Transcripts For BLOOMBERG In The Loop With Betty Liu 20141118

Will keep enough seats so he can speed up his policies. The third arrow to come. A promising site from germany. For the first time in 11 months, german Investor Confidence has risen. Meanwhile, the European Central bank is preparing more steps to boost the euro area economy. Heres the president of you cb, mario draghi. It is necessary to further a prolonged. Of inflation. In itsncil is unanimous commitment to using unconventional instruments within its mandate. The Senate Banking Committee Want president obama to change the culture at the Federal Reserve. They say the president can start with the fed board of governors. Todays wall street journal, two senators say the president should fill vacancies on the board with people who look out for main street, not wall street. They say the new governors should be committed to taking on the new banks. Hydrogen fuelcell cell car has been unveiled. It goes on sale next year. Them arew hundred of planned to be sold next week. The worlds bestselling hybrid car. Depot earningome 14 . For greg,ct to follow who became ceo at the start of this month. Lets return now to the big gamble. A snap election and a delay on the snack hike. Will it fall flat . Is hopeful. E if he really can get out from under this inflationary spiral, somehow watching his third forw, which has been in quite a little while, but if he can pull that off, that would be great for japan. The third hour of structural reforms. Shares jumped over all of this news. Back to give us his take on this. Basically coming back and jumping from the losses yesterday, making up from them. Would as that aid itwould call an election, was well telegraphed. People knew about this for a couple of weeks. It was important, he felt he needed the election to show people were behind his plan to delay the sales tax, and he also said interestingly in his conference that this would be the last sales tax. Giving up with the idea. He says, we will see of this is actually the case. Is alluding ross to, the first and second arrows have worked so far. To me less and Monetary Policy. There is a third arrow of japan that has yet to be played out. Yes. But there is a lot more he wants to do in terms of the structural reform, which will be much more difficult and politically wrenching than tinkling with the with the tinkering Central Banks balancing sheet. This gives him a long lead time again. He is still popular and there is pretty much no question his party will do well in the polls. He now gets to come in with a fresh mandate and push ahead forward. Great to see you this morning. Managing editor at bloomberg market. Top corporate news, as i mentioned, home depot the largest u. S. Corporate retailer, boosting thirdquarter profit that topped quarter estimates. Not stopping the consumer from spending on the houses. I am joined now with more on the results. We were talking this morning with our producers. Where are you going to go to get homeimprovement goods . You have got to go to home depot. If you look at thirdquarter figures, sales were up. Same quarter sales, an important metric because it gives you a sense of how established they are doing, upwards of 2 . Forward guiding guidance. But they did caution it is too early to tell the exact cost from the data breach and what impact it would have, although many analysts said what did they say that the data breach . If me more on that side . So far, it is too early to calculate the cost. They will have a Conference Call at 9 00 eastern time. Expect that to be the main scene. 3. 2 . Aid, up from the interesting thing about all of this is i spoke to an analyst. Company, they put together a survey called the intent to shop. 63 of customers have heard 47 , the data breach and almost half, say it will impact the way that they will shop. To shop at home depot specifically, that was pretty. Uch flat it gives you a sense that perhaps shoppers, the reality and perception are not on par. He said no one will exactly know where. It is hard to tell because you do not have all the data. What about greg, the ceo . The big challenge is how you see it going forward. It is said those looking to go , that trend could be on the downturn. How do you do that . The big physical warehouse, home depot, and the online world. How do you go about marketing after many individuals . How do yet them to feel more confident get them to feel more confident . It is all about trust. Expect profit to be a common word. Thank you so much, mia saini. Xl type line. Pipeline. The Energy Implications have diminished since the project was first proposed. The economy has moved on and oil has moved on. Peter cook, chief washington correspondent, has more. Two supporters have the 60 votes they need to get this through the senate . Questions the big still at this point. I can tell the democrat from louisiana really started this fight over the Keystone Pipeline. She says she feels comfortable they will get to 60, and yet we still do not know publicly who that magic vote will be. We can count 59 at this point, but we cannot get to 60. Arehe and other supporters feeling confident. Four democrats being targeted for support indicated that they would vote no. They all expressed support for the pipeline at various stages, but they have all decided, including mark udall and tim johnson, that they will not shortcut this process. The review process. They would allow the normal process to take place here. Even if Mary Landrieu could get she needs,0 votes you still have the prospect of president obama standing there and deciding whether or not he will sign this into law. Every indication so far from senators, if it reaches the president s desk, he will veto it. That isl be a fight really going nowhere. It could be going nowhere and there is a reason why. The and history the Energy Industry has moved on from the keystone. This has been a sixyear fight. The Energy Industry, including top Energy Associations in the United States, are actively fighter in favor fighting in favor. They think the reality they think it should happen. The reality, so much has changed in the last six years. He look at the motion of oil production. So much more Barrels Per Day produced in the United States. Look at the price of oil, which recently dropped. 75 per barrel. It raises the question of whether this is as economic a project as it was a few years ago. You also have a look at what will happen in terms of moving oil to the market. Alberta alone will be up to 17,000 barrels a day. Rail and theres an argument that keystone is not as important as it was. That is not the case for canada. This is a critically important project to the canadians and will be a big low to u. S. Canadian relations if it does not happen. Any sense that this debate has helped Mary Landrieu in her runoff . The sense i get him talking to both the lawmakers and notyst here, is that it has hurt her chances, but this will be an uphill fight all along. The polls show her trailing in the race for the Louisiana Senate seat. It will be a lot to overcome. It is not clear this vote alone is enough to put her over the top. It has not hurt her chances. It probably helped. Thats all right, thank you peter cook. Much more ahead on the controversial Keystone Pipeline. Six years in the making. Examine if the economics still make sense. Plus, a synagogue in jerusalem. How is israel likely to respond . We will talk with Prime Minister ehud barak. As the keystone xl pipeline debate heads to a showdown in congress, many in the oil industry say, it is already old news. In a special edition of titans at the table, i have a chance to talk with tom stier about his crusade to block the controversial project. Is always presented as either do this or do nothing. That is absolutely not true. We will not run a Society Without energy. It is just a question of how we think about it here at keystone is just part of the problem. Tom stier says the bigger part of the problem is how fans oil has recovered. Questions is a gigantic Mining Operation in the midi the middle of nowhere. They want to take production by 2025 and more than double its. Your job is to make sure that never comes out of the ground. From my point of view, i am not a scientist. Scientists say it would be devastatingly terrible for 7 billion people on the earth if it does. For more, were joined by voices from both sides of the issue. Thanks the Keystone Pipeline still makes economic sense. Is the Deputy Director of Energy Institute in texas, austin, who says any security and economic arguments have been gutted. Michael, lets start with you. You say keystone is old news and we move beyond it. The story economically around keystone five years ago is very different than today. Six years ago, oil is 100 a barrel and headed upwards. Today, oil is less than 80, and headed lower. We had a lot of big projects. We just need one more. Some of the economic urgency or friends and or frenzy around the pipeline have passed. The frenzy has passed. Agree . , would you no, you see the market adjusting to the unfortunate Political Science that has taken place here. The president has continued to dismiss approval of the pipeline. Is we are going to need more infrastructure into this country. In the past five or six years, we build 10,000 miles of pipe line. The president needs to approve this one to allow us to move forward and to allow the market to be most efficient. How toket will sort out move the product, but we need to get the government out of the way and have politics out of energy. I would not dismiss this right off, we are chance porting much of that oil that is the and brought out of canada by rail. Severed tes say several hundred barrels a day are going to be transported by railroads come next year. That asnot dismiss another way of transport. Why would we need the pipeline then . What you see is government, in this case, by indecision, interfering in the marketplace. The keystone xl pipeline was the preferred alternative. Why . Does it is less expensive than rail. But the market has now adjusted to this indecision, or failure on the part of the president to approve the pipeline, and it is actually costing consumers more. Experts will sell you it costs more to move the product by rail than it does by pipeline. We should let the market decide, because it benefits consumers. Why does that matter when you have got oil at 75 and going lower . It matters because we need to move the product. Reduction in the United States continues to increase. Production out of canada continues to increase. We should make our Nation Energy secure right here at home. But we need the infrastructure to move the product. That is why the pipeline is so important to us right now. Anmichael, isnt there argument that instead of focusing on the pipeline, lets focus on making the u. S. More Energy Independent . Lets focus on extracting more oil out of our old land and orget about transported importing oil from other countries. Five or six years ago, when we were worried about middle east imports, the Number One Solution was import from canada as an alternative. Today, it seems like domestic oil and Gas Production is an easy alternative to offset middle east imports. If we care about energy security, increasing american production is good news and it is something we can all benefit from. Rather get oil from canada than the middle east. We do not have to choose one or the other. The rising oil and Gas Production in the United States has changed some of the arguments. Betty, one thing i would add is that we should not forget the keystone xl pipeline is projected to bring 150,000 or so formationday from the in montana and north dakota. This is not purely canadian production. It is a combination of canadian production and u. S. Production to get it down to the gulf coast to be refined. We should not forget our canadian partners, our number one trading partners in energy in the world today, that is a positive thing. We can be energy selfsufficient as north america becomes more energy efficient, and the Keystone Pipeline rings u. S. Production to u. S. Refineries. What about gartman jack mays, makes, the bottom line, yes we are using alternative ways, but the pipeline needs to be built because in the longterm, none of us can project what will happen 10 or 15 years from now, and we need the pipeline to keep our oil cost slower . Question really speaking, the more price and more rails we have, the better off we are economically. The market can be more responsive and respond to cut off in volatility. The more options for consumers, that drives prices down and improves reliability. He is right and that is good news. Today, move and loyal by rail, that is flexible and pretty quick. They tend to burn or explode every once in a while. If i have to choose between moving oil by types or oil by rail, the economically preferred solution is type. But for the environmental community, if you have to choose between types in texas or nothing, they would rather say nothing, because that is less carbon. We have to figure out whether we are having an environmental debate or an economic debate. That is part of it. Safer and cleaner option as well. I have to leave it there. Thank you so much. Jack gerard, the ceo of american. Etroleum, and Michael Webber that is not all. Be sure to catch my entire edition of titans at the table stealing featuring tom stier. Bloomberg. Com tv and search for all of our episodes. Coming up, his look at the lame duck session. Including keystone. How much it empowered his party. We will be back. You are watching in the loop live on Bloomberg Television and streaming on mobile and bloomberg. Com. Im betty liu. Cant is this hour, a tough quarter. Earnings and revenue missed while missed estimates. Urban outfitters said it was weighed down by weakness in his mainstay brand. Cash will be available to users 18 or older with a debit card. The security of the debit card numbers will be handled by square. Snapchat suffered a Security Breach in 2013 that expose data of 4. 6 million users. Carnival trying to dispel consumer concerns by inviting the public to design their next marketing campaign. A few weeks ago, i sat down with the carnival Ceo Arnold Donald and asked what he is doing to change perceptions. As an industry and a company, to develop lifelong advocates so they take the message out, and then providing people on the internet through advertising, information,tions, and especially through our travel professionals, our travel agents. Travel agents help compare cruise and help educate people what it is really like. The best way is to get somebody on a ship. Take a cruise. That is what he wants. It is 26 minutes past the hour. Bloomberg television is on the markets. Equity futures. You can see are marginally unchanged right now marginally changed, really. Likely toon inflation stay tame here in the u. S. Ppi Producer Prices are out in just a few moments. We are on the markets again in 30 minutes. Let turn out to the middle east. Israeli Police Say Two guns, knives,ith and axes, killed four at a synagogue injure islam. Eight people were wounded, including the two policeman who killed the assailant. The attack was the deadliest in jerusalem in years. Said henister netanyahu will respond with an iron fist. Olivia sterns is standing by with the former Prime Minister of israel and there at the Global Financial Leadership Conference in florida. Olivia . I am here with the former. Rime minister, ehud barak thank you for joining us. We meet here after the deadliest violence in jerusalem in years. Promising to respond with a heavy hand. What do you expect that to entail . No government can accept this. Not about to tell you what exactly to expect. It is up to the government to bring the perpetrators to justice, to make sure this does test this does not repeat itself, and at the same time, [indiscernible] regionaltinians into a war of religion. This is theink beginning of another major flareup in violence . I hope not. A tough neighborhood and we have seen ourselves more than once, rounds of violence. To an extent, it is up to the other side, which you have to rely upon. It probably can develop. Hopefully it will not. Have you ever seen this so called responding with a heavy hand actually work . Of course. Many times. But it does not mean you dont pay a price along the way, a disruption of the normal life, and even sometimes diplomatically. But there is no other choice. We are a tough neighborhood. Determined to be ready to answer both. We had richard haas on bloomberg surveillance this morning, the head of the council of foreign relations. He is concerned the region is. Eaded into a 30 year war do you share his concern given everything going on in syria and iraq . The concern is very real. Following the collapse of the empire. No one can predict what will be the end of the game for iraq. It will remain the same or we will end up separated into three different and these entities. Remember, a nation cannot choose its neighbor. Israel is Strong Enough and should be selfconfident enough to fight if as effectively as needed. To a windowalways of opportunity. Mosquitoes. Ling the you think the window of opportunity exists right now . Yes. [indiscernible] blocking for natixis and muslim extremists, [indiscernible] who would broker that peace deal . Achievedk it cannot be without the support of the United States. But it needs a certain kind of readiness to take certain risks on both sides. Nothing can be accomplished without a certain willingness to take risk along the way. Who at this point you think are the leaders in the nation who the extremists will listen to . The extremists will not listen to any reader. But they should be suppressed. Allimportant as as some people describe it, but a loosely connected wider world net. You name it. And these are extremely resilient. It should compel us to join hands. America, china, russia, whoever. If we cannot join hands, leaving i [indiscernible] talking about a special relationship. There are a lot of stories about how Prime Minister and yahoo he has written off president obama and congress will prevent the u. S. From striking a deal with iran. Do you feel that u. S. And israeli relations are at a low point . In the future. In on might be one of them. But the major fact remains that the United States of america, it is support for our military edge, and its support dramatically [indiscernible] these are unique relationships. In a way under obama passes administration, the intelligence relations became unprecedentedly implemented. Evennflation of obama affects the missile defense. It remains so. We have a compelling purpose to keep with the president , congress, and the public. Classwide you think the deal would increase the chances of getting a good one . I am not sure they are as close as you believe. They never made a single concession along the way. That thect somehow administration is somewhat below and they can extract more. [indiscernible] for another six weeks or so. Time will tell. I am not sure. Iranians never lost nuclear or military power. Do you think we will see a two state solution within your lifetime . Yes. I am confident and i hope it will be and i will do my best as contribute so it is happening. Thank you so much very much for taking the time. Thank you, Olivia Sterns of bloomberg, speaking with the former Prime Minister of israel. She will be back in the next hour with us to speak with myron souls. Inflation numbers coming in. Ppi data a little bit on the higher side here. Excluding food and energy, up 4 10 of 1 , more than what economists had estimated. Mia saini has more. Information regarding these prices. Prices unexpectedly increase in the month of october. Higher costs for services and food essentially outweighed a slump in recovery we are seeing. We are talking point to send a Producer Price index, followed by a. 1 drop in prior months. Also, an estimate out of. 1 decline. Prices,ook at wholesale including food and energy. That rose. 4 afteris a month earlier. 8. 1 percent gain. If you take a look at what is happening in futures, a little unchanged this moment as we count down. Thank you so much. Much more ahead. Mcdonalds trying to turn around its chinese is this with organelles. How video gaming may be the next fast food trend. In thethe loop area loop. Lawmakers remain loggerheads on the future of health care reform, a new regulation policy, and the Keystone Pipeline, as republicans commit to blocking anything the president fights for. 60 of americans favor the pipeline and 46 also think the president should wait to reform immigration. Republican congressman scott rigell joins me now. He just won reelection in virginias Second District and voted for the Keystone Pipeline. He joins us now from the hill. Congrats on your victory. Thank you so much. We followed your career on the hill very closely in the last several years. We have covered a lot. Vote looks like and will get the magic number 60 and head to the desk of the and he vetoes it, is there enough of a majority to take it back to the house to pass it again and override the veto . I think there would be. I will go out on a limb on that. Im sure others will not a great. Maybe i am so optimistic about the ability of americans to create jobs and grow our way out of this goal and stagnant economy we are all struggling with. Energy is a principal way to do that. I ran on it and my opponent really opposed coastal virginia energy. Is across the country, there the potential to grow our economy through energy. The Keystone Pipeline, supported by so many trade unions. It is a bipartisan issue. We want to put americans back to work. You share your view among colleagues, particularly in the who say this is just a political exercise. Lets drop it. I have tried to stay away from getting into peoples motives for thanks. I can come to no other conclusion than that this is a partisan political move by senator reed in order to help senator landrieu out. I do not think it is really designed to get jobs going. I think it is a political move here, which is really unfortunate. We have the potential to grow our economy. Keystone would be a great way to do that. Passed in thegets senate and it gets over to the president. Maybe he will have an epiphany that this is a good idea and he will sign it. I do not know. Say they americans approve the Keystone Pipeline. There is a majority there. It goes back to the issue you and i talked about over the last years thomas which is that it does not enamored the ys public that congress can get things done. I thought we would get things done after the next election. I agree. I do not think this one party has a central mandate. What i think the American People are behind is really discerning having a discernment to recognize a principle we ought to reject and a principal compromise. We need to be able to have the wisdom to identify that and the courage to vote for it. Our system does not work without compromise. It is not an easy message to share with folks, but it is the truth. We have got to have Common Ground centered around some round principles. Let sound principles. Whether it is immigration, i convinced. Toi know you want to wait hear more about what the president is going to do, but how do we find a compromise on immigration . What do we do with the millions of Illegal Immigrants in our country right now . I think the key is to narrow things down. Even if we have some smaller, nominal steps that would represent that Common Ground where the two circles are moved to get any overlap a little bit, i think the American People would appreciate that. But we are faced with and the concern here is that the president is, i think, apparently going to try to advance things that he himself just a couple of years ago said he really did not have the authority to do. Like that, saying, prior to this, i did not have the authority, but now he will push it forward, we will reject that in the strongest possible terms. He will say he did not have a congress who was willing to step up on immigration. I want to play for you, we theed with a congressman on democratic side yesterday. This is why he said the president should go alone a on this. I was alone with a Bipartisan Group of eight actually test by Speaker Boehner january of 2013 to get this done. The process we were negotiating, our republican colleagues said, go with it, go with it, i will get it to the floor. Here we are almost two years later and Speaker Boehner has never been willing to bring anything to the floor, including piecemeal bills his own republican majority has passed. I was not privy to those direct conversations. So i really need i really cannot comment. The overall engagement with this congress, just having dinner and breakfast and meeting with rankandfile members, that is not happening. I democratic colleagues say, scott, we are not meeting with the president. Members like me are not. If the president in the last two years has said, things have not gone well and i will do some indifferent, and if he engaged this constructively and consistently, i think that is the best way out of this. He is not doing that. I hope you will change in the last two years and engaged, and i think he will see better results. Congressman, thank you so much. Cott rigell we will be back with much more on in the loop. Moving and shaking this hour, the former ceo of blackberry, over after aing board fight for the companys leadership. Working on technologies of the customers can recharge their devices wirelessly. The board chose heins because they wanted someone with operating spirits experience. He ran starbucks at a time when company was leading market share. He stepped down a year ago after failing to sell the company. , who helped break this exclusive story, great to have you on with us. Heins is an interesting guy. He failed at blackberry so why would he be a good fit for power mac . That is a good question. I thought to a lot of Board Members at powermat. They are very excited about having him join. The key thing is having the relationship with International Mobile carriers. Power that needs to become globally pervasive. And ubiquitous. Whether impression is he is the right man to cement this. Not do sorry, he did well. He was a veteran. Way, this is a deja vu for him. , anook over blackberry ailing company. A much Smaller Company, and, you now worthmount is 500 million in the private market. And he fails to sell lack. When he was worth almost 5 billion. The argumentke that maybe this is a Smaller Company and he might have a better chance, but tell us exactly what happened here and what led to the ousting, essentially the resignation of the founder here . Yes dear this is based on interviews with several Board Members and with the founder. The story, as far as i can tell, is like this. February, he volunteers under pressure, which includes goldman sachs, to step down. Members, asboard far as i can tell, believed he did anything wrong. He is a great visionary and a great founder, but not the manager needed to take it to another level. He hired the executive search for israel and it was not going anywhere. They had two candidates, including heins, but it was moving slowly. He was running. Some fraud over a deal, however, at the beginning of this month, he chopped a lawsuit because they settled over the timing and identity of the new ceo. Right. That paid paved the way. We will see if it will be adopted in as many places as we talked about, as they promised. Thank you for bringing us that story. The road ahead for ultra luxury auto. We will head to the l. A. Auto show to speak to the ceo of bentley. We will be back. Numberys bloomberg big is 24 million. Roughly how many led pixels are contained in this new giant billboard. There it is. That is at times square. It is about eight stories tall and as long as a football field. It is the biggest one in times square. As on the screen are 2. 5 million for four weeks. Google is the First Company to lease that billboard. You will not be able to miss that when you are traveling through time square. Bloomberg television is on the markets. Equity futures are pretty much unchanged. We just had Producer Prices come in a little higher than what economists had estimated. 4 10 of 1 for gore core ppi. We are on the markets again in 30 minutes. Much more ahead, changing the culture at the Federal Reserve to highranking democrats reserve. Two highranking democrats instead of wall street. Welcome back. Were 30 minutes away from the opening bell. Heres a look at the top stories this morning. Das will be down slightly at the open. Increase ind inflation at the wholesale level. Prices rose 2 10 of 1 last month. Ander costs for services food, a drop in energy costs. Prime minister abe has delayed prices for 18 months. Blame for pushing japan into a recession. Also resolving parliament and calling for early elections. A billionaire investor talked about it just minutes after they were announced. Classroom really can get out under the inflationary risk inflationary spiral, somehow watching the third arrow, which has been in the quiver for quite a little while. Off, can really pull that that could be great for japan. Question ands network will says the election will be the 14th. He will keep the liberal Democratic Party in power. Home depot rose quarter profits that beat estimates. In the u. S. , it says there are more customers in stores. Rising home prices. That usually means consumers are feeling better about their homes. Two democrats on the Senate Banking Committee Want president obama to change the culture at the Federal Reserve. Elizabeth warren and joe manchin say the president can start with the fed board of governors. And todays wall street journal, it is that the president and phil two seats with people who will look after main street and not wall street. They say the new governors should be committed to moving on and regulating the big banks seriously. We are under 30 minutes away from the start of trade and lets count you down to the open with top tech headlines desktop 10 headlines on our radar. Me this morning. Ok. Lets start with number 10. I love this story. Orcs ands is enlisting elves of the world of warcraft. I do not know of anybody plays this. In a bit over chinese consumers who there, gaming is huge there. Nott of teenagers just teenagers. Man, grown men. This is mark to go and say, they should eat a chicken mcnugget while they came game. They are a little bit like nike. Nikes not a shoe company. Mcdonalds is a marketing company. They have an image problem in the u. S. Actual qualitycontrol problems in china. In order for the marketing to work, the food has to be cheap. Dispute withld you. They would say they are absolutely a food company and our food is. There that is the problem. Thiserican consumers would be that with them because theyre having Trouble Holding onto the markets. We will see. Number nine is netflix. This story has been playing out over the last few weeks. In a bold play for original content, the company said they will push forward with the plan to release a bill cosbys actual, cosby 77, despite new rape allegations. They continue to come against the longtime comedian and actor according to people familiar with the matter. He is developing a sitcom as well for nbc. They have not yet said they will pull out of this. This is a story that crosses over from the public sphere. Into the business world. Now, what are the costs . These are decadeold allegations. The question is, who will lose more, nbc or netflix . You could argue nbc will lose more because this is where the cosby show has had its home and theyre looking to create a pilot. Allegations, but we do not really know what happened because there was a settlement. It is hard to talk about this because we do not know and we cannot really say what happened. Talking to a friend of mine from , it is just so hard because these figures are so youth, butrom our aggression like this can flourish. There was power with cosby them 80s. And putting. He has such aat squeaky clean image is quite disturbing. Eight, toyota. Japanese for fuel cell powered sedan that traveled 300 miles with a Hydrogen Tank that can be refilled in less than five minutes. So much more attractive i think van an electric car, where you have to sit there at the very least for 2030 minutes. Elon musk would dispute this because he referred to this as full fool cells. Is there demand for Something Like this . Who will buy it . The problem is infrastructure. Are the energy of the future and always will be. The problem is, toyota can only roll this out in places where the infrastructure is in place. Gasoline overcame this. 100 years ago, they managed to get gasoline everywhere seek to drive your car around. There is an electric recharging station at every home. The real question is whether they could get the infrastructure rolled out as well. As interesting to note toyota pulled out of their mark their partnership with elon musk , that they would go headtohead with the electric car push. Samsung saying he will the it will reduce the number of smartphone models it offers by about 2530 next year, park of that move is to cut costs because they are getting squeezed by two ends, number one is high and with apple and smartphones, and another by the chinese competitors. Threes is now the number it is the company i have been covering for a while. They offer these phones in china. The Chinese Company started in 2010 and it is now the number three global player. It knows it will serve the population to the problem with samsung is it is trying to go between the high and the mid. Mid. Are they good . They get the job done. They use a firefox operating system, and open source operating system in latin america. Our standards are too high. Does the phone get the job done . It does. We see the same thing happening to samsung that happened to ibm. Laptops are hard to make a profit on. It is now true of mobile as well. Very true. Number six, this story, it is one of the controversial stories out there. Administrators at the university of North Carolina and cap and and chapel hill claiming racebased initial policies highly qualified asianamerican applicants. 50 years after a further minute after affirmative action and it is still not resolved. Nations are saying they are not pitted against the genuine general populace, but against minorities, and they are not getting in. This is what i know about what an applicant would look like. They tend to do well on a test, and by law of large numbers, you have more of them applying. You cannot have the entire classic the asianamericans. 32 asianamericans. You need that. The lesson is we need to be lower achieving. There was one statement from. Arvard one Organization Says that, you should smell something that. A casebycase basis. They look at everything. Push the economic background, diversity. They will get legacy. Coming up, we will have much more to talk about. ,e will hear from Myron Scholes the Global Financial Leadership Conference. Youre watching in the loop. It is time for our deep dive. For number five, were heading down to the shores of naples, florida, where we write a Nobel Laureate now working at janus capital. Today, he was with Olivia Sterns. Thank you, and thank you for taking the time to his ego that. You are the chief investment strategist at janus capital. We hear you have a new employee. Bill gross. How has his arrival at the firm changed the mood at the firm, or the priorities and strategies . Bill gross had come to janus, i had known bill when i was on the board of pimco from 19801990. He was a friend of mine and i was excited he did come. Janusng the priorities at in the sense that, with his skills and reputation and his ability to manage money and the like, he is attracting a big following. It means everyone has to reorganize themselves and help him with his efforts at this juncture. A little more focus on fixed income. He has brought with him hundreds of billions of dollars in investment money. What are the chances he will get another 300 million bonus . I hope he does. That would be wonderful for he wered for bill if able to achieve that bonus in subsequent years. I will bet. , cbsews bloomberg broke market getting out of many single names. This comes after an onslaught of regulations in the industry. Do you think it is ace a mistake to move away from cbs . I have not studied that in depth. I assume the business decision makes sense for them, regulations and rules and especially capital rules, are such that they cannot make profits in that area and maybe gravitate to others who are less regulated. Much of your work has focused on risk. The overallnk about reaction to the crisis, do you think now, we are safer than we were before, that there is less risk in the Financial System . That is always a tough question to answer. I do not know. I really think the rules that were put in place in doddfrank and others are trying to address specific problems. The issue is what lights you next is not what date you before. That is the big problem. It is a very complex environment and a complex world. We do not know to the extent of debt overhang that still exists, we do not know the extent of international issues, whether the middle east will blow up, what will happen in asia, china, etc. It is a very complex environment. It is hard to know what the next big fight will be. Of ike to the head asked him what marks he will get for doddfrank and he said a c plus. I would give it a d. It was handled quickly and there were many holes in it. Had 2000 pages of rules without any regulations and a number of regulations that have been going subsequent that, it is an inefficient structure and was not well thought out requests you have Interesting Research right now into the costs. What are you finding . Studying the act of managers versus who benchmarked etf. What im finding is active managers tend to overbid the higher volatility to try to control their tracking to benchmarks. Interesting issue with the benchmarks is that they themselves are not risk constant. The risks are changing over time. Even though numerically it looks someough it is attracting particular part of the economy, itselfsickly, the risk is not dynamically changing and not taking into account these. What is the takeaway for investors . Takeaway is you have to be careful investing in ets or index funds generally. That even though it looks as a particularcks benchmark youre interested in, the takeaway is you have to be careful because the risk could change and they are changing over time dramatically. You as theeferred intellectual father of cvs. Thoughts ont your why you think your view to death derivatives have too much blame. Derivatives are ubiquitous everywhere and they are new. Derivatives would have been invented first and they would not have gotten so much blame. I think part of the reason is , butad cvs problems at aig if you look at the overall market and the whole market and derivative contracts, it functioned very well. Pinpointing one particular thing and then blaming Everything Else area got it. We will have to leave it there. Betty, i will send it back to you in new york. Thank you. It looks a lot warmer there than here. Strategist our countdown to the opening bell continues next. Welcome back. Lets get back to bringing you the most important stories you need to know before the belt. Four, more than 10 Million Dollars has now been victims of bernie made offs ponzi scheme. It was doubtful whether we would even get beyond 10 billion. 60 plus. That is now been recovered for victims from his fraud. 6 has artie been paid in the last year, so this is 10 billion already collected. This is a step in the right direction. Will they get to the 17 billion . It is unclear. They actually had to pay into the fund and then got paid back out of the fund. This is the problem with a ponzi scheme. People who are both winners and losers at the same time. But i thought it was interesting reading the Bloomberg News story about this. A funds that contributed money, these were not grant my investors. They had a lot. Collects all of the funds that went into the ponzi scheme. Number three, more regulation on this. The fed needs governors who are not wall street insiders. That is according to Elizabeth Warren and joe manchin. They said president obama needs to fill the two seats with people who look out for main street and not wall street. More people to have a stronger track record in taking care of main street. Obama has a great position where he could nominate two of the vacancies at this moment. I completely agree. I am a little torn because i think the Federal Reserve is one of our two functioning institutions, but the great thing about Elizabeth Warren is that she has always lived and to the realclose economy. Most people who go into debt go into debt because of medical problems. It is important to know these things and have them expressed in our institutions. The bigger question is, is the faith in the fed misplaced . Should that be where we say the buck stops . Last i would take more of a critical view. I feel it is easier for those outside the fed to criticize what they do and it is a lot harder when you are sitting in that the and you have to weigh so many factors when implementing policy. Part of what they do is solid research. Number two. Trying to get the economy back that, abe called unpopular sales tax increase after it was announced yesterday the economy fell into recession. Some might say it is a little bit too late. I do not know but we will have plays out. Abenomics you look at fiscal policy and Monetary Policy and cultural problems. They do not allow him at integration. Those are cultural problems. Much bigger pass cap than they can fix. No change as they head to the open. There are now just five of open. To in theback loop. Lets bring you back to the most important stories that you need to know before the battle. I am summarizing you. Number one, a big payday for wall street, advising on a 100 billion takeover by halliburton. As 315ld make as much million in fees for their work. If you were in m a baker banker this year . I know, but i read the story and i think [halfhearted] yeah. For them. Oney, good at 2. 4 trillion, the most since the crisis, that is good for jobs and transactions. Is it . Global m a is good for jobs . Lets arm wrestle. When you have companies strategically thinking about how you are going to mesh them together, that puts a person in the position where they are not just the underworked, they are being overworked. Hiring and rewarding talent. I am talking about the right jobs. Term. Be in the long in the shortterm we are looking at dealing with lower oil prices. The activists announced plans to cut staffing and r d. What we are seeing right now is not a lot of investment. I am talking about doing the right job for a lot of people. This rally will stay in place. The fact is that we pretty much shrugged off a lot of bag news bad news. Sam stovall said that the next six months might be our strongest yet in stocks. Seasonal november through april, which has outperformed the november through october. Afterou look at the time the midterm elections, it gets even better, with an average gain of 15 in the november through april time. I want to bring in david scranton, with over 1 billion in the market. We are saying that global m a is good, perhaps good for the market. Sam is saying the midterm elections were great for the markets. You are saying . Most people agree that some part of the reason the markets are as high as they are today has to do with quantitative easing. If you look back at the last 5. 5 years every time there was qe of some sort, the market trended upwards. It is different this time because the momentum is so strong. You wrote an interesting metaphor. Imagine that your trainer was pressing 400 pounds but was on anabolic steroids. You might wonder what he could do if not on steroids. Thats still decent. [laughter] but maybe you have high standards for bench pressing. But inherent to that metaphor is the assumption that qe doesnt work. The idea is that gets us to lift off and then we go on our own. Two components to the metaphor. First, people dont really know what the markets are worth today. Pounds. W it is 400 will it be 350 or 200 and 50 . A lot of Institutional Investors seem to have one trigger on the figure trigger a one finger on the trigger. The second part of the metaphor is that sometimes someone at the gym stops taking anabolic steroids. Their strength can increase for a. Of time afterwards. Are you a seller . Still believe that fixed income is still a good approach for today. In equities they need to either trade stop losses on the downside or they need to use Tactical Strategies where they are willing to pull out of the market when the drop is coming. Or maybe market neutral. Something that is a little bit better in the down market. You wrote about Investment Income and growth, is that a good tactic to hang onto . It is. Income is like the bird in the hand. Two months ago here i was asked if i was concerned about Interest Rate risk. I was not terribly concerned back then and i am even less concerned today after seeing the is happening in europe, recent news about japan, spain, italy, though paying lower than our own. There are lots of reasons why i a major strike soon. This term was coined by the university of chicago, where 73 of the time in january smallcap stocks eat out the largecap stocks. Im curious, the way that things have been going so far, as reflected by the russell 2000 index, they would essentially show that they are not going to do very well in the next couple of months. Your thoughts . Ofi think we have seen a lot gains in the smallcap market already. What is happening now is the s p 500 companies are doing buybacks, mergers, and acquisitions, helping their stock price increased through accounting measures. I dont really see that happening this year. I guess i will have to look back to february 1. Are you inviting yourself back on . Absolutely. [laughter] dumbbells. Have our yes. Ive got a lot of work ahead of me. David scranton, ceo of scranton financial group. We will sit down with the bentley ceo for a sneak peak at what they are calling the most sophisticated open top car they have ever created. Bentley, showcasing their most sophisticated open top car ever created, according to them. There it is. That is where we find matt miller, in the middle of all of the action. He is joined by the bentley president and ceo. Not just bentley, but this and heo runs for ghazi wears a lot of hats. Wolfgang, thank you for spending what limited time you must have with us. Let me first ask you about the news we got out of japan. Things in europe also dont look so great, although car sales were not as disappointing this morning, but in general it looks like those two regions are in rough spots and not ready to pull themselves out. Are still doing pretty good. As a matter of fact we are heading for another record year in 2014. We have fairly stable markets. The whole thing is led by the u. S. , our biggest market. Performance in the u. S. Market is very good. Also, our home country in Great Britain is doing very well. In chinae slowing down right now because of the political situation, the bribery, the details of the customers and where they get their money from, but it is still on the highest level, china is the second biggest market for us. The recession in japan, that will not influence bentley sales in the upscale market. People always have enough money to purchase the car, its just a matter of the offer. That is the same story around the world. Grace, i your saving suppose, except in the case of china. What is going on there with the bribery scandal . Customers get investigated if they buy a luxurious product. The government is checking into where they got the money from. This slows down, a little bit, the market. But in total we will sell more cars there this year than last year. I guess you have the most expensive products in the entire volkswagen group. There any need at all to go down a little bit . Example, is making some slightly more affordable cars. Is that a possibility for forgot he fugati . These are the most exclusive Luxury Products you can afford. No more there will be no more dropdown or affordable offers. If you have made it to here, youre at the top and there is no alternative. What about bentley . There is so much talk about the suv coming up next year. For other Car Companies that you have previously served it has been a massive, massive hit. Do you expect to reach down in price . Suvecently the top line became limited to 200,000 u. S. Dollars. If you have a product with everything inside, that is what you can spend. Above. S nothing we are going to solve this problem with the bentley suv. We are doing a product that brings our perception of the market, luxury and performance style. For this reason we are in the middle of the program right now to test out the market. We already got the first reaction from customers that bought the car. We think that with an suv we can really enlarge in our customer enlarge our customer group. 95 of our customers already have an suv in their garage. We think that we can make a good section in the future in this market. This talk about superluxury makes me feel silly asking the gasoline question, but i have to ask all carmakers, is the mattering to ace bentley customer . Basically not, but we are influenced by the overall political situation. Our customers are achievers in life, Business People who care about economic factors. Of coarse, they know the gas price. What costs the electricity is. Basically at the gas station, they always fill it up. And they will with this as well, this grand convertible. It is only a concept right now. When can i go get my first speeding ticket in this . We Just Launched the concept last night here in los angeles. We are keen to get the reactions from the customers and the media about the perception here in the u. S. We think that in california we are at the hotspot connection of the pacific highway, the lifestyle of the car owners and aficionados around will give us good feedback for this car. We hope it will be positive and if we get the right feedback it takes about 12 months to bring it to life. I love the shoulder line. Thank you so much for taking the time. , he is a veryimer busy man, that he. He is and youre like a kid in a candy store. Matt miller will be there live again tomorrow joined by the ford president of america. Autos, the newest version of grand theft auto five , virtual autos, has been updated to work on a new generation of consoles. The franchise is incredibly popular among gamers. This one has a new firstperson mode that allows players to get further inside the game, but there are some aspects that are quite controversial. Erik schatzker joins us now. When has this game not been controversial, right . It is always an edgy game. , it is ae an investor major event. When grand theft auto five came out one year ago it was a 1 billion event. It has since sold 34 million copies. However, if you own an xbox one , this wastion 4 unavailable. This was the next generation console. It to workve updated on these nextgeneration consoles. That has the potential to be a big deal, except keep in mind that there are only 10 as many as there areoles previous. It explains why they develop for the older models first and then updated it. Almost afraid to ask, what are these new firstperson firstperson features that you can do . Quick less essay, because we are clean a Family Network . Enhanced interaction with prostitutes. Hookers have always been a part of the game, it is part of the culture, the edge ela street culture captured in the videogame. But like i said, enhanced interactions. We will be asking the ceo of Take Two Interactive about it when he comes on. They have revived the company, plus we will be talking about the future of technology and media in the gaming business. Lucky you, but im keeping my kids away from that game, though. Ig up, i keep batista batista, he could be the first billionaire to be put behind bars for Insider Trading. We will be right act. Time for our Global Outlook and brazil. Former billionaire, eike batista , standing trial today in rio de janeiro. If found guilty he will face up to 14 years in prison and be known as the first person in brazil to spend jail time for Capital Market crimes. I am joined by juan pablo outside the courtroom in rio. What, exactly, is batista being accused of . He has been accused of Insider Trading and market manipulation. He held shares of an oil company and a few years before a few weeks before announcing that it would be viable, he has been accused of making money on that theyll. On that sale. Of case to the prosecutors really have on this seenr billionaire, who has this spectacular downfall in brazil . The case that they are building, it keeps everyone in for the first time a few weeks before, announcing that the count any was not viable. The president is saying that you should have waited a few weeks before making that disclosure. The other hand, as saying that he sold the shares not because he wanted, but because they were not good for investment and the bank forced the sale of the shares. This argument is what we are trying to find out today in trying to see who has more insight. All right, juan pablo, thank you so much. That does it for today on in the loop. Talk about some highend problems, billionaires unloading private jets and oil prices plunge. Why does it not make economic to keep your g 650 with oil at 75 . We will have more on that tomorrow morning at 8 a. M. Eastern time, right here on Bloomberg Television. Well, it is 56 minutes past the hour, meaning that Bloomberg Television is on the markets. Lets get you caught up on where stocks are trading. The greenness this thursday after wholesale prices rose last month as costs for food service outweigh the slump in energy. The picture in the treasury market . You can see the yield on the twoyear spot and the tenyear is interesting because on friday we saw levels falling the most since 2009. We are seeing somewhat of a rebound in the way the 10 year is trading. Stick with bonds, it has paid off big time to be a contrarian in the u. S. Bond market this year. Yields have fallen, even as analysts predicted they would rise. Analystsion is, as stick with their forecasts, is anyone going to be listening . Doesnt look like it. Joining me to break it down, lisa, lets talk about this contrarian position that seems to be what hedge funds are supporting right now. Group analysts looked at Exchange Traded futures and came to the analysis that hedge funds were generally taking the position that shortterm rates would fall or at least stay level next year. Assets the opposite of manager mutual funds positioning for Interest Rates to rise. This makes sense, fed officials are coming out and saying we will probably hike rates next year. If investors are listening it would make sense for them to position shortterm rates to rise. For the contrarian vote is first of all everyone expected the yield to rise this year when the fed pullback from assets and the opposite happened. Calmed down the murky waters and now it looks like we might not see a movement of next year, if that. And it is not just u. S. Growth and acceleration. It is also the global world. Japan is in her essay should recession. Europe is fighting deflation. How does that affect the u. S. Market . How does the strengthening dollar how does the average investor rationalize what a mutual fund and hedge fund does . That is an interesting question. You are seeing a huge inflow funds, al return bond broad swath of Investment Grade bonds. Those stand to lose if they rise in a significant way next year. In some way they are positioning, along with the hedge funds, and their thinking is that the overriding idea there to support this fed would be that the fed would feel justified hiking rates sooner because of the global slowdown. I feel like i feel like we are getting into too many peoples heads. I am curious, as investors position themselves, the will this just be another year of going against the crowd . [laughter] it depends. I think that people are trying to be a contrarian. This year it was a winning trade. Thatmetimes we have mentality that we all try to embody on a daily basis. But it was more obvious when the trade was going down. Nonobvious is the favor. Thank you for your insight, as always. Stay right there, Market Makers is up next. Live, from bloomberg headquarters in new york, this is Market Makers. Gone with the wind, one of the Largest Solar Companies in america is going big into wind energy. Keystone evenng make sense anymore . As the senate votes, critics say the numbers dont add up. Stick a cork in it. The company that found that there is money in wine without making it or even selling it. Good morning on this tuesday