Transcripts For BLOOMBERG In The Loop With Betty Liu 20140221

Between the government and the opposition. You are looking at video of that fight right now. We have a reporter on the ground in key of, joining us right now on the phone. What is the mood there . Todays mood is a mixture of relaxed compared to before. A little bit. There was no victims were injured people since this morning. A couple of fights during the night, according to some of the protesters who were wearing protective gear and were armed stakes and selfmade weaponry. For the moment, it is called here. People are gathering on the streets. There are several thousand people in the center of kiev. What is the sense as we head into the weekend here . Two people on the streets feel like there is an opportunity for things to get done . Or do you get a sense that the tension is melting . Its a mixture. Calmension its like but the feelings are like the storm is coming. There was a moment of great excitement in the street when people decided that the president would resign. They took his offer of early of himns as a sign resigning. There was a bit of confusion. They shot a couple of fireworks in the air but then they realized that it has not happened. Do people trust that . That the election would be real and that they would have an opportunity to change leaders . They want leadership to be changed immediately. They want him out of there immediately. Because of the bloodshed that happened, they are not afraid to wait for several months. They do not trust the government. President ll trust the they dont trust the president. They dont trust the president. You talk to people there on the ground this started out as a controversy between, should the ukraine be aligned with beena or the eu . Has it much more than that at this point . Not really. From what i heard today from manle, there are i met a n ukraine in theukrain east. He said, no, i dont need europe. Ive underant to lea anybodys control. Im here just to protect my country and to defend the normal way of living without corruption and excess. Those are the lines you will hear from everybody. Europe. About us versus its against the regime. Like there is a lot of concern mounting there. We will continue talking about it throughout the day. Thank you very much. We will bring in the professor of International Relations at harvard. Ambassadored as u. S. To nato and greece. Let me ask you, what is the significance of the ukraine potentially becoming more aligned with russia as opposed to the eu . How does that change the political balance in europe and how does it change it for us questio . Ukraine is a pivotal country in europe. It was one of the largest former soviet republics. It really lies in the heart of part between the Russian Federation and the European Union and nato. The ukrainian opposition in the streets and the opposition leaders want to see ukraine it will have a continued relation with russia. There are religious, ethnic, language and economic ties. A lot of ukrainians want to have association with the European Union. They want trade and investment. They want the rule of law. They want to develop a market economy. Thats what the battle is over. Technically, the larger battle is that the ukraine is badly divided between those who support and alignment with russia and those who want to have ukraine go westward. That is the concern. If its so divided, is the country at risk of civil war . A risk. Nk there is there are certainly civil conflict and there is a risk of a civil war. This announcement this morning of a truce brokered by the president and the European Union and russia overnight, perhaps that can give some hope of a couple of days reis by from this d th the violence this sort of violence. The president has broken most of the agreement is entered. Most of the agreements he has entered. Word was that there was a truce. I thursday, that has been broken. The death toll had escalated 75 towin estimated an estimated 75 people. You can understand why lock people on the ground there would be has been to believe that there really was an effort to work toward something. Right. s many of these demonstrators have been on the streets of the ukraine in the Central Square for many months now. Since november when this crisis broke out. There is deep distrust among those ukrainians about the role of russia and putin because russia has been encouraging the chretien government to crack down and use force. Russia has used financial leverage. The supposed interest for that has been canceled as of last night. The russians are playing a very difficult game. Their plane for keeps. The largest dimension of this is it is a struggle between russia and the west for where ukraine will i. We have had some struggles over the last year. You get a sense of all that this is reminiscent of another time in our history the cold war gekko . Putin is a soviet man. A zerosum take mentality to global politics. If russia loses and someone else wins, russia loses. A lot of ukrainians are saying, we will be happy to have a continued relationship with russia but let us have a relationship with europe. To prevent that because he believes that russia needs to create a greater spirit influence with itself for itself. He wants ukraine to be tightly linked to russia and not have trade investment with europe. Its a great battle for the future of this country. You are seeing it play out this morning in the streets. One would hope that this agreement could hold any ceasefire could hold. The task they would tend to contradict that. Sanctions do those work in a situation like this . I think they might work because the u. S. Sanctions that might be coming up will send a message to the Ukrainian Government that they are isolated and will not be able to even travel to europe and the United States if they continue to use brute force against demonstrators. The president is weakening in power. Iev leftistf ke Coalition Last night. Other members of the party of deserted him because ukrainians dont want to see people gunned down in the streets. They won a civil dialogue and that is not what the government is giving them. President has been weakened here. That is the opportunity for the United States and europe to send a message to him that he has to come to terms with the protesters and deal in a civil basis. Thank you. Ceo. Ave groupons shares of his daily deal site happened down as much as 16 . Groupon forecast firstquarter profits that missed estimates. The company has been spending more and acquisitions and marketing. He is trying to convert the company from daily emails to thousands of discounts. He agreed to by a fashion site for 43 million. A whole lot more ahead for you this morning. Including minimum wage explained. We will bring in a panel of experts and discuss this. Million the winning Powerball Ticket is still out there. Look at yours. Stay in the loop for details. Welcome back, everyone. Sashingtons referee find under fire finds itself under fire these days. How a minimum jgb a job killer. Peter cook is here with us in new york with more. We are joined by the former bain Capital Partner and bloomberg businessweeks editor. You cook, start with you. It has been very controversial. Theres something in here for front. Cbo singh if you hike the minimum wage come youre going to lose 500,000 jobs in this economy. First it was the obamacare unemployment numbers and now these minimum wage numbers. There are tradeoffs here. O thanks. At cb you have republican seizing on the job losses. Thats 900,000 people that the cbo predicts will be listed out of poverty if you raise the minimum wage. To 10. 10. You run the risk of people losing their jobs. But it could be as few as zero. We are not entirely sure. This is prognosticating. There is something in here for everyone. If democrats are latching onto this idea that you will lift 900,000 people out of poverty. At the same time come you are losing 500,000 jobs. How do these two things Work Together . The amount of money that is transferred to the poor is about 300 per family. Payestimates youll increased taxes and benefits. It is barely lifted out of poverty. The other thing were reporting efficient more tax to lift people out of poverty than it is with the minimum wage. 300 billion in the report. This has become such a political issue. The design inbout our population the with the haves and havenots. Minimum wage taking center stage. There might be other ways to address this. But there is perhaps a political reason as well. Polls show that about two thirds of americans favor an increased minimum wage. So obama is using this as a wedge issue heading into midterm elections. Tt is something that you can ba republicans over the head with. Not everybody agrees with that. Not addressing the right or wrong. Im just saying, if you are trying to win votes, this is this is a big issue. Testifyingllen before congress. She came out against a minimum wage, supporting this idea that it is going to hurt jobs in the economy. Democrats did not hear it quite that way. As peter pointed out, it is probably not going to Pass Congress this year. Even before the cbo report and now most definitely because of be report, this is going to a heavy lift. For democrats, it is still a political winner. That is why it will be on the floor come even if it goes down in the feed. You can bash republicans all year. On the one hand, if youre a Small Business owner and you are employing 10 people, are you affected by it . Or are there guidelines that would be enabling you to pay to the extent that you can pass the increase launcher customers, i would say you are somewhat unaffected. You will see your demand go down a little bit. Your taxing the customers who tend to be younger and poorer. They will hand the money to workers and pay for the single mother who works fulltime. Youll pass the dollar from the poor families eating at fast food restaurants to the workers. It is skewed towards the richer people. The cbo report did not show that. I can see your logic on that. The cbo report actually showed a net transfer from rich to poor a robin hood move. A 31 billion transfer. It does not take taxes into consideration. They caution that they have not taken taxes into consideration. What i am describing is what is completely overlooked. Five ends up in the pockets of families in poverty. 30 and up in the richest households. One of biggest concerns is on people. Theyre working in minimum wage jobs. After you have lifted the minimum wage, six months later it results in an unemployment reduction in team. 10. 10 is not a lot for anyone. Seven dollars 20 five cents is the federal minimum wage here. A lot of states are up to 10. 10. The business role in all this is really important. You have seen some of the Major Companies who might be hiring folks it looks like theyre trying to get out ahead of it. Walmart sing it is looking for walmart backs this. Thats a really big deal. That resonates a lot in washington. Whether that is for politics or thinks it will put more money in the pockets of the customers, that could be a big deal. Aheadamerica tries to get of this one back to you for a second. Its worse than it appears. When you get into the academic research. San francisco raised their minimum wage. What you saw was a shift in the populous of workers to hire skilled workers. A lot of the walmarts and burger kings of the world shift to a 10 an hour employee as opposed to a seven dollar employee which tends to be a parttime student or a mother who is a parttime other. A higher skilled worker. Is that the says sensitivity for the least skilled workers is three times higher than it is for adults in general. The reason why you only get reduction employment that she may it that much harder for them to ever get a job. Stay with us. Peter cook is sticking around. Coming up, how will the fed ease down the road . Youre watching in the loop live on Bloomberg Television and streaming on your phone and bloomberg. Com. Im trish regan. The hour. After that means bloomberg tv is on the markets for you. Lets take a look of the markets. Slightly higher here. 20 . Q futures are up take a look at that. Closing in on the biggest week to gain in over three years with temperatures expected to be above normal this week. Forecast calling for another polar vortex starting next week. That is having an effect on thanks. On things. Herbalife is going to washington. The Nutrition Company is accused of being a pyramid scheme. They invited congressional staffers to ask questions about how it operates. Herbalife hasinst been the biggest loser for his firm. Withdent obama will meet the dolly lama at the white house this morning. Third, is being protested by china. They want the meeting to be called off because it will hurt u. S. China relations. It has been 24 hours since the winning numbers of the Powerball Jackpot were announced. Not comer will forward. The Winning Ticket was sold at this Convenience Store in california, about 10 miles north of san jose. The ticketholder has one year to claim the prize. It has been almost two months since the fed began its modest taper. For the most part, does not seem to have a lot of effect here on the economy either way. What is next for janet yellen . Running the right now is mike coy. And peter how the numbers then faring . Its because of mother nature, not mother yellen. The weather we have had in december and january reflected thell of the data Production Report blaming severe weather. We saw the big homebuilders decline in confidence this week. They blame winter weather. The fed has to look through that. They know that First Quarter is going to be pretty bad. The numbers will come in and be half the rate of the third and fourth quarter. Once the weather warms up, things will warm up and the economy as well. There is an expected rebound when the weather improves. Normally after a natural disaster, we would classify this in the same category, you see a rebound effect. We have seen some of that in the numbers so far. That wee suggestions will see a comeback. Asked someaid special questions about peoples business is a far. If you leave out the weather affect and whether or not their business was higher in january of the year ago. In both cases, people say things are better. Heres my question. At what point does this really start to have a deteriorating effect on economy act out if the weather is not good and you dont go shopping or eat or do any of these things come at some point and has a compounding effect. As much as we like to think, things are going to improve when the sun comes out. Do you run the risk that there is some kind of slowdown that is actually material in between . Agree with mike in general. Two different effects on consumer spending. There are certain things that once that it passes it is gone. Going out to a meal, if you miss a special valentines dinner, we will not be valentines dinner in march when the weather is better. Looking for a car, you will still look for that car. You have to separate those two factors. One of the key things to watch his confidence. Consumer confidence has remarkably held up. Tells youmething that that people are just hunkering down and waiting this out. What is also is amazing is the react in the markets. Steady gains after the initial concerns. In the face of the paper. Wall street seems to be ok with this right now. Take a look at the 10year note over the last six weeks. Do . Was qe3 supposed to drive down longterm Interest Rates. They should be going up. They are not. Longterm Interest Rates are lower since when the paper begin. Taper began. Record low Interest Rates for as long as we can see. And yet, no real improvement. No inflation for a lot of reasons. The fed has always said, we would not expect inflation like we got. These reserves are not getting into the economy. I think you make a good point about longterm rates thing now. Which is good and bad. We would love it if the demand for credit would drive up rates by market forces. The fact that is not happening as a negative. I guess its good that the fed is able to pull back and get back to more normal Monetary Policy without doing any kind of damage. On wallteresting debate street right now about whether the fed is screwing things up or helping the economy. So far, the only thing you can really say is that all the doomsday predictions of the people who think that that is screwing things up have not come true. This will have no effect. It would increase inflation but not the man. In order to increase inflation and get slightly negative Interest Rates, you need to conditions. Andneed to lose liquidity high capacity we wont get until after the economy improves. After the economy recovers . If you have the threat of higher Interest Rates in the future, youre more incentivized to go out and spend money now. An individual who is maybe looking to buy a house i can do so now or do so in six the same with a company that maybe wants to invest on the capital side. It doesnt really need to borrow money right now so it can borrow six months from now. Is there a danger in not having a threat of higher Interest Rates in the future . Does that actually have a negative affect . Been in this zero Interest Rate environment for so long. There just is not enough demand to create that kind of situation whether or not we have slightly negative Interest Rates. It does not seem to matter because the demand is not there. That is one of the things that more confident. These reserves lobby converted to loans right away. They will not see an increase in the Interest Rate for quite some time. Does not have a negative effect on incentives . Need to do something now because you can do it tomorrow. I think its indicative of a negative sentiment. You have given the fed the power to attach favors when the economy improves. If youre saving for a down payment on your house come you need to be saving more because you have to worry that by the time 35 years from now you get the down payment, you may not have that much as you thought. Inflation kicks in down the road. It kicks in after the economy recovers. It will not recover in full capacity for quite some time. Going back to your point about what is better the argument of the fed is that you want to give people the assurance that the rates are not going to jack up and possibly stop a recovery. They can invest with confidence now knowing that the demand for their goods and services will be there a couple of years from now. If they get into the traditional fed policy of immediately reacting to any sign of inflation by raising rates, that expansi expansion. Will keep rates really low even at the risk of slightly are inflation. At a potentialng asset bubble . You look at the market last year and this year. How do you know that you are really there . Ennui running it more so than we have . Andthink back to greenspan low Interest Rates at that time, which were designed to have a positive everybody is going out and buying a house. In this case, everybodys excited because if you are invested in stocks and the trades it comes back. Will this affect us as well . Pull theht help growth rate up. That is the hedge against inflation. You see higher valuation in the stock market right now. Seesupposedly where people higher valuation, people look through the evaluations to see that stocks are propped up by zero inflation. That will cause corporate managers to invest more today. They see why those evaluations are the case. That is a problem. You need Companies Hiring people and investigate new infrastructure. If that does not happen, you are just going to be in this catch 22 situation where you are mowing the lawn for a long time. Do you get that ignition . Hat desire to spend more we are waiting for that result. Mother nature intervened. What you think of Janet Yellens communication thus far . It is hard to argue with her brief appearance before one house committee. That is basically all there is. We will have to wait for when she comes back next thursday. Wait for that or the one after that and it will probably be announced. Maybetitative looks get rid of the 6. 5 threshold. They may look at the length of the statement and pare that down a little bit. Thanks so much. Great to have you here. But stuff. Be the king of postits. Its empire is far bigger than that. You are calmly supported by some of its products right now. Your ski on this weekend . How to survive an avalanche. Stay in the loop. General motors announced it could see a 10 sales jump in china this year. Bloombergs matt miller joins us with more on this fueled growth. Pretty clever, right . For gm, this is a huge market. Really for all of the big carmakers. It has become the biggest car market for them. The growth is still exploding. Not only is it their main market, but it is also really the shooting star. Ellwhat sells really wher their . Cars that can carry the entire family sell really well there. I think a lot of people have been having more than one child. What brand . This is what the Chinese People aspire to. If you have a car like the or a fordthe impala focus, those are great sellers there because they are cheap. The chinese want the big fourdoor sedans. About an american brand like gm that positions it so well . One of their Favorite Brands over there is buick. Here in the u. S. , does not see the light of day very much. Over in china, thats what they think of as a great, luxury automaker. Most of the cars that they sell re are made in china. They are introducing a ton of new models over there. 19 new models in china. They expect to sell 3. 5 million cars over there this year. They have a Great International footprint. I was at a gm factory in brazil where they are introducing 10 new models there. It seems they have really been successful on many fronts in terms of these emerging markets. For sure. That is one of the keys of the story. Gm is looking for 10 sales growth in china. T is starting from a high point. Ford will see explosive growth over there. 50 growth. Our member one quarter last year they had eight percent growth in china because theyre coming from a much lower bar. Jim had a great foothold. One of the best of the foreign automakers in china. There is a lot of concern about the economy slowing in china. If they only have seven percent growth over there, that would be a disappointment. Something that would be just a pipe dream for developed countries like the u. S. There are still exploding auto market over there, even if they have a little bit of a slowdown in overall gdp. What pushes chinas growth is the emerging middle class. Summoning people for the first time can afford to buy a car. A bigre not going to buy cadillac, but they can afford a smaller vehicle like a chevy malibu. Theseancing for a lot of families. It is whatever the government decides the financing should be. They just tell the Bank Managers coming up the loan it. It is a big deal in other emerging markets because suddenly people now have access to credit that they did not have before and they can go and buy that car. The car companies. Everyone wants to have a presence in china these days. For sure. Even facebook. They willr whatsapp buy we chat. Todays bloomberg number, 150. Thats the number of minutes nbc wants you to take off from work today to watch the olympic semifinal hockey game. Both mens and womens hockey has been huge the season. Nbc sports chairman says yesterday that he thinks it should be a 2. 5 Hour National holiday. If you dont have time to take off from work today, it is likely that one of 3ms boxes in your view right now. Packing tape, bandaids, cleaning products and posted notes. Inside theh research and Development Lab to find out how one Company Still innovating. 3m. You may recognize their work. The companys real value is in the glue that makes those tiny paper stec. Andou get up in the morning you start your day and you wonder, how many 3m products will have touched today . My answer would be, more than you can count. 3ms bottom line is all about adhesives. They have that market cornered. From the Consumer World come you can see it because it is the products you buy. Many that we produce are used in larger or different devices where our product is embedded in a final product. You dont know it is in there. The chemicals that make stuff sticks are not new. The technology that goes into them are. Thats of keeping that thats thats whats keeping these guys in business. Lab, secondbiggest electronics and energy. Seee wires that you dont that makes your daily life possible. 3m makes those materials and those materials have been tested to their limits. This lab is our high voltage test lab. After we create new products, we bring them in here and we test them until they blow up ar. This transformer is a 250,000 volt transformer. 200 newst spo products every year. Its all about this companys land to dominate every market. Every home, every life. One might ask, expanding to too many points to reach . We have to be diversified. We have the intention of broadening the things that we do and broadening our technology. Whatsapp massive threat to mobile. It is worth billions. Supermodel she will be joining us live at 10 00 to talk girl reunion. Er live picture of new york city. Rent 58th street here. It is friday, everyone. Which means, we are headed to the weekend. You might want to pay extra attention to this. Importanthat is more for skiers. They look for exploration, the more they encounter an avalanche. If we say you can leave in 15 minutes, if its a heavy snow come you can be completely broken and that already. Everything cracked around me. I cannot see that i was on top of a huge hill. Fell and fell i was in a huge avalanche. Theres so much power. Sometimes the avalanche, you just hit over. Different times of the year, after midday it is really dangerous. In the right environment. The system was really big and really heavy. The most important thing is that it keeps you floating. You dont really need to swim. You are out of the avalanche. We will be back on the markets in a few minutes. Welcome back. It is 56 minutes past the hour. Boomer television is on the markets. We are futures market slightly higher right now. We will see how this plays out once a good closer to the open. We are going inside Rupert Murdochs new bachelor pad. All 10,000 square feet of it. Plus, the astonishing price tag. Dont sell those old comic books in your basement. They could be worth something. 30 minutes to the opening bell, this is in the loop with betty liu. The countdown begins right now. Welcome back. Im trish regan. Breaking news an agreement has been signed between ukraines leader and the opposition to end three months of deadly violence. We want to go to our breaking news desk. Olivia sterns is watching the story and the headlines. After three months of conflict and a week of deadly violence that has seen more than 77 protesters and Police Detailed on the streets of ukraine, an agreement has been struck between the president , Viktor Yanukovych, and the opposition. It will include a return to the 2004 constitution, which the orange revolution fought so hard to achieve. It will include a new government within 48 hours. They are hoping to secure an agreement with early elections as of december. Foreign ministers worked all night in key effort to broker this deal. The foreign minister recently tweeted out that this is a good compromise for ukraine to give peace a chance and open away to reform. Poland and the ee you, he says, are supporting it. Agreement has been struck between Viktor Yanukovych, the current president of the ukraine, and the opposition after a week of deadly violence that is seen 77 people, protesters and police, killed. Thank you very much, olivia. We will continue to ring you more on this story. Congressional staffers, anyone who is interested, not any one megan, you want to pick it up from here . This is the company that bill ackman has lost a lot of money on right now. It looks like it is going to congress with staffers taking a look. Herbalife is trying to play defense and take a proactive stance on capitol hill. Executives are going to be speaking to congressional staffers could not any specific committee. It is confirmed by one of the herbalife hired lobbyists as well as the herbalife spokeswoman. At least 2 executive summary life making these presentation, laying s to why this is a legitimate business today. The executives John Desimone and ibi fleming. They will also be hearing from the direct selling association. This meeting is on the house side of the capital at 10 30 this morning. Important to point out that this is not the first time that herbalife executives have set down with staffers here on capitol hill. They also met with senator ed markey cost office at the end of senator ed markeys office at the end of january. We learned yesterday that it turned out to be bill ackmans biggest loss that he has ever had. Maybe perhaps this will turn it. Hat is the thinking here . What are your sources telling you about the company . Are they sympathetic to bill ackman, do they see aside . See his side . There is not a lot of talk yet and that is why you see or believe being a rocket, but senator ed markey has been pretty skeptical of thing on the, sending letters to the sec, ftc, asking for an investigation. Asking questions about this business model. We know that johnson actually just got back to him in a letter this week. We have a copy of the letter. Parallels with the case that staffers are going to be making today, that these jobs come he argues, just like amway or avon as far as the business model, making the appeal to members of congress that this means jobs. Herbalife will employ 7004 hundred people including approximately 6750 one contract manufacturers, employing 94 individuals in massachusetts. Read between the lines. They are stating the language on o, appealing this will be speaking billing which on capitol hill, a feeling that this will be good for jobs. There is a Production Facility for herbalife that they have funded in north carolina. Trying to get in front of it for sure. You think lets assume for a moment that herbalife is in fact completely legit and that bill ackman is totally wrong. In that case, you look at a company that has to spend its time to justify itself on capitol hill. You think of the distraction, all the effort it takes. It is fascinating to see that when someone comes out, and activist comes out against your company, and regardless of if they are right or wrong, there is a battle at play, pr battle for sure. In this particular case it has gone all the way to capitol hill. And it is not just time, trish. It is also money. If you look at the money that herbalife has spent here in washington, last year they spent 1. 9 million. That may not sound like much if you take it into perspective, but when you look at how much they spent previously, they never spent more than 1 million before last year. Clearly they are wrapping up their lobbying in washington. Have got a lot of work to do. We will continue to watch it. It is interesting when you look at the market, investors have decided on the companys side. We will keep you posted. Thank you so much, megan hughes. Without onet set with us, our Bloomberg Contributor good we were talking about the herbalife a story earlier. It is a big distraction. A lot of people dont understand the business. Multilevel marketing businesses, they are into the millions and billions in terms of the overall industry, and a lot of people dont see because the individuals who get into these systems, it is behind closed doors. It is in private meaning come in peoples homes, where they sell a way of life and cell success their way. Are some promises overextended . That is the part they will come under scrutiny for, im probably double play so. By and large, legit company, im sure, just like amway a legit company, and look, the jury is still out, but the market thus far has where investors are placing their bets, that they believe in us. That they believe in this. An industry that is typically not shady, but not a full light. It is the stuff we sell out of our homes and the other kinds of things that going very successful and great and a lot of emerging markets. Absolutely, without question. The real American Dream is in china, japan, other places where they are growing his business is thesedously growing businesses tremendously and multimillionaires are being made. Whenever you see that, people start to look, especially when you have other industries or franchises, because it is very much the same kind of model. Just a little bit different. I make money on the and the present person below me makes money and i make money my entire line how do you think the company has approached this . Are they smart . I think theyre being very smart. Theyre going to the state and saying it means jobs, jobs, Manufacturing Branch here. Thats the way to do it. You want carl icahn . Dan loeb . Anybody with deep pockets . I want the United States senate on my side and hometown people cheering and protecting me. You saw the chart that megan put up. Theyre spending a lot of money. Drop in the bucket compared to what is being made. These business is make money. I mean, they are a license to make if someone like bill ackman comes after you, you have got to stand up and defend yourself mean, it is a most like a shakedown guy. This is what these guys do. Theyre shaking it up not just to do the right thing im sure that is what they say. They shake it up because it puts money in the pockets. In their pockets. Didnt do a good job over jcpenney, too. Always a pleasure to see you. Thank you for being here today. We want to get back to this breaking news that is coming out of the ukraine right now. An agreement has been signed between the ukraines leader and the opposition to end the three months of deadly violence. Our chiefg in washington correspondent peter cook. Lay, you are there on the ground. Do they see this as a positive sign or not . I talk to people after this deal was announced. Couldnt find a single one who said they are satisfied with the deal. Its not enough. It would be a compromise month , another Police Officer told me, who took the side of the protesters. But now it is not enough. Also, there were voices from different parts of the ukraine who are here today at maidan square, eastern part and western part who i talked to. Voice iuld not find any would say they were fine with the deal. We dont know how the crowd will react to the announcement of the deal. It sounds like people are still pretty skeptical. Ilya, it sounds like people there are still very skeptical. Are angry, skeptical. There was too much blood throughout recent days. Me,east when they talk to they dont want to be seen as accepting this deal, because they want more, they want his resignation, they dont want to wait for new elections, is that correct . Exactly. And im standing at the , before the government compounds, and i can see the people are still building those barricades up. Do you anticipate that this actually going to escalate now . If people are that angry, they are that skeptical, might be see the protesters take on a bigger position as we head into the weekend . There is a certain risk that this may happen. There is that risk, correct . Theres definitely such risk. Stay with us, ilya. I want to bring in a Senior Research fellow at the Heritage Foundation who specializes in russian and eurasian studies. He is also a member of the council on foreign relations, and he is joining us right now. What is your reaction to the news that they have reached an agreement . We have heard it from our reporter on the ground right there, saying that the people, the protesters in the streets dont see this as enough. They are angry, theyre skeptical. There could be more tension mounting as we head into the weekend because people dont agree with this. Reviewed carefully all the news reports and also look in social media at some of the opponent from my friends on the ground in kiev, and i must say there is no agreement. An agreement is a specific text that has a date for the elections. An agreement would have a procedure who are involved, who is supervising, who makes decisions if both sides disagree , if 2 sides disagree. E dont have any of that this is a promise. Mr. Yannick povich mr. Yanuko vich has a track record of making promises that he does not phil and andy goes back on them. People on the ground are not stupid. They have seen him backtracking on the constitutional change. Him have seen before backtracking on the promise to sign the Association Agreement with the European Union. They do not trust him and theyre very good reason not to do so. Peter cook, what is the administrations reaction to this right now . We dont have the official reaction from the white house du to the actions and ukraine. Part of that is due to the questions just raise is there a deal, is it an agreement that most of the protesters in Independence Square can accept . Until the United States get a better sense of the lay of the land, you will not hear too much from the administration amps up other than encouraging words for the European Union and the folks on the ground working to negotiate things. They want to see if the deal holds. Seems like that is the Biggest Issue here, and it gets back to the root of what ilya was saying earlier, that the people dont trust it themselves. Immediate was the response from some of the people that are standing outside the barricade as the news cost . At the news crossed . What did they say to you as they heard . Ilya . Ok , im just sorry, can you repeat the question . Absolutely. I was just curious to hear the initial response. We were hearing from ariel cohe n, who said he has a lot of concerns that this is not a real agreement of any kind. Peter cook telling us that his sources Indian Administration are very much in a waitandsee mode because they want to review this. There is a sense that maybe this is not as authentic as perhaps the headline seems to suggest, and it is what you are hearing from people on the ground. Youe right outside are there right outside the barricade could what do the protesters video . What do the protesters say to you . Are notnk the people getting things like whether there is a certain date. They have a very simple demand here. They have a very simple attitude through what is happening a simple attitude to what is happening. The president should resign. Some people say that he should face a trial and get into jail. Some people say he may flee the country. We dont want to have more violence here. Is very sentiment strong for him to face trial clearly, if i may, the leadership is not leading the process. It is the people on the ground who are leading the process. Ukraine. Go ahead Political Leadership of the opposition can and pose an can imposethen an agreement and then the most action elements in the stream protest, the armed elements, may dictate the agenda, and that is not a desirable situation. You dont want armed extremists to lead the process. The people that are just extremists leading the process because of the recent forence, the support base an armed protest has expanded. Seems in other battle zones and conflicts a chain reaction. This is a failure of Political Leadership of the opposition. Riel, do you think this is going to result in his resignation or are we going to get to an actual election . I think whatever comes out of this and has to have a defined in rather short timeframe and it must have a constitutional viktoreven before yanukovych goes to elections or steps down. What do i mean by that . The opposition and the have negotiated for a while that the constitution of ukraine will change and the presidency will not have as much political power as it has today. It is a super presidency, and undermined his own office. Whatto happen out needs to happen now is the Parliament Needs to pass the constitutional reforms as soon as possible, and then if it aside for new elections or have yanukovych step down immediately and have elections within 2 or 3 months. Only a political road map like that can prevent future violence , and no, im not optimistic right now. I dont see the leadership from the opposition. Ariel, stay with us. We will be talking some more with you, ilya. I know you need to get back to talk to the protesters and talk to people on the ground. Peter cook is with us. I also have Olivia Sterns, who is looking at the date for the president ial election. It sounds like protesters dont want to wait this long but walk us through the timeframe. I wanted to add context about russia house russias role. His all caps off 3 months ago because Viktor Yanukovych took a away from a trade agreement with closer ties to the eu. It looks like russia had the upper hand. They offered a 15 billion lifeline to keep ukraine afloat, a gas deal that was going to save the economy. Look at what has happened in the last 24 hours. Eu Foreign Ministers in kiev overnight brokering this power deal could it sounds like the power has shifted back into the eu sphere perhaps Vladimir Putins options for controlling ukraine are running out. We heard from the foreign minister survey log rough Sergei Lavrov in baghdad, saying that sis just a ploy to get ukraine to make the eu choice. Today, the russian finance minister said that the ukraine political crisis has raised many questions about the ability to repay its debts. That, chris, sounds corre that, trish, sounds frankly like a threat that russia may not follow through with its promise of a bailout if the agreement goes through. The u. S. And russia seem to be reliving in some ways the cold war days, as you look at president putin and some of the chance that he has taken a president obama over the course of the last year and a half or so. This seems to be the latest ssue future bidding, tingst issue contribu to the divide between u. S. And russia. Do we expect he will be vocal about this and will come down to a door play between president obama and president putin . Yes, it is a power play already. What i am watching as an is the rhetoric on russian television. It is state run and it reflects the opinion of the russian leadership. The opinion of the russian leadership is that the United States is behind every bad thing that ever happened to russia, or to the soviet union. Or they want us to believe that the events in ukraine are directed by the state department, and that the actually toe paying the armed opposition elements, the socalled right sector, that we are supporting somehow the neonazis in ukraine. Of course it is rubbish and they know it is rubbish but theyre putting it out. Yesterday in a roundtable on russian statesupported tv channel russia today. The russian propagandists were saying just that. The moment the olympic torches extinguished and the Olympic Games are over, it is going to have fullcourt press in go ahead, peter. Just real quick on the u. S. Side of this, ariel sees it the way the u. S. Government season right now, that russia has returned to what they call a cold war mindset and they are trying to avoid that and get russian help on syria and iran and the public if things. We are going to leave it there. We will have more on this and the opening goal after this. Good morning, everyone. You are watching in the loop. I am trish regan, in for betty liu. Olivia sterns has the latest on futures in these final moments before the opening bell. Pointing to a higher open. Not a lot of economic data, but we are expecting is visiting home sales out ash expecting existing home sales out at were expecting existing home sales out at 10 00 a. M. Finance ministers will be meeting in sydney over the weekend. Look for headlines out of that all weekend. Equities on track for a Third Straight week of gains as he bounced back from the january selloff. Back on the markets in 30 minutes. Earlier this week, this company agreed to by sales, home of the diamond store. It not only extended cignas lead as the largest u. S. Jewelry chain but it adds consolidation to industry dominated by local jewelers. With us is cristina alesci, who has been covering the story as she does every big deal for us, and the cofounder and Vice President of circa, Largest International buyer of fine jewelry diamonds and watches. , how did this one come together . They were under extreme pressure during the financial crisis and went through massive for structuring and he was in its first phase of a turnaround. Cigna said we have enough confidence that this company is going to have a future and we are willing to pay up for it because we think that the synergy here actually makes sense. Similar cost savings that will being able to leverage potentially with supplies will be beneficial for both committees. Both companies. You need to be able to leverage rising and supplier relationships. If you can charge more for the diamond, is that part of the thinking . It will benefit you in the long run if they control that market . Im not sure if they will necessarily be able to charge more although they have such a massive footprint that perhaps they can control the pricing. They will have a distinctive advantage on the by side for the purchase on the buy side for the purchasing. Look, wean say, hey, are buying the most, were bigger than any other game in town. You have to give us the deal. Mmhmm. If you look at zales margins, they were up four percent because they were in the first stage of the turnaround. Margins,ok at cignas up 16 . A lot of investors who look at this deal said we like it because we think that zale could improve its margins. That is why you saw the stocks of both companies pop on the news because they were factoring in a lot more efficient operations for zale. What does this mean for the company as it goes forward . It going to is continue to operate all of these brands . I think consolidation on the smaller side of the jewelry industry, there could be consolidation on the mask side of the industry as well. The combined footprint is 3500 stores. You are so many locations throughout the u. S. At the very least, where they have 4 or 5 of their own stores competing in the same all. In the same mall. Zale said it was going to close a bunch of stores and will keep on that commitment to close a bunch of stores. That was brands go, one of the questions on the investor call. Will they keep all of the combined brands . The 2 sides said yes, because it is range of customers they are going after. You know this better than i do, but ive never shop at any of these stores every kiss begins with kay, and what does jarred the memorable line he went to jared. I think zale is the higher end and jared is more your local mall. In terms of the brands they carry it goes up to rolex. What does this suggest about the overall economy . Is this a bet that people will be spending money on jewelry and therefore we can assume that things are better . I think things have been Getting Better incrementally over the past 4 or 5 years. People are getting their toes back into the luxury goods market. Sales at some of these stores have been healthy. To the extent that sales have had a recovery, it has made them an interesting target for purchase. When the theme we all talk about one female talk about you look at the retailers, the Specialty Retailers, they are facing turnarounds and trying to look for capital. In this case, jewelry isnt quite the bites but in the Specialty Retail space. Tight spotite the for the Specialty Retail space. It is tough for the local Jewelry Store on main street that people used to go to. The local Jewelry Store will have to up their game a little bit. They will compete with local ores local zales jareds. Do you buy jewelry . We position ourselves as the ultimate companion to the modern consumer. People have jewelry that they dont wear anymore so they can contact us through the tollfree numbers or our website or visit one of our offices or regional purchasing agents throughout the company and get a written offer. If they are accepted, they leave with a check. Kind of like a fancy version of a punch up and away. Shop,cy version of a pawn in a way. I think it is a very unique upscale experience. No, it is fascinating. Thank you very much for being here, cofounder and Vice President of circa. Cristina alesci, of course. Lets get back to our top story. Ukrainian leaders have signed an agreement with the opposition. I want to head straight to the newsroom. Economics editor Michael Mckee is joining us, along with chief washington correspondent peter cook. Peter, as you and i were talking earlier, we were talking about the historic issues between the u. S. And russia and how that seems to be playing out all over again in the ukraine right now. What are your sources in the administration telling you about the deal that has been reached . We have notish, gotten any official reaction from the white house. As we talked about before, theyre waiting to see how this plays out with the protesters. Will they accept this deal . The last thing the United States wants to do is back a deal that is not accepted by the protesters there. They are trying to turn down at least the u. S. Temperature on this and that is one reason you have not seen the president as directly involved. The conversations between yanukovych and the United States had been with Vice President biden, not with president obama. That is a distinction here. The custom russians are so involved and because they have been basically accusing the United States of playing such a big role, that is one reason you are seeing less of a u. S. Presence here. It may be a while before we hear an option here an initial reaction from the white house. This all effectively started because many in the ukraine wanted to become part of the eu. The president wanted to be aligned with russia. Reacting to this and what is at stake economically not just for the ukraine but for the region . That is one of the key points. This is not really a u. S. Fight at all. Ukraine a significant number of people in ukraine would like to be more moderate and westernized and more closely tied to the eu. The eu would like to have them in that posture but they dont want them at this point in the eu. Or country is not strong stable enough. He created the sort of vacuum where they did not have the full backing of the European Union. The russians, on the other hand, cant afford to let ukraine go and be too aligned with the west. It is there only outlet to the west and their only outlet, really, to southern waters. The southern ports are there. It is a power play by russia to keep them out of two close an embrace with europe. Ukraine does a lot of trade with the europeans and also, natural gas flows from russia to europe through the ukraine. It is a lever that Vladimir Putin has good nobody wants us to develop into any huge conflagration. The question now, is putin dialing it back because he is getting what he wants or is the real success by opposition groups . Ariel cohen was saying that issa zerosumins game, or politics is played as a zerosum game, and as such he needs to be successful here. You wonder, mike, might we see a situation where a portion of the ukraine is divided off . We see all this division politically within the country. Very unlikely. There are a number of different opposition groups but it is not so much regionally based. There has been a power play by some from the shank those region from you shank out from yanukovychs region. It is not so much the division of ukraine as the leanings of ukraine west and east. You are not seeing such a knock on effect in the markets. We have seen a rally in other emerging markets the brazilian reality im a South African rand, the brazilian riyal, South African rand, proxies for emerging market midseason run the world. The world is accepting the status quo seeing this as perhaps an isolated incident, not necessarily going to affect the rest of the eu and other emerging markets countries. This is a lot about economics in addition to politics. Trade in 2012, about 3 billion. Trade between ukraine and the eu, about 38 billion. Russia is much larger than that. It is a big issue for the russians and that is why there is a much at stake in terms of the dollars and cents and why, again, there are so many different factors to weigh, and economics being a big part of this. We will continue to watch this and update the viewers. The ukrainian president has signed an agreement with the opposition. We are talking with a Bloomberg News reported on the ground in kiev. Not all the people, the protesters on the ground, are buying into this right now. We will continue to watch this and the expectation is we could see more tension continued to rise as we head into the weekend. We will be back with more after this. Facebooks 19 billion acquisition of whatsapp has left a lot of analysts scratching their heads. They are trying to figure out what it is really worth. Know carriers like verizon that this deal is going to cost them big time. Telecomo bring in our reporter who carries special covers u. S. Carriers like at t and verizon, and country getting editor contravening editor contributing editor nick thompson. Texting, sopay for this is not good for the wireless companies. Great for us, not good for them. Never good when you are charging a lot as a carrier for these kinds of services. The u. S. Carriers saw this coming. Fromhad big revenues texting and decided that the threat of whatsapp and various other ones that they would bundle it. 3. 2 billion it is expected to cost the wireless companies. 2016, 50 4 billion. In other words, this is snowballing for them. One, is not the acquisition that hurts them, it is the creation of whatsapp. Second, it is not like money is being taken away from wireless companys. Wireless companies had a service where a cost of them basically nothing and what it is that they charged us a lot for it, and somebody came along that was innovative and said, you know what, we will give it a people for basically nothing, which is what it costs on the infrastructure level, they will start special stop getting the monopoly or duopoly they will stop getting the monopoly or duopoly. It took a long time, and a Small Company came and ate their lunch. Too bad. What do they do now . Can they ever get any of the business back . Do they follow a whatsapp model and make it either free or, what, 99 since the year, for aople so that 99 cents year, for people so that they have another way of getting revenue . Atit was a small opportunity the time. They deliver a lot of Wireless Service but it does not they did not see this small thing as being worthwhile. Now they probably regret that. Well, they are responding. They are moving to things where the price they charge is equal to the marginal cost to them. It is where they would have been had they not had this monopoly situation where they captured all the regulators. They are moving to a more rational world. But everyone is on facebook messenger, whatsapp but we are also on verizon and at t and we have this stuff built into our phones. They are slow, they dont innovate very well, there probably going to lose a lot of their they are probably going to lose a lot of their messaging business, but they have plenty of other what do you think of this deal . 19 billion, was it smart to pay this amount of money . No, it is an insane deal for facebook. They have a stand against advertising analyst everything were facebook makes money. Whatsapp is very defiantly antiadvertising. Facebook used to be that way, too, until they went public change thehave to philosophy of whatsapp, which means it is a very high risk move. You are spending 19 billion for a company with 20 million in revenue and you have to massively change the culture and get the employees to be excited about working for you. Not an easy task. Well, they do have compensation. Employees. 19 billion, that might motivate you. It is a hard thing to do, and you wonder, what is the next whatsapp . Do they run the risk that this becomes sort of obsolete over the next couple years and they billion or 30 billion for the next one down the road . Well, the interesting thing is that there are relatively low barriers to entry. You can start a service with little code but there are Network Effects could do more users to go in, the more valuable your service is. It is not easy for a company to use a brass whatsapp at this point. Facebook to surpass whatsapp at this point. Facebook has bought something valuable. It is just 19 billion that make me wonder. Lot of money. Thank you so much. Great to see you, nick. Good to have you here, scott. The u. S. Postal service is going hightech. The late apple cofounder steve jobs will be featured on postage stamp. Other approved the subjects include basketball great wilt chamberlain, tv host jimmy carson, and music rates j music greats jimi hendrix and janis joplin. Good luck. Leader has signed an agreement with the opposition to end three months of deadly violence. We will have more and what the deal will mean for the country, next. Outlook. Or global an agreement has been signed between ukraines leader and the opposition to end three months of deadly violence pinchrunning me is Nicholas Burns from the harvard joining me is Nicholas Burns from the Harvard Kennedy school of government. He served on the White House Security council as the senior director for eurasian affairs. Welcome back to the show. Let me start by asking you your reaction to this news of an agreement that has been reached. I can tell you that our reporter thehe ground in kiev says protesters dont believe it, they dont buy it. They are angry and still frustrated. What is your take . Well, it is a critical moment. If an agreement can hold that would enforce a ceasefire, that is the best thing for the people of ukraine, including those embattled young people in maidan square in kiev. There is been far too much violence. What youre hearing from your correspondent is that protesters dont believe the word of the Ukrainian Government. They have gone back and forth or promises to end the fighting and the government has violated those previous pledges, so i think the Ukrainian Government is going to have to go overboard to convince protesters and the people of ukraine that they mean business. This would be a significant agreement. It would end the use of force and they would call early president ial elections out early enough, by the way, mr. Burns not early enough, by the way, mr. Burns but they want to see the resignation of the president today, right now. The people opposed to yanukovych, the president , they accept the agreement. There may be people on the streets who want more, who want the immediate resignation of the president , red and to have him step down. That is not what was agreed here. If you look at the agreement, it would reduce the powers of the president. There is a lot the opposition could work with, but it is up to the government of ukraine to convince the protesters that the government is going to followthrough. That is the real issue. You think back to wednesday afternoon in the United States, u. S. Time, we got word that there was a truce that had been reached. And yet that truce was broken within 24 hours. The death toll escalated from 25 to at least 75. This is what so many ukrainians are struggling with now. They hear this news and it is just hard for them to accept and believe. I think that is exactly right. The government has very little credibility with the people of ukraine, and why should they . The government has routinely violated its pledges. The government has also been pushed hard by Vladimir Putin and the russian government into a confrontational stance where they have used force. The real dilemma here is that ukraine is a badly divided country. There are millions of ukrainians who want to see the country have a western orientation towards the European Union. There are other millions of ukrainians in the eastern part of ukraine who traditionally have been very focused on their ties to russia to the country needs time and space and a civil dialogue and some teeth to these majord argue ideological and philosophical divisions in the country, and that is not what the government has given them the last several months. Ambassador, thank you very much for joining us and giving us your perspective on this developing story, which we will continue to be all over for you here on blooper collisions throughout the day. That does it for in the loop. Have a wonderful weekend. Stay with bloomberg for market coverage and the latest out of kiev. On the markets is next. It is 56 past the hour, which means bloomberg is on the markets. I am Olivia Sterns good one stock we are keeping our eye on is groupon. Those shows are plunging this morning after first quota profit forecasts travel analyst estimates. They are expecting their bottom line to take it from higher expenses and a position for marketing. The company has been pursuing other companies as it seeks to offer thousands of discounts instead of just daily deals. Equities are moving higher. The s p is now on track to close its Third Straight week of gains. The s p is hovering around its alltime high. To makeable, it seems, a charge higher into uncharted new records or break significantly lower. For more, i want to bring in a jeremy hill. There have been a lot of big economic misses lately. Im thinking about the december jobs number, january jobs number, and the retail sales. So often the reason seems to be the weather. Does the excuse hold up . Weather is weather. I think we are getting a little bit long in the tooth for that investment excuse. You have to look at what happened just yesterday. Out,d the flash pmis come which were actually quite good, but if you compare that to something more regional, philly fed, empire state, which was worse, and conceivably there is a rationale so that the weather is playing a role come when you compare those 2 types of data sets. How much stock you put into that preliminary manufacturing . Im not sure you can put so much into singular data points. That is a theme that even the fed has taught us, right . 6. 5 . Guidance, not really 6. 5 , just generally the overall employment, and when people look at the economic scene in the u. S. , they have to take a much more holistic view of the data. The weather will play itself out. April, we will no longer have that excuse. Is the data improving or deteriorating . My overall sense is that we are nowhere close to her recession. All right, good. How about the chinese flash pmi . The last time we had a number below 50 indicating contraction, itself it set off a lot of alarm bells. Were you surprised there was not a broader church in the market . Broader jerk in the market . It was the genesis of the nasty emerging markets selloff we had going back. We lost 6. 5 in the s p. People obviously have this kneejerk reaction to going back to the late 1990s. That is not going to play out unless there really is a serious type of contagion, which i dont see happening, although i will say that ukraine is definitely an interesting area to focus on. Obviously causing a lot of volatility in eastern europe. Existing home sales will be due out in a few minutes. What is your take on the Housing Market overall . You say utterly bad. I dont know about utterly bad, but schools are closing in chicago not because there is snow but because it is 20 below zero and they have to. I dont think it is going to be very robust number. I dont think that is hiding anything right now from the u. S. Economy. Isll the bias in the economy probably to the upside and the fed will confirm that in the next meeting in march. The housing recovery is still on track or losing momentum . Probably losing a little bit of momentum, but not materially in the sense that it will affect assets rises in the way that you would have a selloff on the back of. Thank you so much for joining us. We will be back on the markets in 30 minutes. Market makers up next. Live from bloomberg headquarters in new york, this is market makers, with Erik Schatzker and stephanie ruhle. Boomer bust. Breaking news. He second delay will existing home sales slump for the fifth straight month. The numbers and what they mean. And house of cards . Bill ackman promises to take his herbalife issue to the end of the earth. A companys meeting with regulators might shake out. Quite cover girl. Tellsodel Petra Nemcova us how they pick who will grace the cover of the cover the sports illustrated