The nook. Crook. Ok with a let me just mention mcdonalds. Potentially third consecutive month. Four states go to the polls today. Vote onork, we get to the Party Nominees for governor. President obama is meeting with congressional leaders on how to deal with islamic state. Lets look at the clarity of the data check. The turn to the equity markets is all about currency this morning. We will address this through all of bloomberg surveillance this morning. On to the next screen. The fix. Vix. A little bit of angst on monday. Sterling continues to get crushed. Gold is doing a turn. Lets get some dollar perspective. This is the plaza in new york. Strong dollar. In this has been the persistent decade trend. Were at a critical junction. These are standard deviations. We dont discuss those in september. No one is talking about the currency war, but we are not ready to proclaim this an era of strong dollar. Everyone is saying we are almost at a critical junction finally. In other words, the long end to the era of dollar weakness. That may be. To ourly, we will listen guests and experts on conversation and foreign exchange. Too many choices today. Here is our front page. Too many choices, but we needed to start with apple. As they is on a roll prepare to roll on new products. Bigger screen iphone, wearable device, mobile Payment System. Is contrast to 12 months ago stark. Shares are up. Samsung is struggling, losing some momentum. M, within your fangirldo would you suggest that we know more about these products today . There isis so huge now no way they can keep under wraps the products that they used to be able to. Insighthave a lot more into what is going to come out today. That does not change the excitement about this mobile wallet and what it means for apple leveraging itunes accounts. Historic cash generation. Staggering. 150 billion. And they returned some of it, too. Since the last iphone debacle , they have generated 109 billion. Billion with a b. Soon we will be talking t. Exactly. A year ago, we would have talked about two new sizes. Whatever. Now we are talking iwallet. That is revolutionary. It is something that changes the system. This moves apple into a new era. Out thatalso point this will require a by and from retailers. You have to put the pointofpurchase device that allows your new iwallet to work. We will be checking in with cory johnson who will join us live from cupertino. We will speak about the financials of apple. Our second frontpage story. General mills is buying organic food maker annies. Premium. Ut a 37 have you ever eaten annies products . Yes, the rabbit macaroni and cheese. Can we have kraft velti that velveeta . [laughter] , my motheras a kid would slice up hot dogs and put them in the kraft macaroni and cheese. If you are good, you would get the plane stuff. Purplewould sneak the annies box. These days, everybody asks for annies. We know the General Mills and the other Food Companies have been looking toward natural product makers to boost growth. To get in on the healthy trend as well. Last frontpage story. This is the biggest ipo of a bank. Goldman sachs went public back in 1999. A u. S. Unit of royal bank of is looking to spin off. It is a vanilla bank out of providence, rhode island. A lot of heritage within new england. Model. Bankerly they are not doing credit default swaps. Oldschool banking. Old school. Citizen spinning off from the royal bank of scotland and scotland spinning off from the u. K. A curious observation. I will go with that. One of the reasons they are thening it off is to make money for helping bailout the u. K. Government. Stillis the only one that is under the u. K. Government. Shock in awe. Strategists of all stripes try to rationalize the use of cash within the bull market. It is a bull market that will not correct. We consider Mario Draghis strong dollar policy. What thek about resurgent dollar means for our american investors. Is this a good thing . It is a very mixed blessing. One thing i want to point out is a strongeroning for dollar has become very consensus. We are a record net longs on the dollar. The record net shorts on the dollar since july of 2012. Everyone was positioned for mario draghi to pronounce more accommodation. We think the dollar will be in an uptrend. You are too young to remember the rubin strong dollar. There it was. Strong dollar policy. This is nothing to do with 1995, is it . A very complicated situation. If the dollar is too strong, the new manufacturing renaissance is not going to be achievable. , we look likeeek a relatively grower Slower Growth period. Isnt that more function of the relationship between the yen and the dollar then the yen and the euro . That is a good point. We are also looking at the trade weighted dollar. Everybody is focusing on the euro, but the yen snuck up. Movementctually had against the dollar against all of the developed market currencies in the future of the dollar against emergingmarket currencies, so it is a little bit less certain. Do you think there is a dangerous level of groupthink here . It is worth thinking about our investment consensus positioning. I say that because coming into 2014 everyone was expecting rates to rise, everyone was positioned toward a weaker fixed income market. The crowding into that market has been unanticipated. The month of enthusiasm for the dollar has been raising flags. Amount of enthusiasm for the dollar has been raising flags. Now, our company news. I think it is applefree. Fully. Hackers did infiltrate the home depot computer systems. They knowledge to the breach yesterday. Systems were compromised, but there is no evidence that the cards were accessed. Debit cards were accessed. Ipl. Choo nears an ipo. Bank of america has been hired to manage the sale. Tivo is set to unveil the ultimate dvr. It can record more than five months of highdefinition shows. Later thisrolled out year. The price tag is 5,000. You have to find the time to watch this. I could think of 5000 other ways to spend my money. That is incredible. There it is. Tivo stealing some of apples thunder. Apples launch. The event is going to be this afternoon. The rumored mobile wallet that may revolutionize the Payment System. It might. Do you trust apple with your wallet . Tweet us. Tune in live to our special coverage on bloomberg west. That will be at 1 00 p. M. It matters. Good morning, everyone. Bloomberg surveillance. An important interview this afternoon. Peter cook sits down with the secretary of treasury and the secretary of transportation. No doubt about it. Tax in version will be front and center. Im tom keene. With me, scarlet fu and adam johnson. Shares are already moving in the premarket for apple. The company is unveiling a new iphone today and included in that unveil will be the mobile wallet Payment System allowing users to buy goods at brickandmortar stores with a click of their phones. Shannon cross has analyzed the transaction economics and she joins us now by phone. What is the significance of that youyments given write that apple views it to be less of a direct revenue opportunity . Mind, they have not announced anything yet. When we think about it, apple tends to look at services as a way to sell hardware devices. One they first launched the itunes store, they ran it to breakeven. Walked before they run, effectively. When you think about what a mobile wallet could do, it will make the iphone much more user friendly and usable. It becomes your wallet eventually. It becomes a device that people need to have. It is basically going to be multiauthentication. Your thumbprint and possibly even a code. From a retailer standpoint, it lessens the chance of fraud, which is a positive for the credit card company. Talk about the contribution of mobile payments to apples bottom line. That is the thing. Initially, we dont think there is going to be a significant contribution as a service. But it will drive significant sales of iphones because you will have the touch on their and we assume it will also come to ipads. It becomes much easier for people to buy things online, as well as in the store. It keeps people from walking away from the cash register, which is a positive from retailers and will drive retailers to address adopt the technology. Square is private and is reported to have a 34 gross margin. It also is unprofitable. Why would a company with a 34 gross margin in a business that seems like you collect cost, why would that be unprofitable . They have to expand the install base. The marketing and research and development and all of the things being involved in being a Company Small growth are sucking the profits. There is profitability within the business. You will get there for apple. The interesting thing is that apple is so big. This could be an indication of a place where they can run with no profit for quite a while, where others cannot do it. It becomes aand Significant Competitive advantage. I like the scale idea. Cash generation since the last soiree at 700 per share. It is roughly 100 9 billion of doom and gloom cash flow that they have brought in. Do you extrapolate apple out to our First Trillion Dollar Company . Five years out . Six years out . From a cash flow generation sure, could they do it. Could the double again, it is possible. Tell me where the market is going to be overall. Apple is still only trading for a 150 price target. 115 price target. If you continue to generate cash and you give the multiple expansion, i suppose the valuation could get there. It depends on market conditions, as well. That appleis the gun has pointed at the cell phone carriers heads . We continue to hear more and more about the carriers moving away from subsidization and then it turns around. An iphone user tends to generate more data usage, a higher monthly payment, and the carriers want them. They tend to be higher income as apple has spread to the mass market, that has lessened, but it continues to be a very Attractive Customer for the smartphone carriers to have or the Telecom Carriers to have. Apple continues to have a lot of power within the relationship. So much as been discussed. Where might you be surprised . There has been so much out there. I think that depending on timing , we dont expect the iwatch until next spring. Apple wants to spread out its provost product releases. Has gotten clumped around septemberoctober at this point. We think the watch is coming up in the spring which will help things balance out again. If it comes earlier, there will be an upside. Beyond that, i think if they came out with some sort of mobile payment strategy that drove profitability, that could be a surprise. I think people understand what we all think is their strategy around it. Shannon cross from cross futures. Thank you so much. I think we need to pose our twitter question of the day. You trust apple with your wallet . There have been some in a different data breaches. Tweet us. Does it help or hurt apples efforts . Weing up in the next hour, will be speaking about apple and alibaba. This is bloomberg surveillance. We are on Bloomberg Television, on your tablet, your smart, and bloomberg. Com. Good morning, everyone. Bloomberg surveillance. Im tom keene from our World Headquarters in new york. Scarlet fu, adam johnson. Cory johnson is in cupertino, california. Right now, our top headlines. Warnings from the world health organization. On the Treatment Facilities are now overwhelmed. Seen more than 1000 deaths already. The dutch Team Investigating the saidsia Airlines Flight that multiple highenergy objects from outside the aircraft caused the crash. The disaster over Eastern Ukraine killed all 298 people on board. Ayor and cello which marin cilic makes up for lost nishikori inng kei the u. S. Open final. What kind of shirt is that . Where are the tennis whites . It is fine. It was an unbelievable match. Those are the top headlines. You were in the third row . I was in the 18 throw. It was awesome to be up there. Joining us as well, surveillance tennis expert, kate more. My entire Strategy Team at jpmorgan has been obsessed with the game. Associates of my are obsessed. I was significantly higher than the 18 throw. I had a beautiful view of the sky. [laughter] what blew my mind last night was every time nishikori did something right, huge applause. Did something right, nobody cared. They were so in favor of nishikori. Only at the turned very end of the first match for nishikori. It was a slow progression. That is my tennis conversation for the year. [laughter] kate moore is our tennis expert for the hour. Good morning, everyone. Cooks big day. This is bloomberg surveillance. Im tom keene with scarlet fu and adam johnson. A quick data check. Sterling front and center. Catches a bounce this morning after an incredibly challenging week. Gold, the outs. Ounce. The politicians speak, so do the markets. The sterling tanks as Great Britain considers a lesser United Kingdom. City, and the financial district, what are the ramifications of the significantly weaker pound . We are seeing some of that play out in the markets, arent we, tom . Good to see you. We lost 6 on the pound against the dollar since the july highs. That is something about how seriously the markets are taking this now. They were not taking it seriously when the polls were suggesting that the no to Independence Campaign were going to win. Now the polls are too close to call. It makes people very nervous. In terms of some of the stocks being moved by this, the banking anything anyone feels has significant exposure over the border. Gordon brown and alastair darling usually dont speak to the Prime Minister until september 18. How closely are they attached as they take on the pros colin forces . Proscotland forces . Increasingly, it would seem. We talked to the former prime who is trying to salvage the no campaign, no to independence. We are talking about the possibility of a 307yearold the union between scotland and england and the rest of the u. K. Breaking down. Planhave launched a new for scotland, a new deal for scotland. They are talking about giving further powers to scotland. They have their own parliament in scotland. They are talking about giving them further powers. Give powers of taxation raising to them. Of all these other issues, which is the most significant . Thet the oil rights in north sea . Military . Judicial . Tax collection . Which of these logistical issues are the ones that people are most talking about . All of the Financial Issues dominated the early part of this campaign. We heard a lot about the pound. The yes to independence camp says they want scotland to carry on using the pound after independence. The main parties of westminster say, no, you will not. There will be no deal over the currency. Union,not have fiscal Monetary Union if you do not have fiscal union. Alex hammond says that the westminster politicians are bluffing. He says they will change their tune and will be falling over themselves and get the scots to stay inside the pound currency union. Say they do not think scotland will be able to keep the pound if they vote for independence. Thank you very much, anna. We want to bring in our guest host for the error, kate moore. Does this change the way mark eventuallyues his tightening Monetary Policy . That is a really good question. One of the things we have seen in 2014 is a massive differentiation across the fellow markets in Monetary Policy. Something struck me about that earlier segment which was the statement, we cannot have a disconnect between monetary and fiscal policy. You cannot have separate fiscal and Monetary Policy in this scenario. I dont think thats true. Think about the eurozone. We are waiting for greater fiscal unity. We are waiting for greater institutionalization. We have one Monetary Policy and different fiscal institutions that are operating on different time lines, with different degrees of conviction. With different degrees of turmoil, have you changed your view on sterling or sterlingdollar . That is a separate part of jpmorgan. Our expectation is that we will be watching the news flow over the next week or so and the movein sterling has been a bit surprising for many of us, as rapid as it has been over the last trading days. These are brutal moves. Absolutely. They can be swift. I want to bring in my morning mustread. The surprised interestrate cuts from the ecb last week. The force of the measures get lost in translation. There is a lot of uncertainty here with the ecb and what exactly it did. Clive crook makes the argument that it does not have the instrument to effect the change it needed. I think that is a fair assessment. Ofdont know the magnitude this asset purchase program. We wont get that until october 2. There was a lot of question about given the size of the market in europe right now, if the size of the purchase market is not large and cannot move the entire market, is it going to be the same as we have seen by the fed, by the bank of japan, by the bank of england . It does not feel like the same shock and all kind of treatment. Line here is cacophony. Still e, should i sell because of pound sterling . Absolutely not. We continue to think that they will outperform in this environment and like equities over bonds. When were looking at incremental money and putting it to work, these kinds of policy decisions will and affect where our next investments will come. We feel good about where we stand, but given some of the uncertainty be a about the grocery jet to ray, our trajectory, our income is going to go to the u. S. Rather than European Equity fund more likely. Are you talking about oldschool cyclicals or new economy cyclicals like amazon and ebay . That is a great question. Our favorite sectors are tech, financials. We are constructive on health care for separate reasons. We have begun incrementally more positive on energy, as well. We are not necessarily looking at steel companies. Wait a minute. She just mentioned 14 sectors . I mentioned for sect