Transcripts For BLOOMBERG Whatd You Miss 20170721

Resigned, posting on twitter it has been an honor to serve the president and the country. He will remain at that position until next month. The u. S. Government is banning citizens from traveling to north. Orea this is after all a warm beer died. Otto warmbier he fell into a coma in a north korean prison. And washington and five other powers world powers sided with tehran after a pact of seven nations. Moroccan demonstrators, frustrated over inequality and corruption clashed with police at an unauthorized protest today. Police surrounded the city center and fired tear gas. Scattered into sidestreets. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im Alisa Parenti. This is bloomberg. Julia live from bloomberg world in new york, im julia chatterley. Joe and i aim joe weisenthal. Scarlet fu is off today. Were counting down to the close of trading. Julia financials under pressure. Industrials, too. Joe but the question is whatd you miss . Spicer is out and Anthony Scaramucci is in after a shakeup at the white house. I love this country. I love the president. It is an honor to be here. Julia the nations greatest lenders are raking and 30 billion, raking i and 30 billion, just shy of 2006 levels. And investors may have a new away fromstay pakistan. We explain. Joe Abigail Doolittle is standing by. Things, joe. We are looking at small declines heading into the close. ,e have the dow, the s p 500 and the nasdaq all lower on the day. The nasdaq headed toward weekly gains. The dow is headed toward a weekly decline. Noting this is the first day in for we do not have a record high for any of the major averages. At oppenheimer, one analyst is encouraged by the number of synchronized runs. He is a Technical Analyst and he has been very, very right in my view at least over the last to give years, having a bullish view on nearterm pullbacks, but this chart may suggest there could be more of a. Ause happy 30year season, but you have the 30your season, but you see the s p 500 has had a tendency to pop higher in the first up and then drop. This year we certainly have the pop. Permissive says the strong he believes there could be a pairing of gains of the s p 500 in the second half of july. It as far as what is moving on the s p 500 today, ladders and leaders, looking at one of the laggards, ge down after the cfo said company profits, outlook for profits is likely to hit the lower end of the range. We also have colgatepalmolive trading higher, and that finally microsoft, interestingly they put up a debtor than expected fiscal firstquarter. A betterthanexpected fiscal first quarter. And then finally, not a very clear risk on risk off picture, but it probably looks a little more risk off on the day, perhaps on the week. We had the 10year yield down to get basis points for the second week in a row. That tells us haven bonds are rallying. Trading slightly higher. And the fix is slightly lower. The vix is slightly lower. Julia thank you very much, abigail. Whatd you miss . Anthony scaramucci has been named White House Communications director. This comes after sean spicer resigned as press secretary. He will leave his post in august. For more, lets talk to our washington reporter. Great to have you on the show. Looking at that press performance, the contrast with sean spicer was pretty acute. He looked calm, confident, smooth is probably the word i would use. How is this announcement and his performance in the press briefing being discussed in washington . You are exactly right. I think he used the right word. Performance. It was differently seen as a performance. Anthony scaramucci was performing not just for the press, but for the president himself who is known to watch these briefings. A couple occasions, he looked directly at the camera and spoke to the president. He apologized for negative things you said about the president. He said he loved the president. He praised him effusively talking about his skills as a politician and communicator, even his athletic prowess. It was clear he was performing not just for the press, but for the president and he was going to try to turn the page from the bungles that sean spicer had run into at that very podium, making a number of gaffes. It appears that if me scaramucci has much stronger control of language and of the ability to get a message across, and it remains to be seen how he is in the press it shop. Have been very as reports and outlets that scaramuccis a sentient into the white house was opposed by some in the white house, perhaps reince priebus, the chief of staff. What about this appointment is so controversial internally . To mr. When we listen scaramucci at the press conference, he basically said he is working directly for the president , in terms of having a hierarchy. He is putting himself on the outside of the oval office. He is saying he is not working for any of those politicians who have struggled for power over the last few months in the Trump Administration. That is one of the reasons we are hearing sean spicer chose to resign because he would not have that top position within the communications operation. Instead it would be Anthony Scaramucci reporting directly to the president. I think the fact that theyre up in so many power struggles within this white house, ringing i and a new face, someone closer to the president who has the ear of the president and the support of the president is a controversial move and will shake up the balance of power within the white house. That is what you have seen resistance from other top officials as this power dynamic shifted. Julia scaramucci did make the point several times in the press briefing he is not taking over yet. He will spend a few weeks getting used to everybody and getting up to speed with all of the issues. He was asked about health care, taxes. Just on that, what he is to say about the Health Care Debate and the possibility of a vote next week i think theramucci president will get a win and Health Care Just because ive seen him in operation the last 20plus years. The world turns back to him. He is generally a wonderful human being. I think as members of congress it to know him better and get comfortable with him, he will leave them to the right things for the american people. I think i will get health care done. Julia perhaps this is more about his relationship with donald trump than the prospects for health care next week. Talk about that. We have the potential for a vote or debate on health care next week. We have the deadline today, of course, for a decision from and paulump jr. Manafort whether they will accepted the request to testify next week, never mind of your policy. What will next week look like . Toluse there is a ton going on in washington that scaramucci basically try to avoid getting into the specifics during his press conference. On health care, it is not clear whether the senate will push through, get enough votes to support a bill next week. There is a bill that is supposed to go forward on tuesday. Its not clear what the senators will be voting on. That is something that is still up in the air. We could see something next week, the president s son, donald trump jr. Testifying before the senate. That caused a lot of consternation within the white house, the fact that the son of the president has been swept up in the sprawling investigations about russia. That is something that very well could bleed over into next week. That could become a dominant news cycle position. We will have to see whether that happens, whether or not donald testifies or whether it has to be compelled by subpoena. That is also on the table. Our White House Reporter in washington. Market equities have had a tremendous twice 17. We will be to Jeff Macintyre from Brandywine Global investors on what is driving this push. From new york, this is number this is bloomberg. Julia whatd you miss . It has been a great year for em equities. The benchmark index has been up 20 this year. Field . Re risks in the for what is driving the allocation to em and the bond disconnect, and which countries are most attractive to investors we have the Portfolio Manager for Brandywine Global Investors Management great to have you on the show. Great to be here. Julia before we answered todays question is, lets take a step back. This is a sweet spot for markets, but youre suggesting your allocation from credit to emerging markets, i guess, on valuation . We are. When you talk about the sweet spot, for the first time in a long time, we have what i call sort of cord needed Global Growth. When you look at different regions you have growth, north america, asia, em. Its not super strong growth. Developed centralbank that is what i mean by the sweet spot. We were talking about Central Banks. They were starting to get worried about the valuation. Storyline is not as concerning to you . It is more risk. Feel better listening to yellens congressional testimony the other day that they get this. They will get back on that sort of asset inflation. Its going to reinforce disinflationary pressures and this is the idea you want to get away from that. If you look at the currencies in emerging markets, too, track it over a fiveyear things will look undervalued. Chest but to me, that is a key part of this. Youve got to look back. To me, that is a key part of this. Youve got to look back. If you look at 2010, yes, the s p 500 at a huge rally. If you get out, you would have missed the multiyear rally. This is not a oneyour development. This is a multiyear process. You brought is this really interesting chart that compares emerging markets currencies that is the teal line heard that fell a lot through 2016. Improved, but not huge. There has been significant tightening in the swaps. Much less concern about credit risk than there was a few years ago. As you point out, there is a disconnect where currencies do not seem to reflect the improving reception countrys of the value. Yes, and that is important. The countries relative to be bond, to the cds, offer compelling value. Joe is the best way to play it in rock currency or foreigncurrency debt . What is the best way to play at . The best way to the best way to play it is in a diversified approach in local currency bonds. Em currencies to rally. Just as a quick note, there are positive things happening in em, but negative things happening with the u. S. Dollar. Julia yeah, im going to come back to that. Joe, youre getting excited. Why the disconnect. Perception, why are they not looking at that . To me, in some ways, it is driven by market sentiment. We know that there are structural problems. But over time, this is going to converge. They will drive this off the sidelines. There are equity markets. Look at this chart. This is the turkish market as well. The caseerformance in of the blue line. Yet these guys have inverted yield curves. What is that telling you . I am a big bond investor. We like to see that. This is coming from stagflation. Low growth and inflation, the small the smart Central Banks would break the inflation premium. What volker did in the late 1970s and late 1980s. Then you can focus on positive growth. Julia so that is yielding. And the longer curve driven by inflation should continue to do what it ought to do. The short rates should come down. Do you like specifically in the em world . We like mexico. Bigger one of our politicians because of the trump effect. Its still very positive. They are still looking at cutting rates in the nottoodistant future. Has a ways to go. In brazil, there is political risk. When you look away from the the deficitssk, are shrinking. We need to have a conversation about shining. Julia do it. Wed have a conversation about china. Julia do it. In our view of commodities julia very quickly, i want to tie this back to the dollar. And i loosely what the central bank is doing, the ecb seems to be more of a driver than global bond deals. Ast factor in those surely weaker dollar here is more important, too . You go back to 2015, 2016, it put pressure on em. Debt in u. S. Ues dollars. The strong dollar puts pressure on commodity prices. We have seen a reversal of that. I think the more constructive view is constructive growth away from the u. S. And thats , thats net positive, capital leaving the u. S. In search of yield. But i think the administration does not want a strong dollar. He has brought the dollar down. Julia that is excuse for the dysfunction that we see. [laughter] u. S. Moving on thank you very much for joining us. My pleasure. Julia now is time for the bloombergs newsflash. Scripps network is said to be in acquisition talks. Discovery and file, are looking to buy the company. The deal could be announced as soon as this month. Jetblue is looking for partners to help at new yorks Jfk International airport. Says the location has the potential to have great value and they are targeted for opening in the mid2020s. The Parent Company lvmh is trying to capitalize on the china rebounds in following from the corruption crackdown. It has also been revamping its digital strategy. That is your Bloomberg Business flash. Take a deepup, we dive into the bloomberg. If you have a bloomberg terminal, youve got to watch tv. This is from earlier. You can see the breaking News Headlines on the right. Its interactive. You get the news and the individuals at the same time. Charts, emails, you can message us directly. Just go to tv on your terminal. From new york this is bloomberg. Julia im julia chatterley. Whatd you miss . Amill tell you what, i practicing on the conversation we just had on emerging markets currencies. Why . You can question whether the rally we have seen will continue, but what i am showing you hear in the white line is premiumear real yield between the emerging markets and g10. As you can see what i am showing you, the white line increasing. That is the premium for emerging markets continues to increase and we have seen the highest level for emerging markets currencies since 2015 look at the blue line. You can see for all of the pickup we have apparently seen since that low, as you can see there, in the blue from 2016, oh, boy, based on the real yield differential, they could have a lot further to go. Combine them with the cvs spreads indicating narrowing volatility for these countries julia someone is lagging. Joe you can look for an opportunity there. And i saw some today about how stocks are doing so much better than gold these days. Heres a really big picture of the s p 500 versus gold. Its basically a measure of how many ounces of gold you need to buy the s p 500. Back back during the bubble it was five ounces. Crisis level post for stocks. When people like stocks, that means that they like human ingenuity. When people like gold, they are bearish on rocks. Julia humans are cheap. Joe humans are cheap. Julia we are headed toward the market close. This is bloomberg. U. S. Stocks sinking today, all movements being lowered, Energy Shares leading declines in the s p. I am jewish heavily. Joe i am joe weisenthal. Scarlet fu is off. We want to welcome you to the closing bell coverage every day from 4 00 to 5 00 p. M. Eastern. Julia we begin with market minutes. Getting into negative territory. A lot of individual movement, i want to start with the energy 0. 9 , which is lower by and obviously we had oil under some pressure today. We have that meeting over the weekend of the opec members. They said the opec supply will be the highest this year for the month of july, so raising concerns. The global glut persisting longer than anticipated. You have drilling names seeing a significant net pressure. 5 lower in trading today. Look look at the Financial Sector as well, and is a real positive move. Red,verall sector in the the story of earnings overall, capital one beating expectations. The company squeezing through the stress test and conditional approval for the shareholders. Backinly investors off the , they like that. Financialve synchrony and E Trade Financial also gaining in the session. Some stocks that we want to pick up as well in terms of what we are seeing with reaction, General Electric clearly disappointing. This is the last quarter before they bow out the new president the old president. Ultimately weighing on the performance. What can the next ceo due to address . We have lots of investors on the sideline, the stock down 3 today. Microsoft announcing movement. 0. 6 . Ere down 6. 7 there some questions about the expense line. A look at thee u. S. Government bond market to end the week with the 10 year yield, yields down a little bit across the board, 2. 24 on the u. S. Tenure. 10 year. Lets look at this chart to get perspective. We are close to 2. 4, now in the middle. We have the fed meeting next week, no one expecting a height. The odds are below 50 in market pricing, so we have seen the decline in yield. We will see what next week brings us. Julia we have been talking about dollar weakness with the fed, and the weakness we saw in the trading session filtering into today as well. Somewhere in the currency, headlines coming out. The dollar weakness story, positive euro story continues. That began again after mario draghi did not talk about currency strength. They were making the argument this was about positioning and some shorts being pulled back rather than adding. The jury is out for that one also seeing sterling higher. If you want to point out emerging markets, we have seen broader weakness across emerging markets which fits with the broader risk appetite. And some of the opponents, the out performers from earlier on thehe week, this one is worst performing. The polish lawmakers have concerns out of brussels out of the political theater and the polish parliament set to defy International Allies and protests. That would affect more sway over the judiciary. They have gone from being the best emerging market currency to being the secondbest. Ch has thecrown cze crown. Joe lets take it the commodity market. Oil tumbling, concerns with rising opec supply down to. 6 , gold getting a little bit with the treasury bid, up 6. 6 . Toton is selling off, thanks some selling out of chinese reserves and iron or is down 2. 3, one of the commodities sensitive to china and other em activity. Those are the market minutes julia . The s p 500 climbed to a new high on the back of strong fundamentals into the Second Quarter earnings. Joining us now for equity week is the strategist peter chung. Great to have you on. We can make this statement that fundamentals are apparently driving the rally. If you think about the lost the liquidity driven, policy driven, underlying that, fundamentals were strong. We are at alltime highs with earnings. There is some strength supporting these prices. And we are reassuring with the charts and the estimates, so the tracking we are seeing in line with the rally in the s p 500. Earningsrst quarter came in much stronger than expected. Second quarter, expectations were not as high, forecasts 8 growth. Already earnings are trying to get closer to 10 . Joe another extraordinary thing is i am seeing these earnings recently with oracle, and the some of theseks, are starting to break alltime high. Numbers we cannot imagine they would see again. We are starting to see it. Here is a fun chart looking at s p 500 tech and the nasdaq 100, very tech heavy. We are getting back to old double. Peter the s p 500 is at new highs, a large for that driving that, the technology. The companies have outperformed and driven the market. Joe one day we will get to the point peter even if you bought at the top, you might have done ok. Peter one thing i would point out with technology, a lot of upside has been driven, but you are seeing shrinking overall. If we look at energy it is stillarnings, growing in excess of 20 . Joe one of the stories people talk about is the banks are appealing because of their monopolies, no one can compete with with facebook or amazon, etc. , but when you are pointing out is that wins extent to companies that do not enjoy the network logins. One for have not been the monopoly argument. Every sector has its behemoths. But there is growth that exists outside of the top industries. Julia i am also reading about what we have seen in terms of the records the s p 500 Technology Stocks are reaching versus when the nasdaq reached them. There are significant differences in terms of runoff. This is critically important, the debate we have. Peter technology is not the same as the bubble. The valuation as applied to the Technology Sector is half of what you saw in terms of the bubble. So it is not the same overvalued textbased. Julia in the 12 months leading stocks000, 93 of the were rallying in the runup to the 12 month lead up. Have i got this wrong . Peter sorry. Julia smallcap . Peter they did great following the election, but it has reserves reversed. They have doubled the performance of the s p 500 with every sector in the smallcap index outperforming largecap counterparts. Joe we have this chart on julius terminals showing the julias terminal. There was a lot of confusion with the smallcap space on the premise the international companies, they are , exposed to global trade that might get shrunk under Trump Administration and domestic orientation was the way to go. But the small caps have done so well. What does that say about markets and Global Growth and trade policy . Peter they are looking past it. Is reasserting itself taking on risk appetite. You have seen across the valley. I was trying to throw it at you and you are trying to defend it off. His current 33 . I was very excited about that fact. I have destroyed numbers at you. Isomberg intelligence feeling my chaos. [speaking simultaneously] julia i dont have any idea what you are talking about. I apologize. Next week is a busy one in washington after a whirlwind of news at the White House White house. From new york, this is bloomberg. Lets get first what is this afternoon. Sarah Huckabee Sanders will. Ucceed the press secretary he resigned, posting it has been an honor to serve the president and treat. He will remain until next month. His resignation came after President Trump hired a financier as Communications Director. Rex tillerson methis resignatior president the oman foreign minister at the state department today. Arabia, egyptudi and other scott cut ties with qatar. Their airspace to qatari flights. Tillerson is causing desk calling for them to easily and blockade as a sign of good faith. Strippedbias king has the authority for the security. They have been treated to a new body overseen by king solomon. The move, after the appointed the new prince. Evidence to determine the fate of a child. Engaged in abeen with a child that cannot breathe without treatment. They say this treatment would cause suffering and would not help. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I have Abigail Doolittle, this is bloomberg. The next week expecting to be busy next in washington. Several hearings. First Jared Kushner was right to testify monday. On wednesday, donald trump jr. And Paul Manafort have been invited to testify before the Senate Judiciary committee. Will they accept that request . Joining us now is the chief washington correspondent. You are back. Lets talk about today. What a day. [speaking simultaneously] this is the norm. Has been a busy two years. The chairman, very familiar with wall street, not just washington. Him. Are not familiar with it will be interesting to see how he meshes with them but also sanders getting that progression. She is very well respected. Joe it is extraordinary for scaramucci because it seemed like he would get a job, they did not happen, then it seemed like he was going to be an ambassador, then the job is the not seem like they cared about him, now he is about to have a serious injures herbal job. Inner circle job. Original so to speak, the original staffers, the more controversial ones, who did not have political experience. I will tell you in terms of washington political coal salt and economy consultant economy, the ones that represent is this, they are competing for what contract to get. But sean spicer is respected, someone who will be a player in the Washington Circle even when. E is outside the white house he has a direct line to the speaker and take overdoes not until the end of august. He will have fun times. And the Robert Mueller investigation has been a hot topic, suggesting donald trump is finding ways to get out. We reported this week the investigation has been expanded. When do we lead back into next week. They are not sure if they will testify . They are increasing pressure from the Senate Investigation to follow suit from the Intelligence Committee investigation into the business dealings, particularly democrats. I spoke to the top democrat on the finance committee and others. Wyden, aenator ron democrat from oregon. [laughter] lets listen to what he had to tell about this. The president is off base say bob mueller cannot get into the financial issues. They are very much linked to the work we set out to do, going back as far as 2008. The president s sons said their portfolio was linked to russian money. We dont have the tax returns are know anything about borrowing money, so bob mueller appropriately thinking based on the news reports about these issues. Julia lets talk about policy. I was tax, the budget. Likelytax, Health Care Getting in on tuesday. Does not have the vote. Regardless of that, lawmakers want to move on to a tax policy. They want to do deregulatory financial policy, and they have to advance out of the house of becausetatives a budget it has the term of reconciliation which everyone in wall street has been hearing about. That sets the rules for them to address tax reform. That is why this minibus is so important. Joe the house has not been doing so well. Kevin they had to do for health care, now again for tax reform as a result. The pieces of deregulatory policy. Paul ryan yesterday was saying we are much more together on taxes and health care this is what im wondering. Where are the revenues going to come from . I know this is controversial. Kevin on revenue neutrality, the border adjustment, there are just of deep of political divisions that exist in the Republican Party as in health care. Julia say that again. Kevin i dont want to. Julia one more time. [speaking simultaneously] the last time for the big new yorkbased made so much money, the financial world was going to the break of collapse. Brink of collapse. What this might mean. Julia the biggest lenders ing 30 billion from a few the surgeon profits comes from despite regulation with banks hurting the markets. Joining us is the bloomberg banks reporter. It was a classic, this is proof the legislation process has not return of the ability to make money. 30 million of the top 10 lenders. The difference obviously, i think it would be obvious for our viewers, is the 2007 profits were fueled i trading. The 2017, largely fueled by lending. Joe the pie chart showing the 2007 versus now, that is the key difference. How much has trading dropped total for these banks over the last decade . Numbers forat the 2009, the high in trading, to 2016 for the top nine banks, down 42 , so it was down more, it is started coming back. That is a pretty hefty drop. Isia the jpmorgan ceo always talking about this. He says frequently 2 trillion more would have been made in the last five years if regulation had been looser. Eyes on the next five years. What does that mean in terms of Bank Earnings if this is what we are looking at . Rofits jumped the same thing is profitability for these banks. Dakin that is true. We are talking about profit, 30 billion. The big change has been profitability, return on assets, equity. The reason both of those are down while return on assets is larger, is because they are having to hold more simple securities like treasuries they can sell in a crisis quickly. That was a big change in 2010. R. O. E. Is down because they had the hell were capital. They have had to hold more capital. Chafed againste those numeral that have cut into their profitability metrics. We quote a lobbyist in this story saying the lowered profitability is keeping Bank Investors away from investing in the bank, keeping others away from the bank. It is worth noting some of these stocks are at record. I am not sure how that stacks up. Joe it could have been higher. When it comes to deregulation, where to banks, where do they see the most promising avenues for some sort of rollback . Is it on regulation . Where are the most hopeful . Dakin things that the regulators can do now. A lot of bankers are not putting hope into legislative changes. Congress, the government in gridlock, they dont have a lot of expectations that will change , but the treasury report, the Treasury Department put out a report last month and did a nice job of separating what can be done by legislative changes and what can be done and regulatory changes. The bankers have focused on what could be done by the regulators, no change, no change in the long right now today. Julia the Bank Share Prices barely moved. Is that because it was too big or it is already in the pricing with the optimism over what kind of rationalization, refining of the rules we can see rather than legislative changes . I think the expectation was the Trump Administration would bring deregulation and the progrowth policies would help the banks. When the details came out, there was not a time that changed a time that changed that ton that changed that. To theif we look forward legislative front and not say anything, we get some kind of suggestion on the all call that the banks can adjust or get around it without being changed to facilitate Trading Operations and how they operate. What are we expecting on that front . Lows in the recommendation did not go as far on repealing the rule were rolling it back as some people have thought. This is steven mnuchin, former , heman sachs guy, gary cohn also had a hand in this. There was a thought because these wall street folks were working on the recommendations, they were going to tear apart the rule. They did not actually do it. There are tweaks, changes, but is not a fullscale repeal. Julia it will be interesting to see what comes from that. He, Bloomberg Markets is speaking to the Credit Suisse banker. Lets get to first word news. Anthony scaramucci is now the Communications Director. He was the financer for the campaign and has been thought of for several jobs. The reporters at a press conference were told of the appointment. This is an opportunity for me to serve the country. I love the president. It is an honor to be answer. Is the third person offered the job of Communications Director since trump was admitted president. Resigned after the announcement and will stay on the job until august. Seeking to travel to north korea need a special validation passport after a ban takes effect. This comes after auto warm beer otto warbier died. He was released from prison where he died. This is according to Court Filings obtained by the associated press. Son metrumps oldest with a man in june 2016 after being told the person could provide incriminating information about trumps democratic rival hillary clinton. Ofsident erdogan is accused scaring off german investment. Ofs is after the arrest human rights activists that included a german national. Thisdent erdogan denies and said German Companies operating in turkey could show up on a blacklist and branded as terrorist supporters. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Recap of theget a market action. We saw u. S. Stocks ending in the red, relatively unchanged, the dog the dow falling for the second straight day. The s p 500, the Third Straight weekly gain, but a bit of a mixed bag in politics. That played into the dollar. The europeanso market session today, there was a broader risk option filtering from the european markets. We saw energy, the oil markets going down. This in july is the highest supply level, playing into the u. S. Sentiment. Transport was lower. In terms of performance a mixed bag in terms of performance. Joe the u. S. Is still hanging in, but europe coming off a little bit since peaking in midjune. Julia the strength, those exporter stocks investors are worried about. People are worried about were hoping for more. The fomc statement will say that policymakers are ready to begin central banking she. The market does not expect a reduction in the Balance Sheet to go very far or as much to the supply of bonds. The david hader is president here. Thank you for joining us. Lets get this out of the way, next weeks said decision, not a lot of anticipation. What if anything are you hoping to learn and will you be watching for . We have no new dos, no projections, we will not get a hike, so the nuance will be what they are going to say about their Balance Sheet reduction. We know they want to do it. Maybe we will get a hint to the timing, whether earlier like september or later like december. That is about it, which is not exciting. Joe speaking of the Balance Sheet, something you have noticed writing for bloomberg, the markets dont seem to care much about the underlined. As much as we talked about it, for as important as qe1 is, the reversal has not made much wave. What do you attribute that to . We have the offsetting or balancing of slower Economic Data on the inflation front. In the bond market you my she anxious about the additional supply because whatever the fed does not live, the market will absorb. It will be relatively small. In the meantime we have the higher frequency data of inflation and retail sales, so i think the bond is focused on the data, which could mean when the fed starts reducing the Balance Sheet, it might stop. That is where the market is. About the other thing is the supply of bonds, even if they try to retrace or retract, because as you mentioned, if we issuance, you expect it to be the shorter end of the curve. And they have made clear they want to focus on treasuries and less on the mortgage steps mortgagebacked securities. The are trying to realign Balance Sheet and be more treasury focused, that marks up the supply. Trillion. Julia we seemed to have lost him, a real shame. We will try to get him back and , but i wanted to get him to talk about how is to actually reduce the Balance Sheet. It may have gone from 800 billion to 4. 5 trillion, but he alluded is to actually to an interesting report. En bernanke produced oh, he is there. So i was trying to steal your thunder. We will talk about the retraction of the shift from mbs securities to treasuries. Have got a few things going on, the Balance Sheet will be larger than it was. If you go with the growth of the economy and the need for money, the feds ability to use it, there is an argument it will be 4 trillion in the next 10 years, which means they will not be that much reduction, and the fed wants it all in treasuries. When they reduce the amount of mortgagebacked securities, they could buy some treasuries. That is not immediate, but two or three years, they are not getting the mortgagebacked securities, it could be the treasury side. You have that dynamic going. There is a lot of uncertainty with the pace and what it will mean. Hypothetical. What is the optimal side . I was teasing the quote you picked out from ben bernanke, that we appear to be growing into the size of the Balance Sheet, that the u. S. Economy is , reducing the need for rapid shrinkage over the next few years. Talk to me about what ben bernanke meant by the currency demand and the reserves out there now. David the currency in circulation has been growing radically since the financial crisis. It would take the Balance Sheet to the optimal level of, i would trillion alone. And the economy grows and there is more currency out there, current demand for currency. The sheet can go further. When he was talking about the economy growing into the balance trillion was using 4 to 4. 5 trillion, that is not far off. I can see it going up that high. Over the next 10 years, it is andible we get a recession, so the fed could increase. There are a lot of moving parts, but it is at the very least, we can say i dont think there is anyone, any prognosticator that thinks it will be lifted over 2 trillion. That is the conservative side, using that as the face. We have a lot of room to go. Joe you were the number one ranked Government Bond strategist for 10 years. Since you are here, where are the bonds going to go . Up and then down, but not necessarily in that order. [speaking simultaneously] david at this time, i am thinking a range. I think weve seen the range. For the short term, the technicals are good, the seasonality will announce into the fall is bullish for the bond market, but uncertainty in washington, the slowing down of inflation, i think the treasury market im using 10year yield, two to two on the and we will50, balance out of that range. It is easy to say Interest Rates will go up because the fed is hiking, but i dont see that happening about 3 without arting risk assets and have corrective effect. I am bullish on the treasury market. Julia great to get your wisdom. The chief strategist. And the changing face of pakistan, the economy, a once hot market losing steam. From new york, this is bloomberg. Joe pakistani stocks have been on an incredible run, making it to the worlds best performers since the financial crisis. But the karachi 100 index has stumbled thanks to disappointing inflows and a political scandal. I talked to our reporter who has been following this. Here arempanies over doing fairly well, and they are driving the markets. Why the stock well, you seeng the market has been up, i think the market is best performing in the world since then. Increasingibility of , the economy has been in the past 45 years, the Security Companies have gotten fairly better since the army has started operations up north. , thatof the television has been moved. It has been destroyed. Better. Ity has gotten the economy is at a decade by now. Incredible runhe in equities we saw of late as the stoxx are still up. We have seen the markets stumble. There are stories going on. What have we seen in the last few weeks . Different things have happened, the market has lost what it was doing in the last couple of months. You have some big events that are affecting the market. Summer pakistan went from frontier market to an emerging 1rket, but that happened june , and it turned out to be a negative impact. Washat happened basically they opened a larger pool of investors, but the investors never came. So before the event, they , 500ed greater numbers million coming in. Not investors are stuck with the stocks. Beenhe Prime Minister has driving cold right now. Case has happened at the supreme a lot ofr here, and developments have happened recently in the past few months. That has taken a negative look. Decision sounds like a classic sell the news thing, everyone gets excited, does not materialized. Tell us about fox gave. This is a gate. What is going on . Happened, it was found children had offshore companies and made some investments. So the Supreme Court had ordered an investigation, and they made steam for the investigation. One after the other they called the children and asked them for the money trade. A lot of those documents, his daughter, given this document over. She gave the document over. The document was they contacted the people in 2007, but it was dated before that. So that gives the notion that the document is forged. AndSupreme Court is price written in a font that was only rolled out in 2007, raising some Big Questions about the documents validity. What should investors be watching now on the legal front as the ramifications from this Panama Papers scandals continues to roil the Political Class . All the sites have been heard by the Supreme Court. It will be announced at a later date the decision. The markets have been taking this, they dont know what will happen. Verdict is ounced, some person will it could be that the Prime Minister has to step down but the government continue. Or it can be anything. Uncertainty make go away. Until then, it will be volatility again in the market. Wow. joe fascinating story in pakistan. That was my conversation with the reporter who covers the pakistani market in companies. Take for thet will european football to get a leg up in the united states. Is bloomberg. Julia lets turn to the of sports and the future of soccer where the popularity still trails other sports like football and baseball. Scarlet fu sat down with the president of fc barcelona and started by asking if the team is still growing in its home market. Is not separated at all. Julia in spain and europe. In spain we are growing because we always find new sponsorships, new contracts. It is something we are pushing hard to our league because of , it is one of the best competitions in the world. Incomes,creasing the but of course coming to the u. S. , which is a market where sport, not only soccer and football, all the sports are in. Soccer has a small profession right now, and we will increase. Barcelona, is that could be a new and interesting sport or the american people. America,e that live in soccer is becoming every time more fantastic. Scarlet barcelona is not the only team that picked up on that. Picked up on that and city has a partnership with the new york yankees. Web r if that is the the best way to do it. What is the likelihood of their solana barcelona looking for a partnership . We want to come to the u. S. We have a partnership in new york. We have some schools, now we are opening our own Football School on the island. We have one in phoenix. We are going to have soon, and we are working for this, professional womens soccer team in california. We are hoping in the next couple months to announce this. So coming to the u. S. To show the people the benefit of the sport, to children. Scarlet you are doing it on your own. You need to team up . We have our brand, barcelona is one of the best sports brands. The magazine a few weeks ago said we were for the secondlargest football brand in the world after manchester united, so we are working on it. And so being a club, a very admired club, as global as we are, right now. Scarlet i know barcelona is touring, but are there specific purpose opportunities in asia or china . Around 40 sponsors globally. We are working in china to have a sponsor because you have to know we have also an office in hong kong we put in a few years ago, running very well because it was a brand, very strong. A lot of brands of the Companies Like to team up with us. We are doing our job also there, and we have an original sponsor program. A sponsor in japan or china the same level of about a different brand. For us the importance is the big and Global Brands like banking. We did one with nike, one of the biggest with nike and they soccer club in the world. We are proud of it. Scarlet as we wrap up our conversation, professional and u. S. Sports leagues are facing challenges. Baseball needs to get more exciting, less slow, attract younger audiences. Softball song ratings decline in Television Last year. What is your read on this . Does it give you pause to try to extend the brand . We know baseball, american football, football are the biggest in the u. S. , but soccer is not really in the house of people, that is what we are doing. Julia the president of fc barcelona speaking to scarlet fu. Joe what you need to know to gear up for next week. This is bloomberg. Julia alphabet, facebook next week. Joe and the fed decision on wednesday and q2 gdp data friday. Julia and donald trump jr. And Paul Manafort going to testify on wednesday. Joe the suspense, we will see your that is all for what you missed. Julia this is bloomberg. Alisa i am Alisa Parenti in washington and you are watching bloomberg technology. Sarah Huckabee Sanders will succeed sean spicer next month as White House Press secretary. Posting ongned today twitter it had been an honor to serve the president and country. His resignation came shortly after President Trump hired Anthony Scaramucci as Communications Director. President trump is shaking up his legal staff. John dowd will be the lead attorney on the team dealing with special prosecutor Robert Muellers russia investigation. He is denying reports the president wants to highlight potential conflict of interest on the special counsels team. Deputy foreign minister is accusing the u. S. Of not living up to its side of the nuclear agreement. The u. S. Announced new sanctions this week and warned tehran would face consequences for breaching the spirit of the deal. It is official. The u. S. Government is banning muslims from americans from traveling to north korea after Otto Warmbier died. He was in a