Transcripts For BLOOMBERG In The Loop With Betty Liu 20150305

Exercises. Activists say such drills hamper reunification efforts with the north. North korea called the attack just punishment against american warmongers. Hillary clinton says she wants the public to see her emails. Clinton has asked the state department to release the messages she sent from a personal account while she was secretary of state. Mrs. Clinton is being criticized for using a private system for business. She wants the state department to screen the emails and delete any sensitive information. The Justice Department is demanding changes in ferguson, missouri. The police force is said to be motivated by making money for the city. The report says Law Enforcement unfairly targets blacks in the st. Louis suburb. According to our investigation, this emphasis on revenuegenerating generated from Police Practices has contribute have intruded into constitutional violations. Nearly every level of fergusons Law Enforcement system. Betty the investigation follows the shooting of an unarmed black teenager last summer. Erin wilson was cleared of civil rights charges Darren Wilson was cleared of civil rights charges. J and j lost the bid. A blockbuster treatment for blood cancers. The deal is the first for abbv ie. The latest blast of Winter Weather is grounding flights again. It is shutting down the capital. Governors in four states declared emergencies. Federal offices in and near washington are closed today. The total of canceled flights is at 3000 and counting. Those are your top headlines. To cyprus. That is where policymakers are meeting today. One of the two meetings held away from their headquarters in frankfurt. The euro is now trading at an 11 year low against the dollar. The ecb keeps Interest Rates on hold. Mario draghi is going to be speaking. Investors, listening closely for details on his 1. 1 trillion euro stimulus program. John ferro. The data is out this week showing that europes economy is taking its theme in the right direction. Is this going to change any of the plans mario draghi has for qe . Very unlikely it will change anything. I sit here in the sunlight and i think he can enjoy himself. The data is starting to firm up. Credit conditions are starting to turn as well. Finally, they have announced quantitative easing. Im going into that News Conference in 25 minutes. I want to know what is your appetite to buy debt with a negative yield. Oppose the kinds of things i want to find out. Those are the kinds of things i want to find out. Betty you have also been working the ground and talking to Business Leaders in cyprus. What are they telling you about the ecb and how they see the economy in europe . This is a country that is at the fringes of the euro zone geographically, it is closer to syria than it is to frankford. This country has been through a financial crisis. Deposit sieges for the people of cyprus i spoke to the ceo of the biggest tank in cyprus. He says, we are not involved in qe until we push forward reforms. Q email not make difference at all. Qe may not make difference at all. Betty what is success when it comes to here . They are worried the flechette will become entrenched. They also want to get lending up from banks to companies so they can change the credit conditions. Before they have bought a single bond, look at where the euro is trading. Is it about pushing down the euro . If that is what they want to do by any means, this is a success before they purchase a single bond. Betty jonathan, thank you so much. Basking in that sunny glow. Euro trading at an 11 year low. Janet yellen spoke broadly about efforts to ensure financial stability. She also took aim at ethical lapses at large banks supervised by the fed. These incidents in their totality raise legitimate questions of whether there may be pervasive shortcomings in the values of large Financial Firms that might undermine their safety and soundness. Betty the fed announces the first results of this years stress tests of the big banks. It is survival of the fittest. You pass or you fail. I want to bring michael moore. They are going to disclose privately today who the banks are that pass and fail the stress tests. Why are they so important if they are done every year . Michael they will announce it publicly. It is important because it gives us a preview for next week when the fed gives banks the true pass or fail grade on you can return this much capital to shareholders. Today, we get the preview of how they did in the tests. Betty we see the results and then we get the grade. Michael it is a couple kate a process. A complicated process. For banks, this is perhaps the biggest level they have for capital returns and posting there are oe. Their roe. This is their only chance to get approval to return some of that capital to shareholders through dividends and buybacks. Betty is citigroup going to be the one with biggest spotlight on them . Michael michael corvette michael corvette has said if we do not fix this, it is on me. They did not fail for capital reasons or on the number side. They failed on the qualitative side, where the fed says we have questions about your process. That is where they have tried to fix of the last year and we will see if they are successful. Bank of america questions they failed a few years ago. People are looking at them closely as well. Morgan stanley recently, because of a settlement with the department of justice, their capital came down. That has raised questions on whether they can return as much capital as people originally thought. Betty we will give ratios today. Why do we need the announcement next week . Arent we going to be able to figure out who passed and who failed . Michael what we will not have today is how much the banks ask for. We get how they did and on top of that, the banks can say, given how we did betty this is what we want. Michael that is what we will get next week, whether they got approval for that. Today, we get in a crisis, how these banks would hold out. That has become less of a question. In 2009, that was the main question. Now, last year you had 29 of the 30 above the minimum in this first round. Most of the banks are in decent shape. It is a question of how much do they get to return. Betty are these tests sufficient . I know there was criticism about that. Michael the fed has ramped up these stress tests. They have two scenarios and the severe one looks like 2008. Betty thank you for joining us. Michael moore of bloomberg. Moving and shaking this morning is j. Crew ceo Mickey Drexler. He has opened the latest international store in paris. We felt the next step was paris. Paris to us has always been the style capital of the world. When you get to the city and feel a certain quality about everything that is done here. It has been on our list. We love the district where we opened up. Betty extolling the opportunities of the french market. It is extremely tough and challenging in the u. S. Forgetting the current weather excuses excluding the west coast. You have been reading about what is been going on. Apparel business of the last 10 months has been very difficult. Very promotional. It is not simple. Betty Mickey Drexler of j. Crew. Brooklynbased at sea island for an ipo could be the largest filing for a new york taste tech company new yorkbased tech company in 16 years. Reality hits. China assess the lowest economic target in more than 15 years. Details, coming up. Betty top stories this morning. China has announced its lowest Economic Growth target in more than 15 years. The premier says he wants the economy to grow 7 down from last years goal of 7. 5 . China faces a number of challenges like a real estate slump. He wants a more efficient economy but he also a dressed the issue of corruption. Our tough stance on corruption is here to stay. Our tolerance for corruption is zero and anyone guilty of corruption and be dealt with seriously. We will see to it that every instance of corruption is seriously punished. Betty strong words from the premier. The slower expansion is tolerable as long as enough jobs are created in china. The euro weakens to an 11 year low. The move comes as investors wait for more details of the European Central banks bond buying program. Mario draghi started his press conference in 15 minutes. The euro fell against its counterparts. Stocks in the region rose. Oil has gained for the third day in new york. Etsy file for filing for an ipo. The company is hoping to raise 100 million. Etsy is still losing money after 10 years even though its revenue rose last year to almost 200 million. You will have to wait longer for that larger screen ipad. Apple is going to start making the 13 inch ipad this quarter. That has been pushed back to september. There are delays involving the supply of display panels. Apple hopes the device will jumpstart ipad sales because they have fallen for four straight quarters. Iphone six plus . Maybe that is why. Peyton manning is planning to play football next year and has agreed to take a 4 million pay cut. He will be playing for less to help the Denver Broncos create cash but stability to improve their roster. Manning can reclaim the extra 4 million through teambased incentives. Those are your top headlines. As we await the latest job numbers it is all pointing up in stocks. Dow, 20,000. The next number four my next guest. He says stocks are still undervalued even if billionaires think we are in a tech bubble again. Jeremy siegel is the professor of finance at the Wharton School at the university of pennsylvania. He is the offer of the bestselling book, stocks for the long run. Every time we talk, you make the case that we are going to go higher. Make the case that we are going to see dow 20000 when almost everyone i have talked to says that profits are going to go lower. Prof. Siegel we are closer to fair market value than at any time over the last five years. My calculations say that the dow 20,000 is fair market value. It is higher in terms of the pricetoearnings ratio than the long run averages. Once you consider Interest Rates and even if the fed begins to raise Interest Rates, they are still lower than the average of the postwar period. My calculations say we could have 20 times earnings and that gives us gets us pretty close to doubt 20,000. That is why i say it is fair market value. In the short run it could go down to 16 or 17 before it gets there. It might take two years instead of one. Betty is that the peak . Even though the fed is going to start raising Interest Rates once they do, the trend is going to be up. Does that mean doubt 20,000 is your peak . Dow 20,000 is your peak . Prof. Siegel when the fed starts raising Interest Rates, it may be june or september, bull markets usually continue anywhere from nine months to 2. 5 years after they begin to raise the rates. Beginning to raise the rates does not signal the end of the bull market. Speaking to your question about earnings, earnings have been challenged by three factors. The collapse in oil price. We have the high dollar. We also have pensions. A lot of charges in the Fourth Quarter and extending through 2015 because of the low Interest Rates and the increasing and increasing the age of assumptions that pensions must use. This happens every four or five years. Those factors they are onetime factors that i do not think will continue to hit earnings in the coming years. Betty lets talk nasdaq 5000. It has got people talking about whether we are in a tech bubble or not. I referenced mark cuban. Here is what he says about why he thinks we are in a worst tech bubble. He says if we thought it was stupid to invest in public internet websites that had no chance of succeeded back then it is worth today. The bubble today comes from private investors and companies that have zero value. What do you say to that . Prof. Siegel i think he is referring to private equity. The funding that we get for new ventures. I dont think that is referring to the public market. We may argue that Twitter Facebook and some of those they are still making profits compared to 2000 when these companies were on the exchange and not making any profit. The pricetoearnings ratio of the nasdaq back in 2000, i saw one on a bloomberg screen that i use, was up to 600. It is 30 today on 2014 earnings. That is a huge difference. Betty you will be back with me because we will get jobless claims numbers in the morning in a moment. Well be right back. Betty two things to watch out for. The live shot of the room where mario draghi is about to hold his press conference in cyprus. He will be explaining more about the 1. 1 trillion on buying program. Jobless claims will be out at 8 30 a. M. You just heard from Jeremy Siegel on why the doubt is going to hit 20,000 by the end of this year why the dow is going to hit 20,000 by the end of this year. Scott brown, chief economist at Raymond James who is one of the lowest predictions for jobs growth at 170,000 jobs created. Consensus is at 235 235,000 jobs. Scott joins me now. Why such a Bleak Outlook for february . Scott i think the outlook for jobs is still strong. You have some bad weather for the month of february. Also, you tend to get seasonal noise. The payroll number is based on a statistical sample. It is accurate to plus or 105,000. We could see a number print as low as 95,000 or as high as 3005000. There is a huge amount of certainty a huge amount of uncertainty. This was an extraordinary pace of job growth. A 4 million annual pace which will be hard to sustain. Betty why is that . Scott these are statistical numbers. It is not unusual to see the numbers go above trend over the short term. Maybe a bit lower in the longer term trend. The numbers will bounce around. I would not describe this as particularly weak even though i may be at the low end of expectations. Betty you economists never want to come out as bears on the economy. Scott i am very bullish on the economy now. The drop in gasoline prices that we had from the middle of last year is and him promise is an in norm is positive for consumers. That will help drive the activity in the spring. You look at january and february, a lot of seasonal adjustment issues. You have some weather that can move the numbers around. As you get into the spring, Construction Activity will increase. Firms will be hiring. Betty i want to bring in other economic numbers we had this week. A sampling of what we have seen. The numbers have not been outstanding professor. Personal income under shot. Personal spending, also underestimates. Manufacturing at 52. 9 was underestimated and so was adp reports. What do you make of those kinds of results that we have had only for this week . Prof. Siegel one of the most puzzling and i would like to know scotts opinion, we have had such strong labor market growth. Such poor gdp growth. It is like a disconnect. With the labor growth we have been having, we should have gdp growing at 5. 5 a year. We will get the productivity number tomorrow. It is going to be 3 . The bigger question is why has productivity lagged . That is why we are getting those numbers. Betty we will get productivity in a few minutes. Prof. Siegel it will be today . I think it is going to be a very bad number. Scott the productivity numbers will bounce around a bit. They are relatively unreliable on a shortterm basis. We are looking at a trend where productivity growth is slowing down. I am optimistic that is going to pick up. Demand increases in the spring and summer. I dont think gdp growth has been all that bad. 2. 2 in the Fourth Quarter. That is because you had a pullback in government spending. Defense spending in particular. Slower inventory growth, wider trade deficit. Prof. Siegel we had one Million People in the Fourth Quarter. 2. 2 growth . No way. Scott that gets back to my main point. The type of job growth we saw in the numbers, that is a statistical sample. If you look at the trend over the last year, 3 million pace of job growth for the year seems reasonable. I think there is statistical noise there. That is not really a sign of weakness, that a statistical noise. Betty what is it that you think is going on, professor . Prof. Siegel i dont know. I have never seen productivity and gdp growth disconnect so badly from labor market growth. We have been teaching as professors something called okens law, the relation between how much the employment rate goes down and gdp goes up. Theres never been a disconnect of the magnitude we have seen over the last two years. Im trying to figure that out. I wonder if scott had any ideas. Betty some numbers are out. Jobless claims are. Scarlet fu has more. Scarlet an unexpected increase. We have an unexpected increase to 320,000 brings us back above the 300,000 level. We just got productivity too. What we have is a revision downward but not as bad as some economists anticipated. It is a drop of 2. 2 for the Fourth Quarter. Previously, it was reported as a drop of one point 8 . Many economists were looking for a drop of 2. 3 . A less severe downward revision. Unit labor costs, revised upward after a previously recorded 2. 7 . This is the direction economists have been looking for. All this as we head into the friday jobs report tomorrow. Betty thank you. A quick wrapup of those numbers. I want to get back to scott and jeremy for a beat. This unit labor cost is interesting. It raises that other question which is, wage growth. When are we going to get this wage growth that will allow the fed to start lifting rates . Scott i think there is plenty of slack in the job market even though we have had strong job growth, you look at the unemployment population ratio and it is below where we were before the recession. Some demographic issues. Still a lot of people that can be put back to work. A lot of people on the sidelines, not officially counted as unemployed. A lot of people are underemployed. College kids, working at starbucks who could move up as the economy improves. Other people would come in to help boost things along. On the jobless claims, there is a weather affect. Initially when you have bad weather, you often see claims go down. People who cannot get to the claims office. And then you see an increase because that weather does tend to restrict economic activity. You will see increase in claims. Betty we are going to have to leave it there. Scott brown, chief economist at Raymond James. Also, thank you to Jeremy Siegel , professor of finance. We are monitoring the News Conference with mario draghi taking place in cyprus. Starting march 9 you can watch the News Conference on our live event channel at bloomberg. Com tv. These are the top headlines. Other top stories this morning. The u. S. Ambassador to south korea says he will be back at work despite getting 80 stages stitches for knife wounds. His attacker says he opposes south Korean Military exercises. North korea called the attack just punishment against american warmongers. Hillary clinton says she wants the public to see her emails. She is asked the state department to release the messages she sent from a personal account while she was secretary of state. Mrs. Clinton is being criticized for using a private system for official business. She wants the state department to screen them and delete any sensitive information. The Justice Department is demanding changes in ferguson, missouri. It says the police force is motivated by racism and making money for the city. The report says Law Enforcement unfairly target blacks in the suburb. According to our investigation, this emphasis on Revenue Generation through policing has fostered unconstitutional practices or practices that contribute to constitutional violations at nearly every level of fergusons Law Enforcement system. Betty the investigation follows the shooting of an unarmed black teenager by an officer last summer. A 21 billion dollar deal. Atbbvie. The first four abbvie since it pulled out of a deal. Dzhokhar tsarnaev admits he committed the crime. They are trying to save him from the Death Penalty by blaming his brother. Jurors heard testimony from three women who suffered injuries during the bombing. Headlines coming up from the press conference in cyprus. We will be back. Betty less than an hour until the start of trading today. Mario draghi speaking right now on the markets economy. We have some movers for you today including those headlines out of europe. Scarlet as mario draghi speaks, we focus on how the euro is trading. It is now positive versus the dollar but this may be fleeting. It is at 11097. You might look for a potential overshoot on the downside. More Euro Weakness if tomorrows jobs report comes in strong. The euro had been weakening in the days leading to the ecb announcement. We will continue to monitor that. Plenty of traders have been getting ready to break out there eurodollar parity hats for a couple weeks. The equities landscape overseas in his home and at home. Hong kong trading down within 1 after china targeted 7 gdp for this year. These are Chinese State owned companies that are listed in hong kong. The ftse up by one quarter of a percent. The u. K. Centralbank met today and decided to do nothing. The index is still shy of its record close. The stoxx 600 already at a 7. 5 year high. Most of the Industry Groups are rising, led by insurers. That is following earnings results. You told us earlier about the deals taking place late last night abbvie swooping in to buy pharmacyclics. These are the receipts. Johnson and johnson, up right a quarter of 1 at the moment. Betty thumbs down from abbvie shareholders. We have been monitoring that News Conference with mario draghi, taking place. Speaking in cyprus. Draghi revealing details of the Central Banks stimulus plan. He noted there will be no inflation given the drop in oil prices. Olivia sterns has all the latest headlines. But we know now about stimulus. Olivia draghi announced stimulus. Now we need to get some of the meat on the bones. So many questions going into this. When will asset purchases start . They will start march 9 on monday. The purpose of renting all this money is to try printing all this money is to try to fight inflation. They see zero inflation in 2015. We thought inflation would grow by about 7 10 of 1 . We have a new growth forecast for 2015. They see it coming in at 1. 5 . An upgrade on the growth forecast, downgrade on the inflation forecast. That is what economists were expecting. Other questions including, how low can they go . Further into negative territory . Who will buy and sell this paper . Will they do it through reverse auction . Anything mario draghi can say on greece we will be listening to closely. Betty i think it is interesting the Market Reaction to the euro down to an 11 year low. Stocks are relatively humming along in europe. Olivia it is incredible. There is a difference between what is happening on wall street and main street. We had numbers out overnight thing french unemployment is at a record high. 10. 4 percent. Even in germany, disappointing factory numbers coming out. There is concern about the strength of the european economy. The growth forecast was revised to today to 1. 5 . How does he measure success . Can he solve the core structural issues in europe . That is down to the leaders of those sovereign nations. Betty is he just delaying the inevitable . He is not solving the problem. Olivia sterns. You can watch draghis News Conference at bloomberg. Com tv. Make sure you download that app. A great Second Quarter for america up a largest second largest wholesaler. Did Hillary Clinton pride privacy over security when setting up her email system . We discussed that, next. Betty some words of warning from mark cuban. He says we are living in another tech bubble and this one is worse than the last one in 2000. Cuban took to his blog to warn against the current manias of investing in apps. Today, it is in the realm of private investment meaning those who are into deep with no way out. Cosco reports a 29 jump in secondquarter profits. The chain reported sales net income climbs to 500 135 per share. It is up 463. Benjamin netanyahus popularity is ticking up in israel after his speech to u. S. Congress this week. Does go Percentage Points in a poll taken after the address two Percentage Points in a poll after the address. Netanyahu will face reelection in less than two weeks. Athe government of the state of maharashtra banned possession of beef and its byproducts. It is now in legal to slaughter cows. The prohibition is a big victory for hardline hindu groups. The u. S. Economy has a weight problem. Research to be public later this year shows medical expenses linked to obesity have soared. Experts say obesity leads to reduced productivity and even higher transportation costs. The federal government estimates 36 of American Adults are obese. Those are your top headlines. The story behind Hillary Clintons email system gets increasingly complex. According to experts, it turns out the email system had the ability to erase messages completely, raising rancor among republicans who have subpoenaed her email records. Michael orielly dug deeper into the system and joins us now from washington. Explain what this system she used looked like and how it is different from the ones that we use today. We are on yahoo , gmail hotmail. Michael one of the things we know about the internet is it is hard to totally erase communications. When we use google or yahoo s email systems, even we delete things, because they are going through google and yahoo s servers, they retain copies. If Law Enforcement or anyone were after those communications they could subpoena google and yahoo and they would hand them over. The way to get complete control of your data is to set up your own email system. It used to be 10 years ago, a company to thing to do. Now, it is not that hard. You can download packages that allow you to set up your own email server. She registered a domain set up her own email server that was private. The interesting thing is the timing. She did this the week before she became secretary of state. She has not discussed the motivations publicly yet but it seems to be tied to this moment when she was about to become secretary of state. Betty the timing is curious. That email has been published publicly. Hdr 22 at clinton email. Com. Is this private email more opaque than government emails and more secure . Michael it has an advantage for clinton in terms of privacy. If the u. S. Congress wanted her communications, they would have to subpoena her directly and her lawyers would be able to put up a fight. In terms of security one of the things we know about the system they tried to do a highend system. They purchased a way of encrypting messages between devices and the server from a Company Called fortinet. It does appear that it was not set up correctly. The system is set up to use a private encryption key that she was to buy from somewhere. They never took that extra step. The used the default. Experts say it is not as secure as it should have been. A sickly, basically, it allows man in the middle attacks. Betty thank you so much for enlightening us on this. Michael orielly of Bloomberg News. Much more ahead how the fed rescued its sense of humor along with the economy. Wall street is staying straightfaced as it awaits the stress test verdict. Betty etsy wants a piece of the market action. It plans to go public. We will have that story in the next hour. Betty welcome back to in the loop. Futures indicate stocks will rise. The number of americans filing from employment than her benefits rose. The u. S. Ambassador to south korea says he will be back at work soon despite getting 80 stitches for knife wounds. Mark lippert was stabbed in the face and arms. His attacker says he opposes south Korean Military exercises. North korea called the attacks just punishment against american warmongers. Hillary clinton says she wants the public to see her emails. Clinton has asked for the release of messages she sent from a personal account while she was secretary of state. Mrs. Clinton is being criticized for using a private system for official business. She wants the state department to screen her emails and delete any sensitive information. The Justice Department is demanding changes in ferguson, missouri. It says the police force is motivated by racism and make his money in making money. The investigation followed the Fatal Shooting of an unarmed black teenager by officer last summer. A 21 billion deal in the drug sector. Abbvie says it is buying pharmacyclics. The deal is the first for abbvie says it pulled out of the shire deal for tax purposes. I wants to count you down to the open with your top 10 headlines hitting our radar. Pimm fox and julie hyman joining me this morning. Lets start with number 10 lets lighten it up. New official documents are giving us a fresh look at what was going on behind the scenes at the fed during the great recession. It seems like it was a laughing matter. A chart was created based on the number of times laughter was written into transcripts from the Federal Reserve at a 2009 policy meeting. It seems looking at the chart it hit a low in 2008 but we rebounded with the number of times they made jokes. Who knew they could be so funny . Pimm what this is charting is, when you see laughter and it is in parentheses. It does not say it could have been the person that actually said whatever it was. Julie was it a chuckle . Pimm i look at the details of this. They should keep their day jobs and not try to go to saturday night lives. Betty here is one of the jokes, we will have plenty of time tomorrow for a special regrettably on televised version of who wants to be an inflation fighter. Julie i think you had to be there. Betty wall street is on edge as it awaits the results of the fed stress test. The test analyzes whether Large Bank Holding Companies have a lot that have enough capital during certain economic conditions. These tests are pretty stressful. They mirror what happened back in 2008. Pimm are they really . They have a system to do this. They have been doing this for how many years . Everyone complains about the regulators living in the cubicle next door. This is the way they have got to do business. These are big institutions. They know whether they are going to make it or not make it. Can you believe they are all waiting by the phone . Citigroup is the big one. Julie there have been companies that have not passed. Pimm anybody in the Banking Industry surprised when those betty nobody will be surprised that jpmorgan wouldve passed. Warren buffett who has said a thing or two about wall street banks. He says he is a soft spot for press journalist. He says hes just like one. If i did not do what i do, i would want to be a journalist. I consider myself a journalist to some extent. Betty he made these comments in an interview. Is he saying that we could all be like buffet at some point . Julie he is trying to butter us up. If i was not a journalist, i would be a billionaire. Pimm he said journalist. He did not say editor. He would be the Investigative Reporter going out there. Betty he is on the hunt. Julie what he is saying makes sense. He just, make a lot more money. Pimm the focus is different. Betty apple fans will have to wait longer for the ipad with larger screens. Reduction has been put on hold until september. Apple is hoping the bigger device will jumpstart apple sales. Julie cannibalization. As by came out earlier this week and said tablet sales were down 30 industrywide. Betty because of bigger phones. Julie if you have a bigger phone, what do you need a tablet for . The phones are selling, the laptop is selling, why do i need a bigger ipad . Pimm apple has the larger iphone. I have talked to people who have the newer iphone and compared it to the size of the smaller older iphone. One of the things they keep bringing up is that the factor of having to hold something that is actually larger is much more difficult and is a challenge particularly because people try to type with one hand. Balancing this thing. Tablets for one purpose, maybe phones for another. Betty it looks like we are still on the iphone five. Pimm i have a drawer full of the stuff. Betty Peyton Manning will be back for an 18th season but he will take a 4 million pay cut according to the denver post. The quarterback agreed to take a pay cut so the team can use the extra money to recruit new players and support him and bring him back to the super bowl. Julie i think pimm is very sympathetic. Pimm he is great that 19 million, 15 million. Betty he holds several records. I remember his performance in the super bowl a couple years ago. That im surprised he is still earning 15 million. Pimm paid for performance. Betty the manning brothers themselves pimm imagine if they did that to chief executives. You have a lousy year, you go from 19 million to 13 million. Julie he has enough sponsorship. Betty Online Grocery wars heat up. We will ask Michael Schlotman how it is panning out. We will be back. Betty we continue to count down to the opening bell. It is time for our deep dive. Krogers, the Grocery Store chain. Earnings topping estimates. Rising for a 45th straight quarter. Kroger announced it created 25,000 new jobs in 2014 with more than 90 of the new jobs in its supermarket division. Uncle schlotman joining the again this morning Michael Schlotman joining me again this morning. It seems like you were firing on all cylinders on the jobs front. You hire to 25,000 last year. Are you going to hire more this year more of the same this year . Michael we continue to have great opportunities in our stores. Many stores continue to look for associates. I do not know that we will hire 25,000 dear, but over the last several years, we had added 6d5000 associates. Today, almost 4000 associates 400,000 associates. I cannot imagine a scenario where we will do anything but increase employment next year. Betty we have been talking about wages and we have the friday labor reports. I was looking through the wages that you pay compared to some of your competitors and your base wage is lower than others. Given your good performance, your rising sales, does that give you room twoo raise wages . Michael our average hourly rate is about 14 per hour. You add in a Great Health Care and Retirement Plan for the associates. When you think about total compensation, they have a great package that is comprised of those three. Most of our associates are still covered by our definedbenefit plan than a 401 k plan. We are doing something right to be to add the number of associates that we have. Less than 4 of our associates in our stores are at the federal minimum wage. A majority of those are under 18 years of age. The folks were trying to support their family, we feel good about what they are paid and what their total benefit package is. Betty on the other side of your business, the Online Grocery business this is expected to be 1 5 of Grocery Sales in 10 years. I know you have introduced this click and collect program. You tested it out in cincinnati. How is that going . Michael that is an effort we acquired when we emerged which best when we merged with harris teeter. It was a great part of that merger having a division that had so many stores with that up and running. We are pulling from their expertise and working out some of the kinks. There are a few changes we have to make to have the process run on our systems but we are very excited about that opportunity, based on the customers acceptance. In cincinnati, it is obvious the customers are going to have that same a traction to it. We are bullish on that. We have an Online Presence as well. They have a significant amount of natural and organic Food Products they deliver online as well. Betty if in the next 10 years Online Grocery sale is expected to be a fit of the market or more, is that something you expect is going to be the same for kroger . Michael our goal is to develop a process where the customer can choose how they want to interact with us. If you look at those click and collect customers they are not exclusively click and collect. Some of our harris teeters customers have been those customers still come inside the brick and mortar store as well. Our goal is to make it convenient for the customer to interact with us, regardless of how they want to do that. Betty fuel sales have been a big part of your revenue as well. I believe about 20 of your sales back in 2013. Lower gas price, is that going to hit your topline . Michael the way we run our business and think about our top line is id sales without fuel because of the volatility in fuel. The profitability of fuel is separate. If you look at the Fourth Quarter, we had 6 identical food sales without fuel inside of our divisions. We are a strong fuel rewards program. That 6 id number was reduced by the cost of our fuel rewards program because people have to buy groceries to get that discount. We are a strong core business we expect to carry us into 2015. Betty i mentioned some of your competitors, target is one, just announcing they will refresh their grocery segment. Brian cornell, the ceo said our guests tell us they would like us to offer more choices more organic, more glutenfree. How concerned are you about a reinvigorated target . Michael our goal is to continue to serve the customers we have inside our stores. Our Natural Foods department continues to grow. Our customers understand what we have. Our simple truth brand became a billiondollar brand this year. Our goal is to focus on the customers we have serve them well and continue to increase our penetration with existing customers. If you look over those 40 five quarters, there has been a lot of competition come and go. Our focus on the customer will continue to deliver us continue to deliver for us in the future. Betty snow whether or not consumers will be kept at home. A look at the snow in washington , continuing to pour down. All across the northeast. We will be back. Betty the most important stories you need before the bell. Pimm fox and julie hyman joining me. Mark cuban, knowing a thing or two about tech booms. He thinks we are headed for another tech test. He says if we thought it was stupid to invest in sites that had no success no chance of succeeding back then, were worse today. At least back in 2000, you could cash out or try to sell your shares as there was a liquid market. These days, it is about privately held. Pimm what do you think . Julie i think it is a bubble, only if it pops. In other words it is all well and good to say it is a bubble. What causes the pop . Are we going to see a cascade of failures . Money is going to be trapped . Betty if it pops in the private world you have a lot of private wealth people with a lot of money losing their shirts. Does that affect the economy and the markets . Pimm i heard the bell. All the people who are trying to raise money for the next tech startup, thanks a lot mark cuban, that was really helpful. Betty etsy filing for an ipo. The company is going to be raising 100 million. It could be the largest ipo from a tech Company Since 1999. Julie the 100 million, that is the technical thing. Pimm ever use etsy . Julie no. Betty are we the demographic . Pimm i have used it and you can connect to independent retailers, tradespeople, all over the world. That is what i find so amazing and it is very efficient. I wonder why ebay had not thought of that kind of thing. Julie a lot of those retailers are upset because etsy has been changing the rules approaching this ipl. They are afraid once it goes public more of the rules will be changed. Betty china is calling for its lowest Economic Growth in 15 years. The premier said chinas Economic Development has entered a new normal without deepening reform, we will have a difficult time with steady development. I read some commentary this morning. Honest comments coming out about how terrible the economy could be. Pimm does he have to pay for the use of that phrase new normal or . Betty as we near the opening bell, a check on futures. Settling slightly higher. Our top story and opening bell our next. Betty welcome back to in the loop. Lets get back to the most important stories you need to know before the bell. Pimm fox and julie hyman joining me. It is the ecb. Mario draghi speaking. The chief says that the bank will begin absent purchases asset purchases next week. He addressed key questions about greece. There he is in a live shot from the press conference. Also noted, inflation still really, really low in the euro zone. Julie 0 . Betty basically nothing this year, and less than 2 going forward. Pimm that is for a very large number of people in a multifaceted economy using the sat word. [laughter] this is huge. It is interesting that you have an italian who is the poster person for europe and the other person may be Angela Merkel of germany. You have italians and germans chimed to figure out what to do with issues with greece and spain and italy and france. He is doing a good job, isnt he . Who else would want to do that . Amidst all of this we have to talk about markets. Pimm he is trying to get the value of their currency down. Betty great time to travel to europe. I want to bring in nicholas. He has been focused on the nasdaq hitting the 5000 level. He says dont call it a comeback. We were talking about mark cuban and his morning on a tech bubble. Are you on the same page with him . Marks point was right it is kind of a large motel at the moment. There is no market for a 25 million deal. 25 billion dollars, sure, but a small ipo betty there is room for an ipo but exactly. Pimm 25 million in 15 years there has been a lot of inflation. What you could buy for 225 million in 2000 is a lot different for from what you could buy for 25 million today. How did he make his money . Betty he sold. Pimm what did he sell . Betty broadcast. Com. And that he never invested in tech again. Not money until you sell. Betty make just nick just did a survey of cash they are holding it 2 trillion parked overseas. The survey that you survey among your investors, they say, what they are unhappy with the cash the companies are withholding . The first was a 72 of respondents, all market professionals, saying corporations are holding too much cash. They pointed to technology predominantly. 12 thought it was way too much. Overwhelming majority. Technology came in for the most criticism, followed by financials. The technology side, investors said we would like them to stop thinking about buybacks to grow earnings good, incremental hiring, incremental spending on m a, not just buybacks. Betty it basically says that the ceos are mismanaging the money. Nicholas the goes back to why you pay more for the nasdaq than the s p. Gross growth is the scarcest commodity in the Capital Markets right now. The s p stocks are closer to zero. To get that growth, you have to invest. Pimm the chief executives and corporate officials are paid because of the stock price, you get the stock price up, you do welcome everybodys happy with you. One way to get the stock price of his two buyback shares. If you spend money on research and development, that doesnt count as an asset. If you spend money on a new employees, that doesnt count as an asset on the Balance Sheet, on the statement. It doesnt economically make a for chief executive to say great, lets invest in five new factories when they can buy back stock and the stock price goes up because you are pulling supply out of the market and they make more money. Is that inconsistent . Nicholas it is consistent with where we have been in the cycle. We have been in the early phase for the past five years. Now at this stage you have to show growth. Investors in our survey say we want to see you do your job and invest money and grow the business. Julie it is interesting that you are talking about this in technology, particularly because i cover retail and Consumer Companies and in a sector that has been quite troubled, we are starting to see some investment in workers, in wages, as you are just discussing the kroger cfo and the stores and technology. Do you think that will become more widespread . Are you looking as an investor for areas where that is happening . Nicholas absolutely so, and you are right. A lot of this is that we had a long hangover from the financial crisis and it dampened not just confidence of investors and consumers but even ceos, and so the buyback theme became so popular. What is the next step . The survey said that growth is now the next step. Julie so how are you translating that into Investment Decisions . What sectors are you seeing that investment happen and where are you recommending people nicholas we did work on the nasdaq recently because the nasdaq is a big composite index, but the top 10 names comprise a third of the next. Pimm capweighted right . Nicholas it is. 50 of the accuses apple. 15 of the use is apple. Betty investors want the companies to spend her but when it comes to their own money, over 40 want to hold on to their cash. They have actually more cash than they did before. What is this . They Want Companies to walk the talk that they themselves want . Nicholas that is precisely right come that is what the survey found. It might sound hypocritical but dont forget that the shareholders own the company. They have a prerogative to say you do something, we will be sending us. Betty is that a bearish sign that so many hold onto their money . Nicholas we asked how much of the 2. 7 trillion dollars in fines is money on the sidelines, and the meeting answer is 2030 median answer is 2030 . They see a lot of dry powder out there. If it does come back in, that is impossible to say. Pimm based on your experience when people are able to cash out , or like mark cuban are able to sell the company or have a 25 million ipo, the actual people the executives that run those 70s, when they make big money, what do they do, park in treasuries, and they say one thing and get to live another way . Nicholas you usually get a high networth banker knocking on your door to back away from the single exposure you had. Betty great to see you. And thanks to julie and pimm as well. We will keep you uptodate on what is moving moments after the bell. Amid plunging sales mcdonalds this changing of its food policies in hopes of a turnaround. What customers say im loving it . Betty training just underway. We look like we are rebounding here. Scarlet fu has a quick look at the action, including mcdonalds. Scarlet jamie, my producer, went out to get coffee and said we need to cover analyst calls another coffee purveyors so mcdonalds and Dunkin Donuts it is. Piper jaffray removed its overweight rating. The second gained 12 over the past month and the analysts that the shares will remain rangedown because management initiatives to improve sales will take time to work. Dunkin donuts is having its best day in months after goldman upgraded it to buy coffee is a big reason. Also, better results from its perks loyalty program. You just spoke with the kroger cfo about competition from target. Kroger is trading at a record high. He is certainly taking a victory lap today after fourthquarter results topped analyst estimates. Outlook is also better than anticipated. Ciena posted a Third Straight day of losses. The revenue last quarter missed estimates because of the timing of some orders, and the stronger dollar was a head wind. Also, investors are on m a watch in the Shopping Mall owner mass riches moving higher after the wall street journal reports that Simon Property group has approached it about a takeover. You can see Simon Property group is slightly higher in early trading. Betty i am still on that coffee though. You have got me hankering for that. Scarlet loyalty perks program. Betty i know, another cup of joe. Circle monday, march 9, coming up fast. That is when the ecbplanned one trillioneuros to ms. Program is going to start. Mario draghi aims to end all the mysteries running his plan. Investors appear to be satisfied. European stocks are gaining for the second day, pushing the stoxx 600 to its highest level since july 2007. Jon ferro was in the room with driving and company and joins us now with the big headlines. You and i were talking earlier this morning about all the questions surrounding the program. Does he feel like that mario draghi answered all the questions . Jon i think he did. For one, we have a date, march 9, when the ecb will begin buying sovereign debt. When i look at him as he started the press conference, this was a very positive mario draghi. You could say that this was the central bank hiking Interest Rates. He lifted his forecast for growth. The forecast for inflation in 2017 is encouraging. The euro one higher. Then came the real line, the forecast. The full and limitation of the marnie policy the full implementation of the money policy includes the bond buying plan betty ok, looks like we just lost Jonathan Ferro there in a cyprus, but it seems like most of the questions were answered on the qe program by the ecb. Back to mcdonalds could you just heard about the downgrade by piper jaffray. Shares are dropping in the Early Morning trade as the fast food giant and ounces it is working with supplies to stop selling chicken raised by human antibiotics. This is Steve Easterbrooks first move one of his first moves in an attempt to turn around the golden arches. He took the reins this week and is attracting customers with healthier options. Mcdonalds will offer lowfat milk, milk from cows that are not treated with artificial growth hormones. Going to be cleaner, more organic. Julie hyman with me on this. It sounds like they are going into the zeitgeist of america, that they want fewer, organic, healthy food. Will this help the bottom line . Julie that is very unclear. Mcdonalds has not given any clarity as to who is going to pay for any changes in the sourcing of its chicken or milk, for that matter. I talked to folks at the National Chicken council and they said that if you are talking about me or chickens raised in this fashion, it is five cents to seven cents per pound more for chicken. Who is going to eat that cost . Will it be the suppliers which fell, by the way yesterday . Is it going to be the franchisees, who are already not terribly happy with mcdonalds because of struggling sales . Is it going to be the customers . Analysts i spoke to said that mcdonalds customers do not want to pay more for the chicken or other products, for that matter. It is unclear if mcdonalds, through its sheer size, has the power to push back and make some of its suppliers absorb this cost. Betty if they want to put the blueberries in their pancakes and the blueberry market goes crazy they are so big in that respect. I am curious as to what this means for the antibiotic market. Julie i talked to an analyst at rbc and he says that if you look at the price of chickens, we saw a surge in the price but it has since come back down to some extent. You could see mcdonalds taking advantage of chicken prices coming off peak to then implement this sort of change that the chickens will be somewhat more expensive than they are now but not as much as they were perhaps at the pricing. Maybe that is part of it. Betty maybe. Easterbrook has only been on the job for a few days, and already the stocks have been reacting positively. He hasnt done anything yet other than this. What is on the horizon that you are hearing . Julie well there was a lot of talk, a lot of speculation about what he could be doing. There is a lot of questions about what he could be doing. She did speak before an Analyst Conference yesterday, and he is going to be talking several other times over the next couple of months. The Company Comes out with the Monthly Sales numbers on monday and that could be another opportunity potentially. Analysts are looking for more implementation of technology for example, mobile payments mobile ordering. That is where mcdonalds has been behind compared to other Fast Food Restaurant companies. And then theres the question of customization. Chipotle has led the market. You are looking at the u. S. Monthly sales for mcdonalds. Chipotle has led the way but there is this big conundrum with expansion of the menu and mcdonalds. How does it find the sweet spot . That is a really big question. Betty i think something people are not talking about is just how dismal it is to go into a Mcdonalds Restaurant these days. When these is renovating wendys is renovating a lot of its restaurants, chipotle is a Pleasant Place to eat. I dont know anyone who wants to eat at mcdonalds and sit in their restaurants. It looks on most like the 1970s. Julie the bottom line is the company is going to have to spend some money, whether it is on different kinds of chicken, whether it is technology, whether it is the overall dining experience, all of this will require investment. And we have remarkably little clarity. Listen, give the guy a break, he just took over. But we have little clarity as to how much this is going to cost and what effect it will have on margins and on mcdonalds bottom line, and hopefully over the next month or so there is an Analyst Meeting upcoming earnings next month we will get more information. Betty i still like their fries and i like their coffee. Thank you, julie hyman, our senior markets corresponded. Stressful day on wall street. Investors are awaiting the results of the feds stress tests later this afternoon. What that might mean for one ceo in particular. Betty if you are a banker every day on wall street it is fairly stressful but today is even worse. Investors are awaiting the results of the stress tests. One suggested that because the stress tests fill the bank under his leadership there was a good chance he will not survive another year of disappointing results. I want to bring in Market Makers anchor Erik Schatzker. He set his own deadline. Erik especially stressful for michael corbett. Citi has an just feel the stress test, it failed it twice in three years, and the first failure was one of the principal factors explaining the involuntary departure of Vikram Pandit as ceo of citigroup. No . Oh corporate is under a lot of pressure here. The widespread expectation under investors who follows the group that it is going to pass. It would be a shocker lets just be clear what we are talking about. When we get today at 4 30 from the fed is the first of two parts, and there is no expectation that citigroup is going to fail the first part. That is the Balance Sheet analysis. That is the stress test. The fed uses what is called a severely adverse scenario including a 25 drop in home prices, 10 unemployment. Betty they will have adequate capital in the scenario. Erik there is one bank that failed the first part of the test last year and that was his ions. If citigroup were to fall down hsbc, rbs last year was on the qualitative assessment, and we dont get those results until next week. That is when the fed looks at the banks ability to manage risk for example, and gives it pass or fail on the request to return capital to shareholders in the form of dividends and buybacks. That is where citigroup was denied and that is what citigroup investors want most of all. We want that capital, baby. Betty thats right, we want some money. You are going to all this on your program. We will have much more ahead. Will an ipo help or harm business . Stay in the loop for that. Betty two Silicon Valley startups taking center stage in the news. First is etsy which just filed for an ipo and it could be the largest fight for new york tech Company Largest Biotech Company in 15 years. And this could be the latest startup to join the billiondollar club. I wish i hadnt known that eyeglasses could be worth 1 billion. I wish i had known that eyeglasses could be worth 1 billion. Leslie picker, who covers the ipo market for us, joins me now. Etsy about 100 million, could be the largest in 15 years . Leslie our sources tell us it could be the 300 million dollars, the most since 1999 and astounding feat for this company, started by a guy who needed a place to sell his wooden computers. He created this marketplace for handmade and vintage goods. We learned yesterday from the filing that neither he nor any of the cofounders names were in eight. It has gone through a series of revamps and restructurings. We have a ceo, a former microsoft executive. Betty how is it going to be compared and valued against others, other ipos in this space . Leslie ecommerce companys, along the lines of potentially alibaba, ebay. Highgrowth, internet startups with the marketplace model. Lending club fits that model, too, because it is a platform where it can next buyers and sellers. Betty wayfarer had an ipo last year and are not doing well. Leslie wayfarer is a perfect example. Betty furniture retailer. Eyeglasses, 1 billion, how did they get to that . Leslie if you look at the list there are 70 companies valued at more than 1 billion in the private markets now. It has become some kind of a game in Silicon Valley to get to this place. We have been told by our sources that there can pressure from investors to actually post that number into the public, that we are a 1 billion company. It remains to be seen whether warby will accept this money or do another round that values than that highly. But today there is so much pressure to accept this money while the market is hot that it is difficult for many of these startups to say no. Betty clearly i had help with my eyeglass purchases. My producers make fun of me, how many different glasses i have. The im some of them there i am. Some of them from warby parker others not. It just makes me want to buy even more, ok . What is the exit plan . Are we going to see a warby park er ipo . Leslie the last round of investing it is economy that is five years old. The average age of an ipo is an 11yearold company. Investors might poke them and say hey, we want our exit, we want our liquidity now. Betty leslie picker, Bloomberg News ipo reporter. That does it for today on in the loop. Dont forget, tomorrow is jobs day. The bad Winter Weather put a freeze on hiring in the u. S. We have an allstar lineup that includes princeton economist alan krueger, Bloomberg View columnist mohamed elerian, and jason furman chairman of the white house economic advisers. All starting at 8 00 a. M. Eastern time. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and stephanie ruhle. Erik 21 billion prize why these two drugmakers say that much for a company with less than 1 million in net income . It makes a hot cancer drug. Stephanie a hot cancer drug come that is another level. If the London Stock Exchange decides to expand, china is a logical choice. Erik arbys nothing to beef about it at a time fast