized monopoly is not always better than a government monopoly. It is better at gaming the system for the same reason that private companies are on average more efficient than governments. Joe what role should private companies have in the provision of public goods . I think it should be viewed track manically and casebycase. On net we could be doing more privatization. We need to worry about private companies under investing, lobbying politicians, cementing their monopoly. Joe one of the most controversial forms of contracts that almost everybody has to deal with his Health Insurance. We know there are issues with adverse selection and people not eating able to get access to it. Contracts work on provide insight to what an optimal system for Health Insurance would be . You cannot get to a fully efficient contract for Health Insurance and it is the same reason why you cannot get a fully efficient contract for workers. It does not exist. If you put none of the cost on the patient, they will use too much health care. When you asked today why you were filming people unhappy with obamacare, holster him is the economist who first figured that out. All these controversies, we are never really going to be satisfied with where we are come right . If the insight is the perfect contract is impossible, their insight is we will never be fully happy. We cannot ultimately solve all of our problem. By knowing this, we can do a bit better. Joe what economists deserve to win . Whoe they are still live, should win . Baumel is 94. They should give it to him next year. Joe you wrote about another nobel prize winner. The noble prize in literature going to bob dylan. What is amazing is you had one of the first takes on that. You had a post written within five minutes of that going up, which is a testament to your skill as a blogger. Good call by the nobel prize camellia . Dylan is a great pick. My twitter feed is filled with people testifying to his importance. The Literary Committee has picked too many riders that no one has heard of. I felt they needed to reestablish their credence. Joe i heard people ask when philip roth is going to win his nobel prize. Not anytime soon, it would seem. Joe while it has people talking about the nobel prize and the literature, i wonder if there is a business, economic aspect in which you could go too far and the nobel prize does not mean anything. If you go too far afield of what literature means were economic means or economics means, you get it to a point where it is a joke prize and maybe longterm strategically, they should be more conservative. The bards of ancient greece would sing homer. Literature in a historic sense was a variety of forms. In novelscrystallized and short stories very recently. This is a return to aim a store return to a more historically based meaning. Joe in the area of other nobel prizes, literature, economics, who else would you like to see get recognized . For literature, i would pick thomas pynchon. Last are they pick a writer of nonfiction. Creative nonfiction is wonderful. People buy more of it than they are buying novels. I would give it to more high quality nonfiction writers, john mcphee being an example. Joe that was tyler cowen. Fromsup, some call it gift to democrats. The damage done to his republican president ial bid does not necessarily mean a democratically sweeping congress. We will explore. Scarlet what did you miss matt what did you miss . Some argue that Donald Trump Campaign could damage fellow republicans to give democrats control over senate and house. That may not be in the cards even with a clinton blowout. , your story points out that they only need four, a net win of four but they need Something Like 30 in the house. It will be difficult even if donald trump continues to offend people nationwide. Kyle that is pretty much true. The democrats need four seats in the senate to win majority. Thing there is there is no linear relationship between her standing and democrat standing. In New Hampshire have done things to distance themselves from trump. They are running on their own profiles. The house is a more difficult story. Democrats have a much more difficult climb in the house. They have to win 17 tossups that are not guaranteed and then they have to win another 11 seats where the republicans are up 1015 points. Gerrymandering in the 2010 elections packed democrats into many areas. Scarlet woman makeoesnt a accusations against obama . He said the airplane accuser would not be my first choice, which people interpreted it to me that maybe she was not attractive enough to want to grope, and another headline says trump imitates grabbing motion as he denies one claim. I dont really have a question, i just wanted to read these allowed. Ofe us your characterization his speech today in light of these revelations. Sahil this is trump as we have never seen him before. He said he is finally glad to have the shackles off and people were wondering, does that mean trump has been shackled . Apparently compare to that, it seems true. He has taken things to a new level. He is upping the ante. He is escalating the rhetoric. He talked about not only what you mention, which was accusing his female accusers who said he groped them in the past of being liars, but he also said this is a conspiracy orchestrated by the clintons and the media and essentially as he has been saying, global elites to tear down his candidacy. He is going full scorched earth. The clintonsir, have done the same thing in the past and accusations have been made against them. They have said it is a large media conspiracy. Sahil a vast rightwing conspiracy. Matt there is actually something to it. I wonder about a delivery of fact. Donald trump and mike pence saaid they would come out with conclusive proof that these allegations are not true. Are you expecting to be working late tonight . Sahil we dont know if this is going to come out. We have no indication that anything is imminent. Im not sure what kind of definitive proof he could have. There are multiple female accusers. It was a long time ago. It is their word against his word. I am not sure what definitive proof that would be. They have not given us any hints. We will wait and see. I am not holding my breath for anything to drop now. Scarlet how does the clinton camp respond to this . Their response so far has been to step back and let him suck up all the energy and make a lot of noise. At some point, bad press consumes everything. Are they content to let him dictate the terms, even as lowly as they are . Sahil Hillary Clinton has no intention of responding, as far as i understand. He this came up in the debate. He flung that stuff at her. She brushed past it. The reason being these stories are not about her. Her husband. T she is content to let that battle play out as it may. The assumption partly being that when bill clintons past affairs have been in the news, hillarys popularity tends to go out. Voters dont blame her. Is a interesting take. I had not realized that her ratings go up. Christopher crane says utility takeover premiums are pretty rich and it is not the time for another acquisition. Scarlet what did you miss . Exelon, a utility with a 30 billion market cap, completed a merger and is investing 25 billion to stay on an accelerated growth path. I spoke with chris crane from the new york stock exchange. I began by asking him about timeframe. Chris it will be a trajectory over five years. Ach year we will increase on level increase getting to 70 by 2020 is our projection. Scarlet is this shift admission that Natural Gas Prices are unlikely to get above the historical longterm average of four dollars . Chris we think natural gas long run is around the four dollar price point. Transmission is developed, export start to really take place. Scarlet got it. You have a projection in terms how high that gasket go over the next year before it comes back to reverting to the main . Chris it all depends on a winner. We will have to see what the winter holds. If we have a cold winter, we will see a lot more price volatility. Warmer winter, higher storage levels, you will not see the volatility come into the market. Scarlet lets talk about exxon and its acquisition efforts. You completed the acquisition of pepco. Purchasespate further of regulation and Gas Companies . Chris were focused on the integration of Pepco Holding companies. To get the of work performance where we want it to be. Having 25 billion of organic growth on our own is like adding pepco without adding a premium. Premiums are rich in the sector. We will stick to our knitting and work on our own organic development and improving Customer Satisfaction and reliability along the way. Scarlet if prices start to come down, if there is a correction in the stock market, with that create more favorable conditions for more purchases . Chris it depends on how we are trading. We are trading at a discount to our peers and it would not be the time for us to be using our equity. We need to see parity with the peers, a better valuation on equity as our Growth Continues to take hold. Eventually you may look at using equity, but right now it is not time to put that on the Holding Balance Sheet or time to be using equity. Scarlet that was exelon ceo chris crane joining us today. Joe what you need to know gearing up for next week. This is bloomberg. Scarlet a down week for u. S. Stocks. An update for indexes. Matt not much gain in the end after the yellen speech. Joe we did see yields up to a sevenmonth high for a moment but a came down before yellen started speaking. We saw the dollar up for a while, but everything leveled out. Scarlet one group that did do well where financials. There will be a slew of earnings next week. On monday you have bank of america reporting before the bell. After the close, netflix. And Morgan Stanley on tuesday and wednesday. On thursday after the close, joe, mats, and i will be breaking down paypal. Jpmorgan got people excited about the prospects there. Also on friday, ge and mcdonalds. Another look at the economy from a different angle. Scarlet in terms of what is coming up next week, dont miss this on tuesday night. Coming out will be at 10 00 eastern time. Matt that will be a hot report to watch. The third and final showdown between donald trump and Hillary Clinton at the university of nevada in las vegas. His las vegas the best place for those two . Joe i think i will be on a plane during that and i think i will be happy about that. Matt i hope you dont fly jetblue. You can watch it the entire time. I will be looking at the ecb decision at 7 45. We will see what happens with that. Scarlet Mario Draghis News Conference after that. That is all for what you miss. Thanks for watching. Matt have a great weekend. This is bloomberg. Mark with all due respect to the russians, the chinese, wikileaks, and north america, the danger this whole time was carlos slim . This already unprecedented week in president ial politics reached new heights. Allege thaten donald trump sexually assaulted them years ago. The Washington Post published an account from a woman named kristin anderson