Transcripts For BLOOMBERG Bloomberg Go 20160811

The finance minister of new zealand said no point in trend to get involved in the currency. Trying to get involved in the currency. Alix Central Banks ineffectuality. Later, we will have alibabas cofounder and chairman. First, we start with the markets. To me, it was that move in the fx market. Jon futures marginally positive in the United States. In europe come out performance in germany with the dax up. 7 . The ftse down. 25 . In next dividends today. Dividends today. New zealand kiwi, even with a rate cut. The market screaming, give me some more. We got 15 billion worth of inply and auction auction. Solid demand and a huge component of that was in direct bidders indirect bidders. Alix will they be selling Going Forward . Lets check in with our Bloomberg Team for indepth coverage. And curran, guy Johnson Steve yaccino. Want to start up with the move we saw in oil. We saw a huge move down as the iea came and went came out with its monthly report. Enda the report was quite mixed in its outlook. In the third quarter, they to financefinance a record amount of crude. It pretty neutral position. Alix one thing that stood out to me, they saw saudi production at a record 10. 6 Million Barrels a day. Yesterday, the opec report, it was hard to discern what they were pumping at. Enda that is the big theme of the market this week. Those saudi numbers were huge. To be fair, its extremely hot in the middle east right now. That is driving Energy Consumption really hard. Nevertheless, it is a record number. In minister came out and said we are pumping out 3. 5 8 million the iran minister came out and said we are pumping out 3. 5 8 million. That is leaving people wondering whether there will ever be a point at which we ever clear this global overhang of crude. Alix in new york, and is 90 degrees. Talk about the impact of brexit. Jon we had the pmi surveys. We got the Housing Market data earlier today. What is the story . Guy that headline is a bit overdone because we saw big tax changes in the u. K. People were buying second homes or investment homes, made those purchases before the kick up in tax kicked in. You cannot ignore the brexit story, it has had an effect. We can see that clearly in the numbers. Since then, weve seen the bank of england come out, we have rates coming down, we make it further rate cuts coming through. July looks a bit better in terms of the forward expectation. It will be interesting to see how prices start to stabilize a bit. The birds have forgotten about brexit the brits have forgotten about brexit, they are now thinking about the summer. Rateed with some interest cuts, seeing it that has a more positive effect. Jon the doomsday scenario has been painted for the Housing Market. Are you really going to go out there and buy a bigticket item like a house . Probably not. The guilt market, it was a huge store yesterday. Then we had a fully covered boe operation. Maybe a fed receiving just a little bit. I dont think the story has gone away, has it . Guy the Debt Management office came out and sold inflation linked bonds. 1. 72, well that covered in terms of the story. That is a fresh record. Somebody somewhere the markets believe a, they want to have these linkers out there, but somebody out there thinks inflation is going through much, guy you very johnson joining us in london. If you linkers look at the weakness in the pound, you want that protection. Linkers. Like the name, there was an election in the u. K. In june. We will have one here in november. Hillary clinton in Steve Yaccino is with us for a preview of what mrs. Clinton will propose. Her to say aect lot of things and shes been saying on the campaign trail so far. Jobs investment, free college for the middle class, Debt Free College for everybody else. , distributive economic policies. Spreading the wealth in a way that makes the wealthy pay more, helps the middle class and boost the economy, as she would say. David it sounds like ratheributive agenda than progrowth, probusiness agenda. Mr. Trump with his plan on monday. Or the parties reverting to their normal basis . Steve in some ways, yes. This election has really always been about the economy. I Bloomberg Politics poor votersay said 58 of said obama is doing a good job, but two thirds and the country is headed in the wrong direction. A lot of that has to do with the economy and they blame democrats for that. You see both campaigns in zeroing in on this. Seenormal policies we from both sides, which one is helping the more dutch helping them is helping them more . David are we paying attention to policy or emails or remarks about the Second Amendment . Time fort 1 15 eastern full coverage of Hillary Clinton speech that Hillary Clintons speech full coverage of Hillary Clintons speech. Alix alibaba trading at 90 in the premarket. Level, thisthis will be the highest close since june of 2015. Earnings, revenue beat on estimates. 18 mobilers bought monthly active users up 39 , Cloud Computing up triple digits. Grow,re continuing to becoming a cloud powerhouse, owning that segment in china. Also looking at retail. A huge week for retail. Kohls having a very interesting morning. That stock also up in the premarket. Profit up 5 , they did cut their forecast, however, growth margins did beat, as well as come sales coming in a bit light. You had a growth margin beat and profit was up. We will be speaking to the ceo at macys. Valeang it out with nt. The wall street journal saying there is a criminal probe now by federal prosecutors at issue, did valiant pharmaceuticals defraud insurers by hiding its pharmacyhe mailorder philidor . That now on display in a criminal probe. For more on alibabas earnings, definitely tune into our our cofounder at nine clint 15 eastern for more on the expanding ecommerce giant. At 9 15 eastern. A 12 billion loan to revise the economy. Each oeach of been struggling since 2011. Egypt has been struggling since 2011. Prosecutors from sweden will be juliannao question sanja about rape allegations assange about rape allegations. There has to be an easier way to meet donald trump. A man who wanted a private audience with the republican president ial candidate as climbed up trump tower that has up trump has climbed tower. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Bloomberg. Jon coming up on the program, it is being called the yu anniversary. Later, we discuss the health of the consumer and preview a big week for retail earnings. This is bloomberg. Bloomberg. S happy yuanniversary. It was august 11, 20 15. Global markets world cup to this. A shock the evaluation of the chinese currency global woke up to this a shock devaluation of the chinese currency. Changed . Almostfinitely alm in the markets these days. Think about where they were one year ago, fx being burned at a record pace, confusion about , thathinas intention was come a long way since then. They are now leading the markets set the currency to some extent and theyve allowed to weaken they have taken back control of the currency and there is not as much fear at the was at the beginning of the year. They are in a sweet spot. Of controlling the volatility in the currency and maybe that has a handle on the capital outflows in the shortterm. Lets go back one year. What they were focused on is the wider usage of the domestic currency. Theinternationalization of yuan. Currently, it is number six in terms of global currency usage. At 1. 7 around about of the total market. Terms of the internationalization of this currency, they are nowhere near the competition, are they . No, they have a long way to go. This has been one of the side casualties of what theyve been tried to do with the currency over the past year. They have clamped down really hard and enforced really strong rules on moving money in and out of china. They continue to talk about internationalizing yuan. We had a report on how they wanted to promote the yuan around the world Going Forward. Actions will speak louder than worlds. Louder than words. They can claim to have a desk cannot they cannot claim a biblea yuan seen as International Currency until then. Viable International Currency until then. Their communication has improved significantly. That doesnt mean it cannot improve more from here. Topeard key speeches government officials, including are notier that they looking for an outright competitive devaluation. The market is now generally comfortable with the new Exchange Rate regime theyve introduced. Weve come from a situation left a void of speculation and confusion to a point where the market is much more calm. Compared to this time last year, he gets to go home on time. It was a different world last year. Alix i was on vacation and got that headline, oh, thank god. The bears. 2 very low volume. Up next, paul hickey shows us why anemic volume doesnt always equal and unsustainable rally. To very low point volume. Alix this is bloomberg. All three major averages sitting near record highs with the bears saying you cannot trust a rally that has relied on very low volume. Oining us now is paul hickey he really digs into the charts, going behind the details and youve done a lot of work on what volume it means to a rally. Paul everybody is talking volumes that, you cannot have these types of scams be sustainable without volume driving the rally. We are enabled market now that is one of the longest and strongest of all time in a bull market. The main characteristic has been volume has been declining throughout the entire market. We broke up the rally in the into days where volumes were above average and below average. If you were only participating when volume was below average, you would be up flipside, in this market on days when volumes were above average, you would be down 65 . Is all ons rally nothing because it is low volume, tells you that you look back and you would have to say the whole market hasnt counted. True . Why is this what is your hypothesis . Paul it stems from the fact that banking regulations, theres less participants in this Market Makers out there trading. You have more activity moving out to the futures market. That is one reason for low volume. Individual investors are not as excited during this bull market as they have in prior markets. Rather than focus on individual stock stories, easy see more buying going into uts. You see more buying going into uts. Etfs. Etfsunneling money into and going abroad. Alix you noticed a big pop in volume at the end of the day. By is that significant . Paul there is the smart money indicator that says the emotional money tends to trade at the early part of the day. The smart money trade story at the end of the day. Especially in the post brexit environment, the bank where the day has been very strong. Beginning at 2 00 in the afternoon. Whereas most of the day, wed seen flat trading to modest weakness early on. This continues the trend we began to see going back to last mays peak. The intraday pattern in the market, we saw weakness during the first half of the day and towards the first half of the day, he saw buying. I want to emphasize one point you made about post brexit. To may ofgoes back last your comment shows it going off a little bit at the end there. Post brexit, it keeps going up. The change in the trading pattern. Buying rightare into the close. On an intraday basis. That tells you there is pretty Strong Demand for stocks they are among investors. Alix thank you very much. Paul hickey on the granular details. Ramp. He 2 00, 2 30 willg up, Hillary Clinton layout her Economic Policy and strategy later today. We will have your preview, next. Bloomberg. [ clock ticking ] time. You only have so much. Thats why we want to make sure you wont have to wait on hold. And you wont have to guess when well turn up. Because after all we should fit into your life. Not the other way around. Everything is cool when youre watching a screen everything is awesome, when youre sharing a meme a voice remote, show me angry kings you know whats awesome . Everything apps that please, more selfies, endless hours of the best tvs brand new apps, shows to go, awesome internet thats super whoa. Everything is awesome xfinity. The future of awesome. Alix this is bloomberg. Heres a look at the big movers premarket. Chesapeake, and unbelievable story. The company is selling its shale assets to a private equity firm to get out of 2 billion worth of contracts. You pay these contracts whether or not you use the product or not. Chesapeake has a 1 billion in debt due next august. Its been hammered by natural gas prices. Chesapeake was one of the founders of the shale revolution. Now, chesapeake leaving that area with a huge transition for this company. Socgen. Ot an upgrade at it is one of the biggest gainers today, really helping to lead european stocks higher. Shake shack on the other side here in the u. S. , samestore sales gained on 4. 5 . They were just up 4. 5 . The court before, they were up nearly 10 . A lot of slowing for those burgers. Labor expenses are 37 in the quarter after they raised their pay to 12 an hour. We keep asking, do margins get squeezed, two companies pare back on their hiring . Jon we will break that down later in the program. Futures pretty much unchanged on the session. In london, a bit of underperformance on the ftse. 20 of the listings theyre going exdividend. Up performance of the dax. 7 . In the g 10kness space. No real biglar, changes in the fx market. We are up to basis points on the 10 year in the United States. On the front end of the curve, a twoyear. Ssure on the the highlight of the week 24 hours away, u. S. Retail sales. U. S. Retail is a big thing for this program over the next two hours. President iss promising to respond to what he calls ukraines terror attacks in crimea. Once again, fighting has flared up putin says russia will adopt additional security measures. Russia annexed crimea in 2014. After two dozen people were hurt in the large fire in an Apartment Building just outside of washington, d. C. , firefighters in Silver Spring maryland had to rescue people from the upper floors. There may have been an explosion. Katie ledecky has won her third gold medal. She has one more events she is the defending champion. China is in second with 23 medals and japan has 18. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Today i morning must read comes from a Bloomberg News piece previewing Hillary Clintons economic speech coming later today in detroit. Ironically, it looks like its a democrat this time who will try to position herself as a fiscal conservative. She will use the speech at a michigan factory thursday to deregulationon the program that doesnt add up. Maintaining her proposed spending increases are offset by equal sized tax hikes on the wealthy and corporations. Joining us now is andy greene. Andrew green. Tell us what you can about what mrs. Clinton will lay out today in michigan. I think she will be talking about the themes shes been speaking about four the entire time for the entire time here on the campaign trail, raising wages, making sure the middle class is stronger. Making sure corporations on wall street pay their fair share breaking down barriers so women can fully participate in the labor force. Making sure our families are stronger. That will be the core message. It will be consistent and stable. Donald trump has been regulus has been reckless in proposing tax loopholes that benefit the 1 . As anybody scored this . What it would cost the government to do what she wants to do . The independent analyses that have looked at secretary clintons and donald trump plans suggest her plan totally paid for, his is not. Her plan will increase jobs by 10 million jobs and grow the economy. His plan is likely to cut 3. 5 million jobs and send us back into recession. The choice is pretty clear on that front. Jobsve created 14 million since the bottom of the recession and president obama has gotten us out of this. We are finally seeing some wage growth. We need a lot more middleclass families able to share in this prosperity the top are enjoying. Jon you said the tax cuts proposed by trump were rou recks theres a huge pool of Corporate Cash sitting overseas that needs to come home. For a lot of people, it just makes sense to lower the Corporate Tax rate and get that money home. Why is that policy reckless . Is proposing a number of policies that are reckless. His abolition of the , billions of giveaways to his own family jon the policy of lowering Corporate Taxes to get that money home back from overseas, why is that policy reckless . The real question is jon the question was why that policy was reckless. Those are your words. The question is who pays their fair share. When we did this in 2004, the found thatstigation more jobs were created overseas by those very companies that brought the taxes back home. Its not something that is benefiting the American Worker or american businesses. Have beenprofits doing very well and its middleclass families that have been hurting. Back to trickle down to regulatory economics, that is not the way to grow the economy. We have leveled out Economic Growth with strong middleclass families. Corporate profits have been doing very well. They are not the ones hurting in this challenging economic time. Inid there is a difference the way mrs. Clinton would approach this question of profits held offshore mr. Trump would reduce the Corporate Tax rate for everybody and give them a 10 rate for giving money bringing money back. Her plan has a penalty for people moving overseas why is that the better approach . , oecdund the world members are looking to close tax loopholes. Areurope and asia, there areions of dollars that right now stateless income that are not taxed anywhere. That is wrong. Ought to make sure all the companies are paying their fair share. Making sure companies that are here in the u. S. Enjoying the investments american taxpayers are making inroads and bridges and research and education, that those companies are paying their , moving their profits abroad to places that paid no Corporate Tax. At thehaving looked thatous, it strikes me this is largely a redistributive approach to economics. Progrowthparticularly or proamerican business. Why is that the right prescription for this country right now . If you want to grow the economy, the lessons are that trickledown economics do not work. Middle out economics to work. You have a strong middle class, you will have people who can consume and by. Consumption is still the overwhelming driver of the American Economy. Businesses dont believe the consumer is going to be there. If we make sure the middle class have more money in their pockets and more people aspiring to be in the middle class can join it, that will be a source of growth in the future. I dont think trickledown economics and deregulation will get you very far. They got as 800,000 jobs a month being lost and 8 decline in gdp. I think secretary clintons plan is one that is progrowth and donald trump is the one that is likely to throw us under recession and lead to a similar type of economic crisis that we saw in 2008. David thank you for the spirited discussion. The center for American Progress managing director for Economic Policy. Mrs. Clinton has her say today on economics. Earlier this week, we heard from donald trump. Compare and contrast those plans, we welcome todd buchholz. He is a prolific author. Welcome to the program. Good to be with you. What are the things that jump out at you the most as far as fundamental differences . Todd what do these candidates diagnose as the central problem . When i look at Hillary Clintons , it seems to me she thinks the central problem with the American Economy is that rich people have grabbed too much money away from poor people and middleclass people. Look at Donald Trumps plan, it seems to me he thinks the central problem for the u. S. Economy is that businesses do not have an adequate incentive to invest. Their entire plans on both sides derive from that supposition. We can start with the basic question. Who is right about that . I tend not to be a cannot evenve i pronounce it because i think the concept misunderstands how capitalism works. Thatundeniably true businesses have failed to invest and its undeniably true that u. S. Corporate tax rates are not competitive, they are higher than nearly every other trading partner they do business with. A large part of the u. S. Economy is consumerbased. That is driving the economy right now. If we can get more money to consumers, the middle class, that would help the economy. If you look at spending right now and the economy, recent gdp reports, you see that consumers are doing ok. The level of overall retail sales is not terrible. Auto sales have been quite strong in this recovery. Housing has been ok. The feeling has been either the lack of confidence in businesses or the disincentives. The former citibank chairman years ago saying money goes where it is welcome and stays where it is well treated. Business doing your work around the world, you say, where should i put my new plant . Is the u. S. As welcoming a place to do business as others . The answer for the last eight years has been no, we are not so interested. We have taxi more and give it away to somewhere else. On the one hand, clinton went bernie light. On the flipside, you have donald trump. Can you trust his proposal now will be his proposal in january of 2017 . How do you make decisions over the next six months based on those criticisms . Todd these two candidates are troublesome. Belongs in hang seng and the other belongs in bellevue. Hillary clinton as being Bernie Sanders. Sanders. Aten bernie now is the chance for her to take up the leftist cloak she was wearing and tell us what you truly believes. Take off the leftist cloak she was wearing and tell us what she truly believes. Bill clinton cut the Capital Gains tax rate. She wants to move it up. Bill clinton signed nafta. She is against such trade agreements. Bill clinton signed a welfare bill and a crime bill and she is repudiating those as well. I think Bernie Sanders has allowed Hillary Clinton to reveal her true self. I think its better when candidates stand up for what they truly believe and i think Hillary Clinton truly believes the problem in this country is that rich people pay too little in taxes and poor people need more money from them. David two very different views of Hillary Clintons and Donald Trumps economic policies. To tune in at 1 15 eastern time as we will be taking Hillary Clinton speech live. Alix a very big week for retail stocks. Macys results due at the top of the hour. Kohls surging 9 in the premarket. Lehmansr ceo of speaks about the help of u. S. Consumer and the macys strategy, next. This is bloomberg. David this is bloomberg. Coming up, macys ceo terry hisgren joins us to discuss companys latest Earnings Report and the health of the u. S. Consumer. A big day for retail earnings. Kohls beating analyst estimates, cutting its fiscal your forecast. You have stored traffic down 7. 1 from a year ago as you have online demand growing. Joining us now is steven newman, le former oehmanns ceo. Steven the best practice is trying to get consumers into the store. How do you differentiate yourself . Why should somebody shop in kohls versus macys versus nordstroms versus all these Discount Stores . We have trained the customer so well for so many years to wait and get the best prices and thats what they want. Great prices and great value. You look at all the offprice retailers, they are the ones that are succeeding because their message is resonating. From allomic people levels are shopping in these retailers. That is the differentiator happening out there. It also seems what is working a specific brands are both of those things seem difficult for macys. Macys is a whole other thing. Toys, there is no reason shop at macys without getting some kind of discount. , iteen their oneday sales he a fiveday sale will dont shop on a daily basis because they know if they wait two more hours, something will come up and give them a bigger discount. It is very hard to change your customer to change train your customer to change. Maybe macys is 510 years too late on that. I think it will be very difficult. Look at how many stores they have. The unique that many stores with online and people shopping online growing by billions of dollars a year . We are seeing starport push for some monetization of that real estate asset. Ares like michael courts saying i dont want to discount any more because i want to preserve my margins. Michael kors. Steven amazon is so innovative, i have to give them that. Places in the marketplace take t. J. Maxx, for instance. Need all the technology than amazon might be doing because they are known for the great price and you have to go in there and find it. Macys was so great years ago because macys had the private label that differentiated them. Now, it is all the same. On top of that, you have the imports from japan and all these companies that did not exist 510 years ago that people think are cooler. Abercrombie is try to change. Trying to change. What is going on right now it, it is much more difficult. Alix thank you very much. Steven newman, good to have you. Still ahead on bloomberg , we are joined by Terry Lundgren. This is bloomberg. Alix one year ago today, the yuan was wreaking havoc across the Global Markets. This is your very simple chart. U. N. Julieyuan a global selloff and markets. January andgain in february. Now, weve definitely seen some stability. Yes, the pboc lowering that reference rate it is much than it was last year in august. This is the onshore offshore yuan volatility. You see it pick up again in february and march of this year. We have been relatively calm. China has been tightening capital controls come increasing intervention, doing it at a time where Global Conditions are much more calm, and that has helped spread the calm in the market. This comes at a cost. The cost of reforms that have allowed the yuan to be floated more freely and treated more freely. Traded more freely. This is now 1. 7 in june. The sixth ranked currency among those currencies traded globally. Much lower than the u. S. , Something Like 40 . There is stability, but it comes at a cost. How long will the pboc be able to keep delivering on that without that reform . Jon we will be on top of that in the next hour. York andon and new asia, this is bloomberg. Brexit hits home. Drops therty sales most with both demand and sale declining in july. Jon valiant is said to be the subject of an investigation with a mailorder pharmacy. It alix clinton heads to michigan. Use a speechd to and factory to poke holes at aggressive tax cuts. David welcome to bloomberg. Im david west along with Jonathan Ferro and alix steel. Of vers jon i remember so many people having to cancel their plans. Little bit of stability, but it has come at a cost. Alix Deutsche Bank warning caution. You will have the pboc proceed. There is the rest risk of a depreciation. They want to be a part of a global monetary system. They have 1. 7 of that. They have to be able to liberalize to get higher. David they want to be a part of a major reserve currency. Also, it has continued to gone down. Steady is the cause there. Jon appreciation versus devaluation. Alix that is lower. [laughter] were going to be joined by great guests to discuss all of this. Us tom z ratner will join discuss the president ial race. And all about us got a look at the markets. The exciting room the exciting move was fx. Jon the kiwi stronger in the fx market. Sterlingess on the crosses the pound. In the equity market, little bit of stability with the dax up a third, the ftse underperforming. 20 listings theyre going and dividend going x dividend. In the commodity market, brent crude unchanged. The bloomberg Commodity Index unchanged. The bond market not unchanged at all. Big move to talk about. Tenure treasuries up to basis points. Up 10 10 year treasuries basis points. We await big supply coming to the markets. Also keep your eye on macys. We had those breaking numbers coming out and moments ago. Acts to someen an of their stores. They are Closing Stores resulting in a 249 million charge. Also, looking at options for four large flagship stores. Reaffirm itsid fullyear forecast. In alks to sell mens on union square. Stock is up 10 . This lack of foot traffic in malls, what do you do with the retail space . David they are open to doing more. Maybe asset sales, joint ventures, they are not done yet. Jon you know is this reminds me of . Whenever i hear about macys, it is exactly the same conversation. Pare back your real estate. It is not happened quick enough. David the questionnaires when you get to pare back, what do you have left . Does the Department Store continued to exist . Alix we will be having that exact question. Lets go around the world and check in with our Bloomberg Team for indepth coverage. Week in down a big retail earnings. On valeants newest we have numbers from kohls that cut their back stock. Macys beginning continuing to restructure. The market has been waiting for this for so long. Cold and macys are doing things that kohls and macys are doing things that people have been waiting for them to do, close stores. Question,raises the are they too late for our investors saying . Yes it is ok you are starting at this juncture . The shares were battered over the last year. Any kind of symantec doing something right is an indication. What can we expect over the next half of the year in terms of the struggling retailer changing that Business Model . Retail pullingng back in Department Stores will have to respond to this. Continue tove to close, continue to give their inventory under control. What is interesting to me is that macys did not announce something bigger with their real estate. Macys, kohls come up over 9 . Shelly banjo, thank you so much. In jon talking real estate, housing prices. It was a good transition. The fastest declining transactions in the month of july since the financial crisis in 2008. Im talking about the Brexit Effect in the united kingdom. I want to get to guy johnson. It sounds dramatic. The takeaway is no drama yet. Guy there are number of factors that have skewed this story. This is a story of space agents of those who sell houses. What we are seeing very clearly is the postBrexit Effect. We are seeing and effective q1 when the government change the tax loss surrounding by second homes, they raised both taxes. People who went out for second homes and buying investment properties. This is a combination of brexit, which slowed things down, and the effects of those tax changes coming through. It will be interesting to see looking forward to see whether or not were seeing the effects of low Interest Rates starting to have a more positive affect on the market Going Forward. In the price down that it is, there may be opportunity for people around the world to come in and buy u. K. Property. They are hinting that that is going on already. Jon i think we have a different name for state agency in london. Beginning of the july to the beginning of august, it is different for real estate. You got a government functioning in the u. K. And a rate cut from the bank of england, and you have got low, low rates. The last 24 hours, you speak to anyone in the bond market, it has been a conversation about guilt. What is the story today. . Curvehe curve has the is beginning to flatten. Everything below that is down. You look at the longduration stop with the bank had the problem earlier in the week, that is still well bid. The curve continues to flatten in london in the pound continues to drift lower as well. We have seen inflation bonds and a record low level. The market continuing to pilot to the the market continuing to there is inflation coming in that would be from the lowest sterling. A flatter curve in the u. K. Guy inn london, g u london, thank you very much. David shares of valeant are plunging after being targeted in a criminal goal criminal probe. What do we know about this criminal investigation involving valiant . This is been going on for quite some time. Back in october, we learned that valeant has been using philidor. That is totally normal in the pharmacy world. But that is but the problem is that they owned philidor. Ongoing. E has been learned there could be potential criminal charges because they may have been doing fraudulent activity with insurers. The insurers did not know that philidor and valeant were actually the same. It could be an artificial use of some of valeants brand of drugs the underlying complaint is wire fraud. David it was a misrepresentation made to insurers. Why would they have been hurt by that misrepresentation . Valeants drugs are very expensive. Theant is more so due to fact they have raised prices. The pharmacist should select of course the doctor said to use another brand. It looks like valeant was pushing their brand of drugs. David a lot of Companies May be thinking what are they not revealing. Thank you very much. We are going to go over to alix. Alix you got it talk about retail. Macys trying to restructure their physical business. Closing 100 stores. Asset sales,g joint ventures, talking to other partners, may sell the mens store in san francisco. Vendors, putting money into technology, putting money into applications and aggressively trying to make the ecommerce to the mall idea, the Department Store idea. Bad and good, the good, Gross Margins better due to inventory management. On the downside, they cut their 2017 fullyear forecast. Any kind of little good news is great news for retailer stocks. Also want to hit on chesapeake. That stock moving big in premarket. Shaleselling all of its assets to get out of a 2 billion contract. They had a lot of that coming through next year that they are trying to get free of. Alibaba, theon earnings extravaganza continues. That was due to cloud any commerce. Both of those businesses surging. Cloud computing revenue was up 156 . Slowingof any kind of in china that we had been hearing so much about. If the stock closes over 90, it will be the First Time Since june 2015. For more on alibabas earnings, make sure to stay tuned and stay with us for the cofounder at 9 15 a. M. Eastern. We take a look at Donald Trumps economic policies. We will discuss what it means for private equity. E ratner this is bloomberg. David this is bloomberg. Im david westin. We have highlights of economic plan Hillary Clinton will play out in warned, michigan. It will include the largest investment in good paying jobs since world war ii, ensuring worker share in profits, and making the wealthy pair pay their fair share. Joining us is steve ratner. Welcome back steve. This is not a dramatic departure. From what she said before it is a repackaging. Taking what you said before in putting it into some things and buckets. David it is a pretty stark contrast to what we have heard from mr. Trump on monday. The meritsinks about of either plan, it is fair to say that mr. Trump put forward a probusiness, progrowth sort of economic plan. This feels more like directed towards redistributing, getting more the lower class, middle class and the economy. Is that fair . Steve partly fair, probably not so fair. Trump says a small he wants to massively cut taxes even though he has not said what he wants to do on the spending side. You busy have to cut spending to get the deficit and a reasonable place. His cuts favor the rich. The one place he is not probusiness is on trade. He is basically against it. Quentin is more for a robust government clinton is more for a robust government. Tax the rich more provide more benefits for the middle and lower class. What she is really talking about is investing in america infrastructure, education, all the things that had been cut over the last 10 years. That is a progrowth agenda. Hers a progrowth agenda and trump not. Lets go to the we hearon point because this not from just the corporations, but small corporations send the regulations become too burdensome and it is impairing their ability to employ people. Is Hillary Clinton going to address that in any way, shape, or form . Steve i do not know if that is on the top of her list, but i hope she will. I am a clinton supporter and have been. But i think somes approach i think trumps approach by the way, he said the increase in regulation since 1880 cost the economy 25 of the growth they couldve achieved. We have had more republican president s during that period of time the democratic president s during that period time. I think the regulatory issue is as much a bureaucracy that keeps running rather than any particular policy. Alix it seems like a hot potato in policy. How do itd be as ordinary income . Should it be as Capital Gains . When you stand . Steve it should be taxed as ordinary income. Im a beneficiary of carried interest. What i did in my private equity days is work. [laughter] i like work. I dont know why it should not have been taxed as work. It is a very small revenue number. It is a principal matter. Both Hillary Clinton and donald chuck can agree on this, they are absolutely correct. I think there are broader questions if Capital Gains and dividend should be taxed as lower rates. That is a different question. Jon the center of this debate is wealth inequality. It has been driven by assets. The rich have assets and the poor dont. If you want to narrow that, you are talking about taxing flow. Would you have to tax stock, dont you . Steve i would respectfully disagree on your fax. The increase in income inequality was driven by income, by assets. Youre talking more about wealth. If you are looking at income numbers exclude Capital Gains, you have much more inequality over a very long period time. The inflated asset problem is a separate problem. That is probably why i would not say i would be opposed taxing profits on those assets at higher rates. I dont think is america we want to go down the road of taxing wealth. That is a bridge too far. David another tricky issue with taxation is offshore retention of profits. There are two very different approaches laid out by trump and clinton. P says let cut everyone says is that a life people for trying to keep those profits on shore. Which one is the most sensible approach . Steve first of all, mr. Trumps tax plan does not work because he is proposing that as well for the socalled yourou need to do to cut , asrate from 39. 6 to 16 mr. Bloomberg to pay you as a contractor rather than an employee. He has a plan a does not work at all. The problem of the money offshore has been blown out of proportion because of the 2 trillion offshore, there is another 2 trillion sitting in for whatever reason, companies are not investing. Change orlieve economic picture by 10 point bases of growth. You go back and specifically talk about how companies can deploy that cash. Steve ratner will be staying with us. And 1 15 p. M. Eastern time, we will have full coverage on Hillary Clintons speech on bluebird television. Jon i think i need to get steve is my agent. [laughter] , we will discuss what it means for the fed and its impact on the economy longterm of growth. This is bloomberg. Jon from new york city, this is bloomberg. Im Jonathan Ferro. A fascinating spread in terms of Economic Data between payrolls and udp growth has started to widen pointing to lower productivity in the economy. Steve ratner still with us. That spread of payroll growth in gdp stocks are down here. Is that how you explain that . Steve one of the things that does not get enough attention is our most seriously its declining productivity. We had declined productivity for three quarters now. First time since the late 1970s. Productivity is the engine for the economy. Economy cannot move without productivity. Gdp growth will over time, always be equal to Labor Force Growth plus productivity growth. If you have half a percentage growth of Labor Force Growth, 1. 1 of labor growth, you get 2 growth. We are in negative territory. This is really scary and should be worried about it. Jon a damages potential output. You see that in the terminal rate going down, down, down. I would ask him how to return this around . Asyou need higher wage costs the impetus to get companies to investigate productivity up . Steve productivity is one of the most mystifying economic concepts. Certainly getting companies to invest more. , they said wehis are too many robots, but we have too few robots. We dont have enough automation. Your point is right. The circle would be higher wages. David re measuring productivity accurately in this new digital age . Steve i know there is a big debate about it and we dont have enough time to get into in a segment. There is missed measurement problems, but there has always been mismeasurement problems. You had massive cuts. The actual price of cars fell. I was not captured in the cpi. I have no reason to think it is worse than what it has been. Jon fascinating. Chairman. Isors alix coming up, we have ecodata. Initial jobless claims are minutes away and we will break those numbers down. We will discuss the future of media with turner ceo john martin. This is bloomberg. City, thisnew york is bloomberg. Ro. im john fer softer session on the 15 london. 20 listed Companies Going x dividend. That is why you see the underperforming in the london market. Here is the situation in the bond market, yield unchanged at 1. 5 . A stronger dollar with dollar yen. Breaking data comes through there it alix alex jobless claims fell 1000. It is down by 1000 from the week before. Still continues to tell the story of a stronger labor market despite the fact that we had those weaker gdp numbers. The labor market continues to hold up. Index,e import price looking at your on year down 3. 7 . That is better than estimates. Lest deflationary in that sense. Points. Y four giving up gains in the session. Jon what happens when you cut rates . Typically the currency weakens. Not in new zealand. The reserve bank in new zealand slashed rates. Johnng us for more is morgan. It the world expect in the rate cut. It came. The message, i want more am i want more. What is the lesson coming from the Southern Hemisphere today . Anunless the central bank is indication that the easing cycle could be protracted, markets 10 to trade at the end of market phenomenon. Jon governor wheeler, not enough to come into and marketed try to hide the fx market. Alix that is the issue with all Central Banks. You know the doj wants a weaker yen. They just cant seem to get there. Where is the risk and fx and the rate market when it comes the Central Banks . The risk at this stage of the cycle, since we are three years , theyasing for the doj have reached the limits. They dont think there is capacity in the bond market to upsize the programs. The risky to go from a period were investors are focused on easing to a period or they are focused on they think the next move after pause is a hike. Even if that is a year from now in japan or two years from now, the tendency would be to buy the yen in anticipation of that. Jon the carry trade, what happens to the carry trade is it breaks down . One, you get a dick schaap Interest Rates, and that shock could come from the doj if they do not ease further. If it pushes down the oil price into the 30s. There are lots of ways this could happen. I feel like the Interest Rate shock is more likely in the next three or four more three or four months. Alix 1. 5 backed up to 3 . What does that ever tantrum looks like . Jon it is about 50 basis points. [laughter] the temper tantrum was led by the fed in may 2013. What youre more likely to get or doj isfrom the ecb a reluctance a to ease further. You dont get a signal that they are ending the buying, but youre getting the indication that they are willing to ease more. When you get that rate shot, it is probably 25 to 50 basis points because you are still going to have policy rates at zero are negative for a long time. In i dont about it, but moved to 50 basis points when yields are at zero, if you look at duration, that is a brutal, brutal move. What is the contagion that comes out of that . Global bonds will selloff even if this was a european or japanese phenomenon. You the treasury yields the backup, too. In terms of the effect, it could push volatility up from my. 5 up from 9. 5 . This get to involved in highyield currency. I think it is an event for qe and something that would definitely alix didnt we kind of see this when you have the doj, nonaction even a couple of weeks ago. You did see a backup in the yield. We did not see that contagion in the treasury market. One of the reasons you have not seen much volatility on the market is because the doj is still dangling out there and saying september is a meeting where they will be assessed policy and unveil additional measures. They dig up that meeting in a way that prevents people from selling bonds and buying began actively ahead of it. They know the doj has a tendency to surprise sometimes. If the doj does not deliver, that is when you get a repeat or extension of the moves you saw in bonds and currencies a couple of weeks ago when they passed on a cut. The you think this will be the catalyst in the scenario we painted out in the last five minutes . It is a tiptoe down the path to easy money. Eventvery likely to be an to give you 25 basis points in backup. Big move wall, jon fascinating discussion. He will be back. Thanks, jonathan. Time Warners Turner invest in digital publisher this is turners second that online publishers. Back in march, it invested in mashable. Joining us is john martin. Welcome, mr. Martin. Lets start with this investment in 29. You are leading 45 million. Its going to us why youre making this investment . As you said a little bit in terms of the portfolio, the brands we run and operate on a daytoday basis, more and more, we are focusing on where consumers are going, and where consumers are spending an engagement time. So a big part of our strategy is to make, either through organic investments, or flatout acquisitions, or strategic investments, which is like refinery 29, you want to expand the reach of our ability to reach consumers where they are, and be able to monetize them. Refinery 29 represents a really Terrific Company with a great brand. Really focused primarily on millennialminded females, 27 million loyal monthly users. They come with us, working together, we believe will be able to collaborate on new content creation at content creation and invent marketing. Even to marketing. Looking towards were different genres of consumers are spending their time because our brand need to be where consumers are. That is part of a big transmit that is part of a big transformation happening in our company right now. David largely female oriented fashion blog with substantial traffic already. I understand what they may bring to you in terms of audience. What does turner bring to them that they otherwise would not have . Look in their compass returner that they would not be able to about the strategic investment . We have to unique capabilities we can bring to them to supercharge your business. First, we have scaled audiences ourselves. We have very strong Team Abilities in terms of monetizing those audiences, and we can help cross promote refinery 29 across our own branded environments. We have three of the five top Networks Among millennials with tbs, tnt and adult swim. Scale, weincremental can supercharge the ability to monetize, which will benefit both sides. David Media Company such as turner not limiting themselves to traditional content. Your investing interest is in investing in distributional technology. You have a similar investment in eyestrain. This into what yet to say. This is bob. This is a whole new world where traditional distributive have gone to the content space. Comcast is a great example of that with their purchase of nbc universal. Distribute is going into the content space and content owners are going into the distributors space. We are looking at a marketplace that is so dynamic. David as i said, you have ice stram. How does that work into your strategy . Our investment or m a strategy is in digital and when youre content. And it is in digital and linear content and our ability to monetize those audience better. More we more and immediate content providers and content creators, we believe we are going to need to take our own destiny into our own hands to make sure that our video can get to consumers in more places, and in more ways, and in better ways in terms of user experiences than what they have been used to experiencing through traditional cable, satellite, telecom providers. That is not to say that those players and a strong partners for us. They will be. We want to make sure we retain possibility and the ability to reach consumers and actually control with that experience looks like. Plan little bit about her it has been a mature business for years. If i tell you now it is going down little bit. The biggest single reason it is going down is because theyre just a Many Networks in the United States. There are a lot of households that just cant simply afford to uber video a big bundle and pay for the networks they dont care about. What we with our traditional partners and distributors we are in discussions with new partners and new potential distributors, the idea of smaller packages of bundles that will have more highly rated networks that could possibly be offered to consumers at lower price points. That offers the opportunity for some households who have dropped out of the multi channel universe to come back in because i do think people like to still watch tv and video consumption has never been higher than it is today. David that make sense for some of your consumers who want fewer channels. How does that work for your more traditional cable providers . Do they get shutout . We would love to work with them in the same way as potential new entrants. There is nothing that we would not potentially do with a new entrant as we would do on the same terms and conditions of the traditional players as well. We would like to continue to see innovation because innovation is going to spur better consumer experiences, which we think will ultimately going to drive usage and monetization. David don, thanks so much for being with us today. That is john turner. Jon breaking news. When he ran the Legg Mason Value trust now buying legg mason stake in lmn, the fund company that he now runs. Living after 35 years. Alix it has been a really rough eight years. He was betting on stocks in 2008 when the financial crisis hit. He has been shy in the media and hard to get a hold of them get his ideas. This is the next to dr. In his career. Much more on this story later on in the program. The white house isnt commentating on Donald Trumps latest accusations. Republican president ial candidate says you can give president obama to blame for the Islamic State group wreaking havoc in the middle east. Mr. Trump isis is honoring president obama. He is the founder of isis. Hes the founder of isis. Hes the founder. Trump has long blamed the president and Hillary Clinton for creating a power vacuum in iraq and was excited by Islamic State. Ukraine is warning that russia is trying to escalate primerica. Has Vladimir Putin accused ukraine to engage in terror tactics. Prosecutors from sweden will be allowed to Julian Assange about rape allegations. The interview will take place in london where Julian Assange has been held up since 2012. Wikileaks released email stolen from the Democratic National committee. Globaglobal news 24 hours a day, powered by 2400 journalists, in more than 150 news bureaus across the world. This is bloomberg. Alix it is being called the yuanniversary. Shotear, the yuan devaluation. This is bloomberg. David this is bloomberg. Im david westin in the hewlettpackard enterprise greenroom. Coming up, we will speak to joe sigh about his companys earnings. Heres your Bloomberg Business flash. Obama alibaba posted Quarterly Earnings that beat estimates. Computingom Cloud Services soared. Alibaba is positioning Cloud Computing as one of its fasting growing businesses. There is a report that valeant from the city goals is the subject of a criminal investigation by u. S. Prosecutors. It is a question of whether the drugmaker defrauded insurance by hiding its ties to a mill order pharmacy. Valeant says he are cooperating with the investigation, but not confirming details. Theyve made not be that bad for wall street traders. According to a compensation consultant. They said talks fixing sales and trading could fall 50 . That is your Bloomberg Business flash. Wmmin much andra i am chandra. Jon terminal users are waiting on the bloomberg. Out what theecking low yield environment we had a little bit of color here. Data pension fund has found a way to help boost returns and cutting out the middleman like Hedge Fund Managers like Asset Managers. There going to do it themselves and not rely on that third party. In fact, they are saying that traditional investment costs will take 66 less than using fund manager. What is aiming for the Hedge Fund Guys and Asset Managers . The Hedge Fund Guys are struggling as it is. Now what . Jon the story is the outsourcing of the hedge manager away from Pension Funds for one big reason they dont have the talent or infrastructure anymore to do it themselves. They did it so they could cut costs and outsource the Fund Management to other people. For it to become a model and really take off, they got to perform. David the performance is how much do you make and how much to you pay . There are two things involved. They price himself out of the market. Alix it show the distention of a low yield Market Making the decisions for these guys. Jon bonus cuts for traders and jill makers seeing easing slightly. This is of course according to johnson association. It called for made ill makers may not shrink as severely as expected. Maybe starting to form a bond. Printr it is tv radio, or on Bloomberg News, costs, costs, costs. It is a buzzword right now still. David why do we think that is read so much on the bloomberg . [laughter] alix to be fair, we saw revenue , and banks really killing it. The big question is will that be sustainable . Jon they night they now see the incentive pay forfeit going down. That is still brutal. David no question. , yesterdays u. S. Treasury auction was offered at the lowest yield since 2012, but how much demand was it for the debt . We will show you in battle of the charts, next. And this is bloomberg. David this is bloomberg. Im david westin and it is time for battle of the charts. , you are going to leave it off, the home team. Alix we have a very strong treasury demand yesterday for 10 year treasuries. These are foreign and Central Banks and mutual funds. Issuanceht 72 of the became a yesterday. The month before, they bought 54 . The primary dealers, the guys that are obligated to buy, had 20 that they were able to get their hands on. The reason why this is important is if Central Banks are buying up the treasuries, it does not make them liquid assets. Central bank, the fed, has control over raising Interest Rates. Foreign buyers are in there and not going to let us treasuries go. Can the fed push the yield up at any point . David or are more bond strikes coming down the road . To buy them, you have to pay them, and that is at a lower yield. Lisa i find this one of the most import charts of the year. Yearis the gap between 10 japanese bonds. The gilt cap has shrunk to the narrowest ever on record. What they showed is that Bond Investors are betting that more carney of the bank of england has more ammunition to suppress feels further, while the bank of japan is running out of gas. It shows that people believe that the british growth rate is going to stay low for a long time, even with the stimulus and more carney has recently announced. Jon this and be the same chart of the same person. [laughter] look at what it is having with the big bids. Foreign demand for treasuries have the yield backed up last week and the fact that it was the lowest yield in four years. Goes to show that foreign demand, we talked about currency hedging, that would take away the guilt advantage is still there. People are still buying. Asid i want to go with alix well because it surprised me. About the demand would go down for treasuries. Alix i could be hedge funds, too. Jon very good point. Coming up, we will have tsai and cofounder joe Terry Lundgren, both coming up. This is bloomberg. \ this is bloomberg go. Thursday if you are macys or kohls. Killer numbers from those stores. They blew away estimates. Macys finally closing those storms that stores. Maybe expectations have gotten some of the are coming back up. Jon we fastforward to the big data point in the United States went tomorrow we get u. S. Retail sales. We continue to see that rebuff in the consumer in the data. Alix and what will be there to support it. We have a big r. two big names and retail with us. Macys chairman Terry Lundgren and alibaba cofounder and executive vice chairman joe side. Of thees well, head extent coming Goldman Sachs. we are about 20 minutes 29 minutes with the opening in new york. Down by one quarter of 1 . 20 of the listings on the ex dividend today on the performance and london. Outperformance of the germanys dax. Sterling weakness. That is what you can see. Down in almost every currency. Capturing index e u. K. U. S. Payrolls. The long end of the guild yield curve rallying. Yields coming in for basis points. Another record low potentially. 1. 213. Ed we cannot kind of fastforward to another auction today. 30 years, alex. The demand of the long gain. What will it be like on the 30 year treasury . About 15 billion worth. Alix the demand is who in their doing the binding buying as well. Got to focus on valeant. A report coming up the company could be facing a criminal probe over philidor. Is it actually defrauding insurers by hiding its ties to philidor. And that defrauded insurers . That is what is under question right now. There is some potential damage of this probe at 1 billion. On the upside we have retail and naff get. Its going to give up its holdings in the barnett shale to get out of 2 billion worth of pipeline contracts. No payments for the barnett. Barnett shale is really u. S. Shield revolution started. Found itse chesapeake home and expanded into the biggest natural gas producer in the u. S. A huge transformation for this company. We were just talking about the extraordinary quarter for kohls and macys. Kohls blowing away estimates. Margins were better. That is the good point. The negative was it cut its 2017 forecast. Comp sales were lower than estimates. In terms of getting macys, earnings above estimates but its about managing their store inventory. Closing 14 of its stores and planning to shrink further it store portfolio. Looking at joint ventures and partnerships and asset sales. A big transition for macys. For how its happening in the markets, we have Abigail Doolittle at the nasdaq looking at everything tech. Abigail, lets start with you. You are checking out yahoo . Abigail getting a very nice tailwind from the big alibaba First Quarter report. Yahoo has a 15. 4 stake in alibaba. At stake in alibaba along with the stake in yahoo japan will remain a part of the remain co. Once the operating assets go to the First Quarter of next year. Turning to a stock faring less well, and warren shares. It is punting on the announcement of its secondary offering of an undisclosed buy. Investors may be hearing dilution, and they are raising cash to find a cardiovascular drug study. Investors may have questions around that. It always seems to come back to biotech for the nasdaq. Alix peggy so much. Thank you so much. Nira, you are looking at the euro stoxx 600. Nira absolutely. Stoxx 600 at a sevenweek high. It is close to recovering its brexit losses. Not quite there be getting close to it. 1 can see up almost 4 10 of intraday. And some of the best and worst performance, i want to highlight it had better than estimated profits and it improved if margin outlook to 16. 5 goal. Maybe expectations in all business units. You can see the shares of 4. 5 , one of the best performers on the stoxx 600. Takes pressure off the ceo, who is fairly new and the role. Looking at old mutual, one of the worst performers. The londonbased insurer planning to split into separate businesses. It dropped the most in more than six weeks today. Firsthalf profit missed estimates. The rest of the year will be followed challenges. Shares down 5. 4 in intraday trade. This has been tracking down the ftse 100 which snapped five days of gains, its longest stretch since the rally meeting up to the u. K. Referendum. They are looking at another big benchmark, the dax. It is headed into a bull market territory. It is holding there and we are holding its extensive 1 . If you look at the relative strength index, there is some suggestion this week the dax has been overbought. Back to the big question, has this rally got much further to go . Alix keeps going and everyone questions it. Thank you so much. One big u. S. Stock we are watching is macys. The companys secondquarter earnings topping estimates and announcing to close 14 of its stores. Lets look at the task on hand. Lets start with macys stock prices. Terry lundgren was named ceo in february 2013. There has been a steady decline that weve seen since july. The stock lost about half of its value since that peak. The main challenge for macys and for all Department Stores can be seen in this chart. People just arent buying stuff in malls. They are spending their money on Internet Sales, which is this orange line and eating out which is the white line. Not visiting Department Stores. It has been relatively flat for a long time. Relatively flat since 2007. Its not clear what would change that trend. To combat these challenges macys is closing underperforming stores. This equals 100 fullline stores out of 728 locations. You have slowing sales and profits that have attracted activist investors who are pushing macys to monetize the companys store portfolio. Hedge fund star board values it billion, which is double the market cap right now. A lot of pressure to change how they deal with their real estate. David . David we will stay with macys and bring in the companys ceo Terry Lundgren on the telephone. I use much for joining us today. We have your earnings. We want to hear it from the horses mouth. Tell us how you see the quarters earnings . Terry we are encouraged and apparently the market is as well by our announcement. I think most important is is not just a quarter. It is that every single month was better than the prior month. We are seeing continuous improvement. It is directly in response to the initiatives we took starting in january this past year to get us position for a comeback. David take us through those initiatives. Which paid off the most in this quarter . Investone of terry an additional staffing and selling and selling support and management and our stores in advance of the actual sales coming into the stores. We did that for the top 150 locations and work beautifully. We are clearly seen not just a sales improvement, but an improvement in Customer Service scores month after month. That was the first big, large bet. That is the biggest expense base of any retailer with bricks and mortar. Placing that that was significant. There were initiatives into various categories we saw working for us. We placed another bet on the denim business. Denim has been a soft category for a while. When it is hot and works, it benefits Companies Like macys with a giant assortment of that category. Backtoschool is off to a very strong start. It is because of the dinnerbased business denim business. Startingese things are to happen with her directly responsive to the initiatives weve taken. David you mentioned the Top Performing stores were focusing on. Closing 100ill be stores. How did you come up with that number . How long will it take to get those off your books . Terry we have about 730 macys stores. This would bring his back to 630 buildings, 575 fullline stores because some are furniture stores. A map ofid was we took the United States and basically looked at populations. We looked at growth. We looked at the Shopping Mall density. Recognized that are 7. 3 feet per human being in United States. Other countries have 1. 3 to 1. 7. The reality is the United States is over stored. We are getting in front of what we know is a trend that is in a current. That is customers are balancing their spending with online as well as in stores. Your commentary earlier failed to mention we are the Third Largest Internet Company in america. We will benefit from this move towards more online sales. Be itcategory we sell, apparel or assessors or Home Furniture he accessories or Home Furniture, we are the Third Largest retailer and the thirdlargest seller of online products. This is a strength of hours. We believe benefiting the customers that shop online and in stores is the answer for our company as well as the way customers. In the future. David talk about the internet component. You are having troubles. How did you do this quarter . How much steady growth of Internet Sales . How can you compete with an amazon with hundreds of thousands of products from all over . Ry we have the same systems for processing fulfillment. Were the only two im aware of in terms of having that Highspeed Technology and are filled with centers. We can compete favorably. Sameday delivery, next they delivery, those are available in our stores as they are with amazon. There is really no difference. We have been recognized as being the on the channel leader in our space. More important is our advantage of having stores. That is the way customers shop. 90 , including amazon numbers, 90 of the goods sold in our categories were sold in a brickandmortar environment 2015. That may go to 89 , but is not immediately going to 40 or 50 . That is the reality many do not understand. While our businesses online are going quickly, it is the large majority still sold in bricks and mortar. David fair enough. At the same time amazon is going to dramatically. Macys is basically having slowing down of losses. Do you think you can figure up the pace of growth . Terry no question about it. Our Online Business is growing at a rapid pace and has been growing for several years that we given at this. The challenge is not the Online Business. It is in the store business. That is why we are taking this initiative to recognize by closing 100 stores we can take the capital, the inventory, the people that count in the stores and put those into the remaining 570 54 macys stores and 38 bloomingdales and 100 lead mercury stores and reinvest capital there that will increase our capital and returns for the future. David talk about your real estate. A lot of people are giving you advice. Where are you in that process and what is the timeline for when you will know what to do if anything with your real estate . Terry we have been positive about this this is never been a friction point. Forad a broken transaction 270 million done before any other investors started talking about our real Estate Strategy. This has never been an issue we have been concerned about. We are doing it in a way that does not increase leverage of our company. That may take a little bit longer but we are aggressively pursuing the real Estate Strategy and have some exciting things that will be announced a minute they are live deals. We have got a lot of things in motion right now. You will definitely see things before the end of the year and you will clearly recognize this subject is an opportunity for us to monetize our real estate and reinvest and have reinvestment opportunities in our business. David thank you so much are being here today. Terry lundgren, macys ceo and chairman. Up about 15 percentage points. Clintons Campaign Launched an initiative to recruit endorsements from top republican. It is called together for america. 50 republicans have announced their support on the first day, including george w. Bushs former director of national intelligence. More than 30 people hurt in an explosion in an Apartment Building just outside washington, d. C. Firefighters in Silver Spring, maryland had to rescue people from the upper floors. Some residents through their children for the windows. Several people are missing. Rescue teams are now searching for the rubble. Forces in libya say theyre closer retaking Islamic State strongholds. Troops have taken over a huge Convention Hall that was used by the militants. It would deprive the Islamic State of its only base outside syria and iraq. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Is emmett chandra, this jon despite chinas slowing economy, alibaba holds up. The cofounder anything vicechairman joins us next. And the Corporate Credit boom. Our investors getting compensated for the risk . Goal to Goldman Sachs Asset Management will join us. 14 minutes away from the cache open in new york. Futures positive from across the board. This is bloomberg. Alix alibaba shares popping in the market after investing heavily in the cloud and media. We know that this inference is go to emily chang it was speaking with the cofounder anything that vicechairman. Emily joe, thank you so much for joining us. It is great to have you today on bloomberg. I want to start with a broad question on the Overall Health of the chinese economy. Alibaba has remains resilient even at the economy slows. How do you explain that . Emily, we are more than resilient. We set the fastest growth rate ever in terms of revenue since our ipo. We generated 4. 8 billion of revenue, 59 year on year growth. If you look at our Commerce Business where we are facing consumers, we generated 2. 5 billion of operating income. That in itself is 30 year on year growth. From our perspective, the Chinese Consumer is very healthy. I can understand peoples concerns about the chinese economy, but the way we look at it is we dont focus on the quarter to quarter cyclicality of the economy. What we look at is the longterm trend. In the long run, chinas economy is shifting from manufacturingdriven economy to a consumptiongerman economy when it comes to gdp growth. That place to the strength of alibaba. That is what we are all about. In the long run you look at the chinese household, there is 4. 6 trillion u. S. Dollars of net cash savings on the Balance Sheet of chinese households. This is because over the last few years they have had real wage increases. They dont have a lot of mortgage debt on the books. This is all going to provide the foundation for very, very strong growth of consumption. Emily it is the oneyear anniversary of the devaluation of the yuan and it has continued to drop. How do you see that evolving and affecting alibaba and other Chinese Companies . if you look at the yuan in the longerterm context, look back to her three years, what we have seen is that the euro and the japanese yen has depreciated even more against the u. S. Dollar. This is a phenomenon that is happening all over the world. We are looking at the chinese yuan and it looks like it has stabilized over the last few months. We are very encouraged by that and we are very encouraged by the underlying consumption activity that will propel gdp growth. Emily the sec investigation has an focused on the alibabas financial structure. What has been the developments of the investigation . A few months ago the the fec sent us a letter. They said this is not an enforcement action. This is something we are asking alibaba to voluntarily provide information about a few issues. The way we reacted was we fully cooperated with the sec. We said we were going to provide all the relevant information and we did that. Here is the thing. A lot of Companies Get letters from the sec. Well we have decided to do is voluntarily disclose it to the market, not only in the fact we have this conversation with the sec, but also the specific issues that are involved. We have made very clear disclosures. Weve been very transparent on this issue. Regular kindin a of exchange with our regulator. Beyond that i dont have anything to update. Emily you have consolidated the finances, which did lead to a big profit drop. 76 . When d. C. That situation changing . When do you see that situation changing . Joe i have to the claimant 76 . Iod last yearer we had an extraordinary gain related to an investment company. It was a noncash item. It made the year on your computers and basically irrelevant. What is going on is if you look 2. 5r port operations, billion of operating income and our core Commerce Business. That operating income is growing at 38 percent year on year. If you look at the eps, it is growing at 33 . Eps that is very robust growth. We did consolidate the yoku. Ions of lozada and we take a long view and despite consolidating these losses we are generating 61 operating margin and are core Commerce Business. It gives us the luxury and the resources to invest very aggressively into new businesses like Digital Entertainment and our new Innovation Initiative such as internet cars and things like that. We feel very comfortable with our margins. We feel we have a lot of resources, a lot of cash flow to invest in new growth. Emily speaking of yahoo , its going to a sale of its core business. Has yahoo discussed with alibaba but it plans to do with the shares it hold . what they need to do is figure out what to do with the alibaba shares. But weuld do nothing, are going to be fairly reactive when it comes to that. We are going to leave it to the yahoo board to decide what they want to do the alibaba shares. The important thing for your viewers to know is that if yahoo sold alibabas stake, they would incur a huge tax liability. That doesnt solve the problem, even if we are invited to acquire the shares of what they call the remaining co remainco. We would not be able to cancel the shares legally m f inheriting that big tax liability. It will be a very difficult question for us. It alibabaut has more than 24 billion in deals in the last year. Massive deals in technology. Microsoft, linkedin. How open is alibaba two really big deals . Have 61 operating margin in your core business you have to think about how to smartly use that extra cash flow, that margin to investor future growth. When it comes to our m a strategy we will be very disciplined. We have set ourselves several important criteria, including growth in our user base, improving our customer experience, and also expanding in our categories. If you look at the large acquisitions and investments we have made over the last year, they all fall very consistently into those principles. Because he yoku wanted to get into Digital Entertainment. We partnered with an invested with the Largest Electronics retailer in china because we want to execute with them. And on the channel strategy to on the Electronics Retail stage in china. These are examples of the acquisitions we have done. We are open to large deals. We are opened a small deals. The important thing is they stay consistent with our m a principles. Emily he made a big investment in a covenant called quickfeed to be paid over to funding rounds. According to reports, alibaba stopped paying. Therectually happened and how to other Companies Know you will not do this to them . We have fully paid our investment into it. The fact is by far we are the largest capital provider to quickseed to the tune of 100 million and we paid on time. We fully paid up. I think what you have seen was a a contract forg there is some technology that they were supposed to develop for us. The fact of the matter is for the china market its a very different market. And for the kind of like they were trying to develop, it was very difficult to gain traction. There was any kind of dispute. We have very good relationships with them. We are supporting the entrepreneurs running the business. Thats the approach we take in the u. S. We want to back entrepreneurs. Always greatia, to have you here. But hes much for joining us. That was emily chang with alibaba cofounder and executive vice chairman joe tsai. A little bit of optimism in the market. Jon what a difference a year makes. Positive numbers out of alibaba. Im not sure many people are positive on china. We compare that with 2015, august 11. Then things are looking good. David they have gotten better about communicating what they are up to and where there are headed. That was a big problem in august. There was also the stock exchange. Bank described it as fear. Then attended this is now the new norm in the markets and we can adapt. Jon then we play the game in january and february all over again. When is the turn . Here we are. Futures positive. 59 points. Could be having a pop up around 1 10 of 1 . In london you are under performance driven by a few listings. The outperformance is in germany. We switch to new york for the opening bell. Switch up the board very quickly. 1. 5 is the yield on the u. S. 10year. The dollar is softening up. A stronger yen. You see the pound weaker. Back below 130. Wti up. A 42 handle 25 seconds into the session. Alix i have is a prize. No record high on the nasdaq, dell or s p. That is the headline at 9 30 the morning. We had great data coming up for the s p. Only 4 of it is actually a new 52week highs despite the fact we have seen eight record closures over the last four weeks. Not a lot of volume in the market. Individual names we are seeing a lot of action, kicking it off with shake shack. Down 6 . Samestore sales coming in at 4. 5 , below estimates. About half of what they saw in the First Quarter. We are seeing what higher wages mean for companies. They raise their starting wage of 12. They say labor wages jumped 37 in the quarter. The other company were watching is chesapeake. They are offloading their barnett Shale Holdings to a private equitybacked group to get out of 2 billion worth of pipeline contracts. Getting no payment for barnett. Barnett shale is where shale started. Chesapeake front and center, one of the pioneers of the shale revolution now leaving that behind in order to shore up the Balance Sheet, get the cash flow, help to pay down debt. They have almost 9 billion in debt. Up with retail, killer numbers with coal kohls and macys. Nordstrom reporting after the bell jcp reporting before the bell. Macys be on the top and bottom line. We are about two minutes into the session, of about 131 of the s p 500. Creeping back towards another record high. Maybe even in this session. In the credit market its all about issue. Boom inve corporate bonds. On the rise of the last few years. The next guest sees the higher leverage in sliding corporate margins. Swell joins us now. Great to have you with us. Yesterday, rbf goes to market. 2. 65 billion. What is that tell you about the demand out there for this . Guy. Sorry to be the bond on people are usually estimates. To borrow a phrase from a couple of great singers, feeling a little bubble lucius. I wouldnt quite call it a bubble. If you think about your question, you have a bank in the loss absorbing securities of massive size and tons of demand for it at a time of the u. K. Has exited the european union. The prospects of recession are extremely high. What does that tell you . Look at the currency. The markets are telling you there is a great concern to be a recession in the next year or so in the u. K. And within the gilt market. The same time those are happening people want more and more yield. We feel this rush in demand for yield is something that will last and will work until it doesnt work anymore. Likely sell prefinancial crisis, it usually does not end very well. The shapeto begin, and frame this conversation, i need to find the credit bubble . What does that look like . The credit, the fixed income is little different. Mike 13 returns and highyield. That tells you one thing. You look at leverage. There has been a significant increase in leverage in corporate debt. As a result that gives us a significant amount of concern. You look at flows. Enormous amount of flows coming in. If defense went in the Economic Cycle that is happening. It is happening early, its very possible that those flows can lead to more and more Corporate Investment as a result of the ability to borrow at low cost. And taking advantage of a long cycle economy. Think about where we are right now. We are in the late stages of the recovery in the u. S. That gives us concern. Look at corporate margins. Corporate margins, other than todayannouncement have continued to impress. The margins that are still positive are the ones being generated by more leverage, by stock repurchase. Those are all signs a give us a concern. The last sign is increasing news, weather it is more leverage, fraud, accounting issues. Those are signs there is a lot going on on the corporate side of pushing dust companies are pushing harder and harder to generate margins when they are not naturally there. Alix you have 20 of issuance of the whole year since brexit. You have leverage piling on and return of covenant life as well. When the credit bubble turns, who was holding the losses . Mike it is a game of Musical Chairs to a certain degree. Whoever is caught at the end of the investment. I think in the end you have institutions like ourselves that will be dynamically managed. Making that are searching for yields and saying i can borrow at 0 rates or rates in my market in asia are negative and i will throw all my money at the corporate market, in the end those of the investors that get stuck. That is something of concern. It is not today or tomorrow but if we think about where we are in the risks out there in terms of slower growth, this merging compression is a concern. We as Bond Investors think the fed will potentially raise rates in december. That increase in rates because we are seeing wage pressure in the u. S. Economy. Well we talk to companies in our sector that we follow, we are seeing pressure in terms of hiring people. That is good for the consumer in the job market is healthy, but in terms of corporations thats an issue. Thats usually the indicator of recession. While we dont believe is the base case for 2017, the risks are higher. When you investing credit, you want to get compensated. Jon i want to get the credit versus sovereign debt. You have made a time of money buying securities. Its been a hot potato. You buy them in hold it to maturity. Then you have a capital return. The question i asked him credit, is sovereign debt going to drive credit . At the moment is the market going to come often anyway . We had 10 auctions yesterday. Demand was real strong all over again. Is that going to go away anytime soon . The sovereign drive credit in that regard . Mike in traditional cycles you dont have a situation where sovereign markets drive credit. In general if you look at credit performance over time, in general raise rise for a reason rates rise for a reason. Credit usually performs well and an increasing rate environment. I think this time is different. Things are different this time because of the impact that centralbank policy has had on markets. And endly to poorly. This is unprecedented global centralbank accommodation. If you look at the bank of japan they set it may be counterproductive to have negative rates in our economy. In the event they moved to or away from monetary policy, negative rates, more incentive for people to take those very low cost of financing and go on by creditrelated assets and they take that away, rates will rise in that market. So much of the demand for risk assets, whether it equities are credit or sovereign bonds is driven by negative yields across the globe. We think it getting towards the end of that cycle. We think this time the sovereign markets cant have a pretty big negative impact on the credit markets in a way they did in 2013 for a shortlived period of time. David everything you said last few minutes estimate that the market is this pricing risk. They are not properly rewarding risk. What is the market imperfection . What is a not functioning properly . I asked that because of my indicate what would turn around if we change that. Mike it is not a liquidity issue. Functionsome degree a of what Central Banks want people to do. They are incentivizing people to take their funds, remove them for their domestic markets to drive down currency valuations. Secondly is they are trying to do that to continue to drive rates slower to stimulate borrowing. The problem is when people have no confidence in the economy, that borrowing is not a curry and you dont have a positive effect on growth and a negative impact on savers and financial institutions. Alix taking all this into account, what is your best call for the year . Mike i would say a couple of things. First off not all risk markets are bad. Its a matter of relative value. The Corporate Credit markets are inflated by this demand. There are a lot of assets not a part of that. One thing in terms of the structure the market, people want yields. They are going to forward government bonds and the are going to corporates. There are a lot of assets that are a little bit more esoteric that are not benefiting. I would say tips are one of those securities. Have break evens in the proving k about and improving economy, it should benefit tips as well. You will see wages increase. These securities have done the opposite. As credit markets rally, these have done nothing or gone down. Why is that . They dont give the yield today. There is such a demand for yield today. Nobody is willing to make an investment for something that might give them yield tomorrow. Jon you will have to come back. Of Goldman Sachs Global Portfolio management. Not much fixed income around. David please come back. Coming up, we look at another set of data they could move the markets tomorrow. What to watch it tomorrows retail sales numbers. This is bloomberg. Onid coming up later bloomberg west, frank this ignore now visignano. Alix we have a rally underway with u. S. Equities. We are trading right around another record high. It closed right now, 2182. Intraday level is 2187. Nasdaq is at a record in terms of a closing high. The dax continuing to climb higher. There is concern that the dax is an oversold territory after injury coupled market earlier in the week. Dig a little deeper on the rally in the nasdaq. Abigail doolittle is joining us. Starting with bio pharma. It closed right now, i would be another record high. Abigail this is the fifth straight session of the nasdaq opening higher. If you can hold onto these gains, it will make a new record high. A new closing high i should say. We have a microcap company. The smallcap Biotech Company is expanding the enrollment in a midstate study for its tumor drug after promising clinical activity in mutant solid tumors. Promising and the stock is having his best day on record. Turning to a more established name, yahoo shares are up nicely. The highest level since june 25. A tailwind for the big alibaba First Quarter report. Yahoo has a 15. 4 in alibaba. That stake in alibaba and yahoo japan remain in the remainingco remainco. Investors like the strength and that remaining stake for alibaba. Jon about 16 minutes and an up about 131 across the board. Those two stocks just moving in tandem. Tomorrow its going to be about retail sales. It has been a next back of u. S. Economic data lately. A strong payroll to report. Even the gdp, you have weak spending that consumption is good. This is ahead of the retail sales numbers. For what to expect is Bloomberg Intelligence chief c al. The strength of the consumer, you see it everywhere. And the earnings and the data. We will see it again tomorrow . We will better see it in the second half over youre in deep trouble. With the economy growing just 1 over the last three quarters. We are at a dangerously slow speed. The only game in town in q2 was really Consumer Spending. Growth they q2 composition verrilli provides the template of what we should expect over the next couple of quarters. That means we need to see strong Consumer Spending in the back half of the year. One of the first clues of that is going to come in tomorrows july retail sales data. David we have talking about macys and kohls. If you look yearoveryear, this is still down. The total revenues and the net income and things like that. What about the online part . How much of that is driving the entire ship . Carl just as the composition of gdp is important, Consumer Spending is shifting. Department stores have had some real tough sledding over the last several months. Really over the last several years. They are changing the habits of consumers. You will see a lot of strength in online shopping, which. We can parse out of the retail sales data alix where is going to be the weakness . Tomorrowre is a report are you have to dig beneath the surface. We saw the second strongest monthly change over the last six years. Strip out auto sales. Then you had a big declining gasoline prices last month. More than what normally occurs in july. Strip out gas station sales as well. When you look at x gas sales, you get a better sense of underlying consumers. We have seen this phenomenon in the past couple of years where q2 was great for consumers and steadily deteriorating over the back half of the year. That cant happen this time around for the fed is missing their target of 2 growth. Gas, that is the median estimate down from 0. 7 . 5 in q2. Veraged alix thank you, carl. Coming up, did his Bloomberg Markets. Vonnie, what you have on the show today . We were talking about the rally of the Central Banks. Vonnie we will continue with that. Even stronger than the yen today. We are talking to the global head of currency strategy at ubs wells management. We will be talking about this rally in treasuries on stocks. It is a healthy rally . Then mandela Jpmorgan Investment management will be talking to us as well. And hillarys speech at 1 00 p. M. Eastern. We will be seeing whether fiscal produce will be something that will be a team of her speech. We both look at some fun resorts in cuba before all this ends. Alix vacation, what is that . Thank you very much, vonnie quinn. David we are all looking forward to Hillary Clintons speech. A preview coming up next. We will talk about what she says. Details next. This is bloomberg. David this is bloomberg go. Iser in a factory as that it right Hillary Clinton will lay out plans for the economy. Taking direct aim at what arrival donald trump proposed this very week. Heard from what weve this will not be a radically different from what she is talked about before. What are you going to be looking for in the speech . Will talk about a lot of policies she has already talked about. What is interesting in location and the concept of the speech is the direct rebuttal the donald trump. She is in michigan. Donald trump gave his in detroit. She is getting hers not too far away from flint, michigan. Expectl talk about we will be dangerous to the average americans. She will frame donald trump in three ways. The first is she will remind her democratic supporters his ideas are republican ideas and they dont like those. He will also talk about something her in her allies have been doing a lot, cap Donald Trumps policies are unrealistic and dangerous. Talkingthird one is about his policies as selfserving. They will benefit the wealthy. How trump will benefit from his policies. How the estate tax would help his family. Things like that. We will take those three lines. David how much of this speech is going to be about what Hillary Clinton wants to do and how much about what she wants donald trump not to do . Steve you have to see a mix of both. She cant claim hes not providing specifics without herself. She will go into detail about a lot of the things we have discussed. Wants toon campaign make this election about donald trump. The more she talks about him as a dangerous, unrealistic president the more she can keep that ball in his court. The more she winced news cycles by keeping news about donald trump. David how much of this is theater in substance . I happen to be from fort. Flint. I dont think donald trump is an saying we should regulate lead in water. How much of this is just the other . Steve a lot of it is theater. Poll campaign is been a lot of theater and Hillary Clinton is trying to play on that. I think a lot of that its nothing new. It cant all the theater and i think the Clinton Campaign knows that. You will see them try to make sure the inject just enough policy in order for folks not to be able to sit on tv and say that was not all political theater. David thank you so much are being with us. Bloomberg markets will be covering Hillary Clintons speech live at 1 00 p. M. Eastern time. Alix at 1 00 p. M. , the u. S. Treasury will be auctioning 15 billion and 30 year bonds. After the bell we would get more regional earnings. Nordstrom reporting secondquarter results. Expectations are high after macys and kohls. Jon in the bond market in the long enough treasury yields a little bit higher and of that supply guilty of that healed. Ield. Er guilty y they could get ugly from Goldman Sachs. That does it for bloomberg go. Next, it is Bloomberg Markets. From new york city, this is bloomberg. . C sv it is 10 00 a. M. In new york and 10 00 p. M. In hong kong. I am vonnie quinn. Nejra i am nejra cehic. This is Bloomberg Markets on bloomberg television. Vonnie we are going to take you from washington to london and cover stories that of france and china. Here is what we are watching. Oil trading lower after the iaea addicts Global Markets will continue to rebound this year and pickup in demand from refiners as they absorb record output. Howlooko we lookout commodity is going on global assets. Nejra strategies and paying off and investors are warding the shares. The Commerce Business streaming entertainment and growth in the crowd and streaming revenue at alibaba. Clinton lays out her economic plan for americas future. She will have a plan to grow the labor market by highlighting content