Transcripts For BLOOMBERG Street Smart With Trish Regan And Adam Johnson 20140416

Whether or not it will pay off ahead of the First Quarter earnings. Plus we are live on the for from new York Auto Show. To catapulte going sales . All of that and more, coming up in this edition of street smart year ago markets are near the highs of the session there. Thehe green, same story on nasdaq, julie hyman has the big three, watching the stocks you need. Some of the upside we are seeing today has to do with Industrial Production. Janet yellen did not seem to hurt matters. Yahoo is out with numbers, but it is sort of an interesting story here. Yahoo s earnings were not that fantastic. It seems to be more gaining because of the figures come ali baba. Of course, they own 24 of alibaba, that Company Reported a surge in sales of 66 . It will not be relying on it forever, they will becoming public, but for now it is still helping matters at yahoo . A different story is bank of america. Unexpectedosted an loss. Not what analysts have been looking for. Bank of america, like so many competitors, had many Legal Expenses as it tries to tie up the issues related to the financial crisis and mortgage practices. Those fees still coming in higher than the bank and analyst had bargained for. Speaking of banks, the First Investment bank coming public today, raising less than initially expected. Shares are rising in his first day of trading after pricing at 25 apiece. All right, thank you, julia. We will be talking to you shortly. Google is on deck today after the close, they have been consistent as a performer, seeing organic Revenue Growth for the last 16 quarters. At their core business could be in jeopardy. Ad spending on bing has increased 60 in the First Quarter, more than doubled googles 29 gain. Slowly beeno stealing market share. Something that google has noticed, they are trying to branch out, ochocinco product categories. Like google glass, finally hitting the market. Yesterday, just for one day, of course. Does this quarter market turning point change course . I am joined by tom forte, jonathan keller, and pete stossel. Great to have you all here. I will start with you, tom. They are talking about products. There is concern about the advertising revenue. How would you characterize the situation for google right now . What is generally speaking i am more optimistic than the picture you painted. I think they have done a good job growing their way through this transition. A significant increase in activity, their page views, with pressure on activity as a result. Are you worried about being at all . Not so much. If you look at this quarter in particular, theyre going to aport motorola as discontinued operation, creating an easy comparison. It could be some good news for google. So, yesterday is a oneday thing. I have had them for a little while. I have been an advocate in a slightly ironic way. What is the irony . That they look very silly. You are right. It is hard to take people seriously when they wear them. I think the design is a mistake, but the myth the technology is great. You bring up an important point. I thought it was just me saying that i would not wear those. A lot of people are concerned that they look a little bit funky. He was going to pay 1500 . Very few, though they did report that they sold as many as they had, if i dont know if that is the same as selling out. Of the white,ut but they have the other color . Manyey said they had as places in the Explorer Program as they had to give out. To translate that, i dont think its gangbusters, but it was a decent get a decent day for google glass. Jonathan, have you tried out google glass . Did you see that on a daily basis . I have no interest. You have to try it. That is like me and catch up. I am not going to try it. I think it is hard enough for , a watch, i band dont want anything near my face. To google go back glass in a second, but jonathan, i know that today he reported google looking at bringing fiber to new york city. I mean, we have seen it in some loan markets throughout the country. Nowhere near such a cosmopolitan area, like new york. What will this mean for google . I think this is the best thing ever to happen to new york. I cant tell you how many Time Warner Cable subscribers will literally break down doors to have some other option at this point. I think this will be a huge thing for the city. Even the startups in the tech industry, this is a major, major thing if it happens. A major thing if it does happen. Great thing for the company . Google fiber is talking about expanding into 34 markets. In new york city, that would be huge. If you look at their initiative, they are looking at expanding connectivity on both sides of the project. A drone acquisition. With google fiber on the other end. They acquired nest recently for 3 billion. Keep, any concerns that this company is getting too scattered, trying to do too many things all at once . I dont think so. First of all, i dont think that they are very worried about being. I think that that will make the company thrive in the near future. But these moon shots, these longterm projects, if any of them payoff, self driving cars, fiber, drones, it will create a hole in the market for google, potentially giving them dominance in a whole new category. I mean, this is critical for them at this point in time, that they continue to take market share in an expanding area. If they dont, we have seen what happens to Tech Companies that fall behind. Tom . They have a lot of staying power, they deserve a lot of credit for that. They have done a good job seeding these future investments, be it the driverless car, google glass, or these other initiatives. I think that they will be ok. At the same time i think that facebook has done a good job and they are positioning themselves well for the future. Everyone is on this acquiring spree lately. Even yahoo , obviously, trying to remake itself, jonathan keller, with Marissa Mayer really making a push into the content space. When you look at the landscape for google, who is their biggest competitor . Tough, i dont think that they really know who they are yet either. They are still in the process of figuring it out. Content seems like a big play, but i would say that that is spread out amongst a bunch of categories. News, media, content, getting into what looks like news really heavy. There is not a direct comparison, but it seems like they are still figuring it out. Seems like they want to do a little bit of everything. Your price target . 750, bullish on the stock. How soon could we see that . 750 dollars. Any more thoughts on google glass before i let you go . I hope that their recent deal translates into a redesign. The technology is great, but if they could make it look less silly that could be a winner. I have got to go with you on that. I am sorry. It looks a little silly. But neat stuff. You have got to try it, though. I will give it a shot in the commercial. Tom, jonathan, good stuff. Coming up, bloomberg is live at the new York Auto Show. We will be speaking with steven cannon and the audi of America President , scott kiev. The new York Auto Show is in full swing right now as all the major automakers show off their cars. Of course, our own matt miller is there, and he has a special guest. Matt . Trish, thank you very much. I am here with the head of the americas for mercedes. We are looking at probably the most amazing vehicle at the entire show here. It is almost like you really very seriously. Tell us about the vehicle. It is kind of a crowning achievement for the amg brand. The coupe is coming later this year. To me it is the perfect intersection of beauty, intelligence, and raw performance. With the mostle beautiful class we have ever put on the road, enjoy a number of amenities, like hot stone massage and aromatherapy while her going from zero to 60 in 3. 9 seconds. About theld argue beauty, but you cant argue with and theurbo v8 technology of this vehicle. You would never want to let it drive itself. Stereoscopic camera, longrange and short range radars thomas senses the vehicle position in space, allowing the vehicle to react when the human is not reacting fast enough. It can protect critic pedestrians and crosswalks without driver intervention. That is a level of intelligence that is almost on a church gentry towards autonomous driving. Trajectory towards autonomous driving. You could see a deer at night with that night vision. That is so incredible. You have other cars here. This is probably out of my price range. Over here there is the c class. It has been getting a really warm reception. Especially from silicon valley, silicon alley kids who want the fuel economy but still want the luxury. This is our number one volume car here in the united states. The new generation is coming in september. For the first time our volume product comes out of north america, which is fantastic. This vehicle is taking a step up in every dimension. It is slightly larger, the interior space is better. It is on a level that many would describe as glasslike. We have taken 200 pounds out of the car. Highly efficient fourcylinder engine. A really complete package in the mid 30 price point that will absolutely set the benchmark in that segment. You also have an all electric be class over here. From the ultimate internal Combustion Engine to zero emissions, spanning the territory there. We have got the biggest spectrum of offerings, from highperformance to utility, zero emissions, and one of our product advantages is our great portfolio. Once we bring customers into the brand, we give them all kinds of options, places to migrate, and we do a better job holding onto them than any other luxury franchise. Am i ever going to be able to buy i want to buy a car from steve cannon, you say that you you say that you will make one and sell it to me, no middleman. We have factories all over the world, from china to the u. S. , germany, and south africa. The days of us being able to have you a car without a middleman, i dont see them anytime soon. We have a great either network that take tremendous care of our customers on the sales side and service side. That Business Model is not changing. Does it bother you that elon musk is selling directly to his customers . Let him do that, someday he will need a Service Network and when that happens, well see what happens. How do you handle recalls . How does mercedes spot the problem, contact the customer, fix the problem . We have been hearing a lot about recalls, lately yes, we have. I dont know if you saw the mercedes is the least recalled car in the industry. I would expect that fact. What it does happen, the customers come in, we give them the wherewithal to solve the problem, off they go. Obviously we take the safety of our customers very seriously. When we identify problems, we generally fix them before we are asked to. Got it. Well, if you need a product tester, i am always willing to take the coupe out for a spin. Very good. You have my number. You bet. Trish, back to you. Matt, we will be checking in with you in just a bit. For continuing coverage, check out our special channel on bloomberg s website, ipad, and tune in next to find out the havoc being wrecked on corporate balance sheets. Alas, stanley big is going to join me to talk about how it plus, stanley big is going to join me to talk about how split personality can help at the office. That and more, when street smart continues. Time for todays global outlook. Venezuela, into google venezuela style, decided to create new rules for their currency. At are you a big business operating in the country . The government is now offering you a cut rate. The official rate is 6. 3 to the dollar, but the new rate, for those privileged enough to actually secure it, is 50 bolivars to the dollar. That is almost as good as the black market rate. Confused . We have more on what it all means for corporations that have big holdings in the country. Latin america reporter tom a kottke a core zukowski, joins us right now with more on the story. It is kind of mindboggling, the government is basically saying we have several different rates and it just depends on who you are as to which one you get. Right. The essential importers get to buy at a much cheaper rate than the nonessential, would get to buy them at 10. But really, it is still such an impossibility to get dollars, most people are going to the black market, but now they have created this new system where you can get them for 50. What happens is if you are a company hang on with the companies, i want to get that and what it means to the balance sheet. If i go to venezuela right now and i take out my American Express card and try to pay for my hotel with it, what rate am i going to get . On the credit card you will get an official rate. But that is the bad rate. Right. Now, if i am a big corporation, a u. S. Corporation doing business there, 6. 3 to the dollar, i am not so excited about that. What will venezuela offer me . And you want a stronger rate if you are booking in dollars. You make them and book your profits in dollars. What is companies are kind of this leading investors if they book at that rate, because in reality they cannot access that so, it creates what are they saying . When we go through their earnings statements, a Company Operating there we know that colgate, procter gamble, those are Big Companies with operations there. Other companies, like brink, for example, that you dont normally think of, how are they affected by this . The thing with a company like that, it has been an interesting short for some hedge funds. They have been booking these inflated profits at 6. 3 per dollar when, in reality, they cannot access that rate. What they are doing now is adopting the 50 rate, which slashes their profits it actually creates a huge loss or their overall earnings. But does it matter . Your money outng of venezuela anyway. Look at a company like herbalife, which has had such a big presence in latin america, specifically venezuela, one of the complaints and concerns is that how all those money that they just cant get out. It is a big concern for a lot of companies. They might as well just write it down to zero. What does this tell you about venezuela and its future . The idea that they have all of itdifferent rates . Shows all the distortions that happen when you have to capital controls like that. What is really interesting is that auditors dont seem to have consistency with what company should be booking their profits. What is the thinking right now . That companies should be honest with their investors and should be booking at a more reasonable and realistic rate. You mentioned that some hedge funds were looking to short these companies. What are some other examples . Directv has a lot of exposure to venezuela that you would not normally take about. If they were to book, the total cash or the entire company would fall 26 . Really interesting. Other examples of countries like this . Is this an emerging market problem, or a capital control problem . Well, they go handinhand. Argentina has its own multitiered currency system in a way that is not official. You have the official exchange rate, then you have the blackmarket rate. Bottom line, if i go there tomorrow i am better off taking might u. S. Dollars down to the Street Corner . Yes. Thank you very much. Really interesting story. Coming up, stanley banks has stanley bing has some interesting theories on improving yourself and your business. All right, everyone. Time to embrace your craziness. You may know by next guest, gil schwartz, a. K. A. Stanley bing, known for his business humor. He is the Vice President of corporate communications. The curriculum, everything that you need to know to be a master of the business arts. He breaks down how to harness a different persona and make it work for you in business. Mr. Bing joins us now. Stanley bing, great to have you. Pleasure to be here. What do you see as the number one quality that successful people consistently have in business . And approach to being strategic in the issues that face you. In this book i give a course of study that enables people to think strategically about the variety of real issues that people have to deal with. Like looking stupid, for instance, which is you know, a danger at every level of your career. In some areas looking stupid is worse than being stupid. [laughter] you can look stupid, you just dont want to be stupid. That is the thing. The idea that you need a strategy at every level, as opposed to being reactive or , that is allnfused difficult to deal with in business. So, a strategy. Being able to harness some of your good traits and bad traits. You talk about something called the x factor. There are a lot of negative things that you compile into this x factor. Rage, delusions of grandeur, paranoia, narcissism. Together you say that if channeled properly they . Re good i am looking at the chart right now. The x factor is a small part of your ability to be successful, but without it you are kind of drab and you will not rise to the top. Look for Something Like perfectionism, which is an attractive red on the chart. In normal life people who are overly perfectionistic are annoying to other people. In business, they are highly effective cfos, accountants, and other job descriptions. Cissism, people will people who are only capable of speaking about themselves. Lets talk about you, what do you think of me . That quality of being very selfcentered is a huge asset if you want to ascend to senior management. It is interesting. You want people to show the qualities that you would not necessarily in real life want to be showing. You make the point that the higher you get up the food chain, the easier it is to kind of unleash a lot of that. Well, that is the thing. I really believe that as you get more powerful, your ability to express who you are blossoms to the point where you are at very high levels and can be completely unacceptable and no one will call you on it. You can be 100 yourself. Great to aspire to, right . That is what people aspire to. In the middle ground you have a middling ability to do that. At the very beginning of a career, you are very often stuffed into cubicles and kind of shaped by your culture. Part of this is playing the game throughout your entire career. Maybe this gets back to what you were saying, having a strategic plan. A plan that is shortterm for problems like why is my town clark town car not here . How to manage that issue. At many drinks should i have this particular dinner . I have a rule with that, which is you always remain one drink behind the most powerful person in the room, that way you hold up the rear. In my early days i was usually two or three drinks ahead, which leads to disgrace. A funny anecdote, consequences for not drinking, the point that you have got to be social. Sort ofdeal with these mundane things that people want answers to. Like how to dress, what gadget to carry. What phone to be using. How to influence the perception of you. What does it say about you when you have a bluetooth earpiece in . People see it, they think i dont know. If they see you talking on it to no one in particular and walking down the street and talking to yourself, then you go into a red zone below zero for people. If you have a black area now, you know, it says certain things about you. It says that you respect content in a way over all the toys, gadgets, and apps that Everything Else has, but it also says that you might be half of a step behind the iphone and samsung people. That is very interesting. We have this chart here that comes to your book as well about the interesting image implications. This is interesting because we talk about blackberry and its dismal future. I loved my black area at the time. If i carry it now blackberry at the time. If i carry it now, people think i am behind. This is perception. What is your research organization, by the way . This is all based on the Research Done on my think tank, the National Association for serious studies that i have established an incorporated, waiting for its registered trademark now. People need to know where your research comes from. Absolutely. Absolutely. All of its information is proprietary. But it does it here to the highest standards of internet journalism. Thank you very much. A fun book. People are used to seeing your column in fortune magazine. They can read them all right here. Thank you very much. Stanley bing, appreciate it. Coming up next, everyone, details on the bolus ipo. We will speak to the chief executive who is committed to retaining control of his firm. Welcome back. I have breaking news from julie hyman about what is been going on with the debate over highfrequency trading. The state of new york has sets a numbert subpoenas to of highfrequency traders and is seeking information into the ark wholl private exchanges that are not as transparent as the public exchanges. This has really been sparked by the publication of the Michael Lewis book looking into highfrequency trading. There has been a lot of debate over it in recent days and there have been various investigations that have been brought into it since then. This is the latest of those, subpoenas going from the state of new york to highfrequency traders, trying to get more information on dark pools. We will keep you posted and bring you headlines as the get them. Thank you so much, julie hyman. Begins for bolus and company. The shares are climbing after the Company Raised less than it had hoped for in its ipo. They are not really climbing, are they . Like they are doing a lot better. Can bolus, founder and president of the company, feeling a lot better, but it was not looking too good, not only do they have to reduce the size of the offering, but it was still priced below the expected range. I asked him about the decision to make it a smaller offering. This is what he had to say. Market got very volatile. You have to price where your comparables are. Welllt like it was a executed deal and we wanted the stock to trade up. So, the markedly that the market definitely moved against melissa moelis. There were a number of other congregating factors. One, he controls a majority of the stock through voting shares. Selling . E is not no, but heres the thing, he is taking a onetime payment, so the use of those proceeds, they raise the money in the market today, 80 of those proceeds are going into the pockets of himself and his partners, one hundred 30 million to 140 million out of the 160 that was raised. When you look at Something Like that, it is not a huge surprise that investors would get pushed back. Is it also symptomatic of concern among investors that we are maybe nearing the top of this ipo market . A lot of stuff has come out. Investors are definitely more selective. The window seems to be narrowing, not closing. They have feasted on ipo, now they are full. Addition you have these other factors that were specific that made it even more challenging. Stay with us. Leslie picker is with us as well from bloomberg news. We have certainly seen a big increase and christina and i were just saying, leslie, that of all of these take a look at this chart here. The First Quarter had twice as many ipos as we saw in 2013. What is behind this . What is fueling this drive and a committee . A couple of things. One, the performance ipos that came out last year were stellar. Look at the twitters of the world, the hiltons of the world, all of those deals came out on extremely strong footing. The companies thinking about going public are looking at those and saying that they want that condit performance as well. Market,ally, the stock the ipos are derivative in so many senses of the word. It is a way for them to outperform. So, when stock markets are roaring, it is a great time. Good point. I guess the question is, as people question this market and look at all of the ipo activity that has happened so far, can this momentum keep up . What are you hearing about deals in the pipeline . Leslie brings up the public market. What we have seen is pull back in a lot of the technology stocks, giving additional concern to investors looking at technology stocks. You wrote a story about this today, leslie, on the chinese twitter. They are pricing at a significant discount because they know the market, they know the market moved. Exactly. A totally different story from when twitter went out. I readnth, specifically, that the ipos are priced between haveand today, of them 96 traded down over the last two weeks. 90 six percent. Looking at performance, that is a perfect statistic. You and i were talking about the fact that all the offerings this week were priced below the expected range, an early indicator that something is going on that may portend future problems in the ipo market. But the big one we will be watching later this year is of course out a bob a. Alibaba it has been down, with such a large percentage of its success. I feel like hourly bob a has a special halo around it, for some reason i feel like alibaba has a special halo around it, for some reason. No matter what the markets are doing, no matter what other companies are doing, this one is going to rocket. It looks like a hot deal. Every investor seems to want a piece of it. Maybe because they know they will be fired if they dont get a piece. It does have a certain sense of height and the halo effect to it, but i am curious if that will change once their drawers are open to the public and the press and investors can scrutinize every single line of what could be a couple of hundred page document. It is always the government and how the company interacts with the government. I like our lower third on the bottom of the screen. All right, good stuff. Thank you, guys. Good to have you here, leslie. Coming up, peter cook sat down with ralph nader to talk about his later his latest campaign. You will not believe who ralph nader is teaming up with. Hedge fund managers. A new one for you. Ralph nader is teaming up with some bigname hedge funds to fight the government takeover of fannie mae and in a. Our chief washington peterpondent, peter , spokemet with him and about it. It is an unusual alliance. We are used to seeing ralph nader protesting what is going on on wall street, crowe testing the big names, but this time he is on the same page as some major players, like Bruce Berkowitz and bill axman, players who made a big that that the government bailout and takeover of fannie and freddie will not pass legal scrutiny and that they will ultimately earn millions of dollars. Ralph nader personally invested in both Companies Back in 2000, well before the government bailout and takeover, making him different from these Hedge Fund Players who have snapped up shares since the government takeover. But ralph nader says he shares the view of those Hedge Fund Players, that the governments actions here were not legal and it was not fair for the government to effectively vaporize common shareholders in the takeover and sweep up all of the fannie and freddie profits without giving consideration to private investors. He makes no bones teaming up with wall street in this case. The fairness argument is very powerful. Now you have some heavyweight hedge funds advancing shareholder interests. Im glad they are there. Because there are thousands and thousands of people who put these shares in a locked box for their kids education. They deserve a chance they will never recover fully, theyd deserve a chance to recover some. Nader says that his views on legal issues are similar to the hedge funds, that he probably has different views on regulations going forward, but the bottom line is that they share an interest in seeing the governments case overcome and he is trying to make that case, helping them in washington on capitol hill as well. We will watch for it. Thank you very much, peter cook. Moving on are we moving on . I guess we are doing a tease, coming back in two minutes, talking about the top 10, from burberry to bank of america. The top 10 stocks that you need to know. The markets are still moving higher, sitting near the high of the session, the dow was up 146, a gain of nearly one percent. The nasdaq is trading higher as well. Coming up in the next hour, we will talk about a couple of men who are transforming the eyeglass industry. They are the founders of warby parker. They are coming up next, on street smart. We will be back at the close of trading, right after this. All right, every sector is trading upwards into the high of the session right now as we head into the close. Time for your top 10, cvs late spin offssion, try to its billboard advertising segment and the judge will rule on the transaction. From the irs, the billboard rose in the last memo last month. Cbs plans to sell the rest. Number nine, burberry, the second half of their position rose in their online expansion, helping to boost growth and flowing into store foot traffic, expecting to open about 20 to 25 new stores. Number eight, at t has reached a deal with volvo to bring its Wireless Service to volvo vehicles. Access radio, maps, and even remotely start the car. Number seven is starbucks. The largest chain of coffee will be moving their headquarters from london to amsterdam. Blasted bybeing british lawmakers last year for complex accounting to lower their tax burden. Number six is post holdings. Million,oods, 2. 5 according to a person with knowledge of the matter. The personal increase came from distribution in the retail base like easy eggs and simple potatoes in the roster. 24 umber five is yahoo , up in its stake for ali baba, sending the stock upwards. Posting 66 increase in sales, doubling its net income. Yahoo may have to focus on turnaround efforts. There is no may about it, they have to. They will sell their stake as part of that deal. Even if they dont sell the entire stake, why would i want to buy yahoo when i could buy ali baba . That is the issue. Yelp, up right now, the Online Review website, moved from buy , the country the company is in its early stage for penetrating the market. Number three is bank of america, shares offering less than earlier today, they reached a 950 million settlement with iran shall guarantee Insurance Company on claims that the countrywide unit pulled faulty mortgages. Legal fees are one reason the bank posted a surprise loss last. Uarter, 6 billion in costs number two, king digital, up three percent. The game maker is set to make its candy crush debut in china. King digital will release the the . 10 mobile game center will be coming out in the summer. The number one stock of the day . Melissa is up there, almost five up there, moelis, almost five percent. Filings say that the Company Plans to use 80 of its currency for a onetime payment to the founders and partners, while the rest will be invested back into the firm. Here we are, coming up on the firm. Session highs on the dow jones, a gain of roughly one percent. S p, today of nearly 19 points. A little better than one percent. Through the sectors we can see pretty much every sector in the s p moving higher. Some optimism, we had janet yellen speaking earlier today, she reiterated that the fed is going to be there and keep Interest Rates low for the foreseeable future, giving investors perhaps another reason to cheer here. We want some additional context on the market moves today. Also with us, christina is here as well. Pretty much everything across the board . Had a lot of whips going around in the last few weeks. This is more of the same in terms of that. The fact that we are at the highs of the session, there is not any particular catalyst that has driven us there. As you said, the janet yellen speech was sort of a stay the course time the speech. Industrial production came in better than estimates, yahoo rising, technology bouncing back generally, with hopes being pinned on the heavyweights after google and ibm come out with their numbers momentarily. They maybe that will write the technology shipped. That is likely what you are hoping for. I dont know about that, investors seem to have had that, making things particularly tricky in the volatility market. Take a look at this s p chart. Do we have it . This is a year to date chart. You can see that we are actually back in positive territory. Janet yellen, indeed having a bit of a positive effect on the market today. For the third day in a row, this comes after last weeks tough losses with a lot of those momentum names losing momentum. There was concern that that would mean an overall breakdown in the markets. Tom, you are here with us as well, we are going to be talking about a number of earnings that we will get to momentarily, but google is out right now so i will ask julie to do it. Looks like google is coming in below estimates. Looks like it is the adjusted earnings per share number, 64 four is what analysts had been looking for. The ad rates had been falling, so we are looking at cost per click down nine percent versus one year ago, that is what was estimated by analysts. It was also forecast that that would somehow be counterbalanced by an increase in the number of clicks, right . But the First Quarter pay clicks were up 26 . Estimate was 28 . That did not completely offset the drop that we saw in the ad race, which may have been responsible for what we are seeing here. Overall revenue coming in at 14 billion. Here is the number, the x traffic acquisition costs, 12 point 2 billion, slightly less than anticipated. We will keep looking here for the forecast, that will be a key as well to where the shares are going. But in the immediate first blush we are seeing those numbers are by four percent. You surprised . Tom, what happened . Oftentimes google will not give guidance but in the First Quarter they will talk about pressure from incremental employee related expenses. This is their First Quarter reporting with motorola discontinued, creating noise for the numbers, which we thought would be favorable. I would love to hear their line. Was there an incremental uptick there . What were the numbers like . I think they will grow through this transition to mobile. I think that the shoot off sets the pressure for pricing. As we look ahead, looking at threat of being being is that a threat that they need to be mindful of . My question would be if there is something going on in the macro environment. Or is this just a reflection of analysts not making the proper adjustments . Prettyaw google make a big acquisition recently. They have announced some other on othercquisitions fronts. Seems as though they are trying to get into a lot of different product categories. Is that a promising future . I think it is definitely promising. Looks like they purchased a smart thermostat and a smart fire alarm. We think that there are a lot of acquisition opportunities there, ones that we think apple should have made if you think about taking regular devices in your home and connecting them to the internet. Lets get back to these numbers. Hang on one second. We are seeing the google First Quarter cost per click average decrease approximately nine percent. As we talk about the threat of other players in this space, bingham, yahoo , or anyone else, what about Pricing Power . Moreey have to get competitive, right . The only ones with Pricing Power right now is facebook. Because they are seeing the transition from the desk ad moving over to the newsfeed, where they are getting much higher cpm rates. For google it is about going from desktop to mobile and it is still a choppy transition. Coming back to the role in drones, are we not talking about really far down the road . This Company Still gets 96 of its revenue from search and other stuff, like licensing fees. All of the school stuff that we hear about, google glass, etc. , that is just sort of fun stuff, like a hobby for google at this billion what, 3 dollars . When are they going to make money on that stuff . What is interesting about these acquisitions is that you can see these companies as distinct as their Business Models are looking out into the future and all melding into one. They are all going after the same assets, which is really weird, right . Prices, butiving up it is also i am curious to get your thoughts on this, is this a lack of vision for what they are going to be in the future . They are just reaching out and doing whatever cool thing comes their way to stay relevant. Google has always had a longstanding policy of letting their engineers spend 20 of the time to think of the next the idea. All of this Technology Goes towards that culture of the company. I think that theyre basically planting seeds for future growth and it will be sometime, but that is ok. Seems like they have picked up the queue . I think that facebook is slightly better job on projecting what is important in the future. Look at their recent acquisitions. I think it would be discrediting google to say that they are not doing a good job. We have some more breaking news that we want to get to right now on highfrequency trading. Julie, what is the latest . Eric schneiderman, who has been out in front of these issues, has sent subpoenas to six highfrequency trading firms, asking for information that they have on exchanges and trading strategies. Not formally released, according to a person familiar with the plans, the firms that we know about, chopper trading, jumped trading, and tower research. Those are the ones that we know about as of right now. As i mentioned earlier, this was all sparked by the publication of the Michael Lewis book looking into highfrequency trading. There has been a lot of noise about whether there is anything actually illegal going on here. Those are all smaller firms, arent they . Tower research . Yes. That is the thing with highfrequency trading. There are these little firms. It is not clear. It will get interesting if they are able to target the larger firms and grabbed headlines. Same thing in each of these cases. They go after the smaller guy in the hopes of one day bagging a huge name, which will move the needle on this stuff. Going after the smaller guys, you know, it is not that exciting. They will certainly give you a lead, because of the lawmaker threat, but there is an ipo that is supposed to be happening there. That was a company that had, losses in fivef years . There was this thinking how could that possibly be . A were incredibly successful. They had to postpone because of the ipo as a result of the book. They basically disclosed that they did not know what these investigations meant for their company. They could not answer whether or not it would impair them going forward, so they had to postpone the ipo. Thank you very much, guys. Heregreat to have you today. Coming up, the ceos and founders of warby parker tommy how they are going against the grain. They are here, next. Plus, the future of bitcoin is pretty grim. Be joinings going to me to discuss it all, when creed smart continues. Street smart continues. Call, i guess you could this one reverse retail strategy. Some brands close physical stores to bring the majority of their business online, work warby parker is doing the exact opposite. Taking oned online, highend boutiques with 95 frames, now they have launched five brick and mortar locations in the last year. For in new york city. One in hollywood. They dont want to stop there. Joining me now, warby parker founders. How did you come up with the idea for eyeglasses . We really started the company to solve our own problems. We were frustrated at how expensive glasses were. They cost me 700, it made no sense to me. This technology has been around for hundreds of years. Nothing in the materials themselves justified prices at 500 to 600 dollars. You saw an opportunity. They are not that expensive to produce. Can i produce something that is as good a quality product . Exactly. We wanted to shrink the value chain and work with manufacturers and, thanks to the internet, work directly with consumers, affectively selling glasses at the low wholesale prices. This was interesting, you started by bypassing the middleman, now you are getting bigger and saying bring in the middleman . You are actually going to have brick and mortar stores. Why do that . Refound that customers wanted glasses, wesold our launched features in vogue and gq. The company took off like a rocket ship. People called up and said can we come to your office to try our glasses . Is one of those things. I do wear glasses, though i wear contacts most of the time, and when i go to get a new pair, i have to try them on, to see them, to see what they will look like. It is a testament, really, to your product, that so many people were buying them online. I imagine now that you will see a lot of foot traffic in these stores. We try to make the online experience really easy for customers, offering a couple of ways. We have a virtual try on for you can upload a photo and try them on virtually. We also have the home try on program where people can send them get them sent in for free and you can quickly try them on. You are making it as easy as possible for buying glasses online. It is also interesting to me that you succeeded in a space that one might have thought would be a tough product, in that, as i mentioned, i wear contacts. If they dont wear contacts, a lot of people are getting laser surgery. Is it retro chic to be in glasses . Wax people often say that glasses are having a moment, but they have been having a moment for about 800 years. It has always been a fashion accessory, but it has also always been about form and function. That is why they love going into our stores. We just opened up a store on 82nd and lexington in this former pharmacy space. It has 21 foot cathedral ceilings, a mezzanine, you walk in and feel it. It is a fun experience. How would you describe the brand . How important has the definition of that brand been to your success . We really think we are creating a lifestyle brand here. We want people we think that eyeglasses are fun. We think that people should own multiple fares. How many do you own . I think we each own thousands in our apartment. We think that people should think of glasses the same way that they think of , withand handbags different pairs for different occasions and different outfits. Our price point, 95, we think that is excessive over most consumers. Good luck to you guys. Coming up, the former deputy of the Consumer Financial Protection Bureau will tell me why he believes in bitcoin. All right, you know [indiscernible] is throwing in the tower the towel. A Japanese Court to allow it to liquidate its assets, saying that the rehab plan is too complex. Fail is justgoxs one of the problems that that point has faced. Moneylaundering clamp moneylaundering claims on some sites, complete collapse issues, and its actual price. Despite these problems, bitcoin has a surprising supporter, the former head of the Consumer Protection financial bureau. Focusede raj dante, on u. S. Consumer finance, they have given that she has given the currency his stamp of approval. He is on the board of Circle Internet financial, they are building secure access to digital currencies, like bitcoin. A former are government guy. You work for the Consumer Protection agency. What are you doing, investing in bitcoin right now . I grew up in pittsburgh. Things i like about innovation in Consumer Finance is exactly the same reason i went to the Consumer Financial Protection Bureau. How is it that you can take new ideas and make the system work better for regular people . One of the benefits, obviously, is that it is not regulated. That it is this uncharted territory. As a former government guy, do you think that bitcoin needs regulation . Absolutely. The potential for Digital Currency to make an impact on peoples lives, payments can be cheaper, easier, faster, and more secure. There are lots of ways to get from here to there, but having a steady and clear set of regulations around it will make things better, not worse. The technology is interesting , i dont dispute that at all, but i question whether or not the actual bitcoin as being see it is going to exist in five to 10 years. Who is to say that there will not be some other kind of currency employing Similar Technology that will succeed . Why do you think bitcoin will be the survivor . It is entirely possible that there will be variants of other digital currencies, that the form that exists today will develop and improve over time, but the fact of the matter is that anything that solves the problem for consumers and merchants, to my mind that is a good thing. Whether that is bitcoin or Something Else. We have ways of doing that right now. Credit cards, paypal, other kinds of mobile Payment Systems are emerging. Why bitcoin . This is an example. My parents were semiretired, traveling in turkey. A cab inthe back of st. Louis, i take out my iphone, i pity a conference with them for free. Try to send them 100 . There is a lot of friction. For good reason, but mostly because the existing payment infrastructure is decades old. Entire western union, i am scared . I dont know if theyre terrified, but there is a chance for real breakthrough. If the technology exists to transfer money cheaply, then why are people paying a lot for it . In general in Consumer Finance, like any other business, when you have a 99 tossed advantage, that tends to make a difference in terms of the ways that needs get satisfied and the prices at which they clear. I hear you that this is cheaper, faster, more efficient, but we still have the big problem right now that it coin, in terms of price, is all over the place. Take a look, we have the startup year, prices plunging, recovering from below from earlier in the month. Nonetheless, this is a quote currency quote unquote currency that you cannot trust right now. Think about it to we two ways. Yout degrades in value, dont feel great about having value stored in it. If it goes up by a factor of 100, why would you spend money instead of holding onto it . The fact of the matter is that stable valuation will help. If emergent is going to except bitcoin, they have to know that it is dollar for dollar. At the end of the day it will get pegged back to the u. S. Dollar. Two things will have to change for it to become more stable and have more utility. Number one is that there needs to be more use in buying stuff. Absent that utility, the value in Corporate Finance terms, the price gets very volatile. The second thing is that Market Makers will get into the business. There has to be a way to hedge against exposures and you and i should do that on our own count. Realistically, that is why Market Makers exist. Then you are in the situation where we do not know who created this. It is completely unregulated. Andhave merchants, likely, consumers, likely, feeling like this is wild west territory. For the currency to exist as a currency, it needs trust. People need to believe in it. Let me talk about the trust aspect. Absolutely, there has to be trust for it to work at scale. It is regulated. The moneylaundering apparatus applies to it. The Treasury Department has been appropriately clear on that fact. That said, a good payments mechanism has got to be fast, cheap, and secure. 2 years ago, 60 of the transactions on the exchange or liquidated. That absolutely is a sign that this marketplace is going to mature. When you look at the new the new firms in this marketplace are considerably more serious minded, considerably better financed, taking these things seriously. Lots of changes ahead. Raj date, thank you very much. Coming up next, our final look at the final at the new york 2014 autoshow. Car from around the world are in new york. Matt miller is there and has the latest for us. Hey, tricia. A are standing in front of couple of the new a3 that they have launched. I feel like there must be a lot of demand, this has the combination of the luxury aspect, less the green aspect of being a plugin. What do you think . I dont need to say anything. You nailed it. That is true, the sport is back on the market. Very successful car. Really, we are to add this great piece of technology. It is a balance of two worlds. Pure electric driving with small, high output fourcylinder engines. It takes away the anxiety. The other thing that is crucial is how we package to the car. Most are plugged into the giant battery. Takes away the space. Not here. It drives really well. What is the drive train here . Where does the electric come in, as far as power . Like it is a fourcylinder engine with a battery on top. Combine there is about 201 horsepower. It can obviously go in both modes. It is a real slick thing. I think that that dynamic is really important, and that is what you get. A plugin that drives like an audi. The day,a 2. 5 back in so this has more than that, plus instant torque . Exactly right. Also, i didnt have the quilted red Leather Seats that you have in this. Ifple have to come see this, they have not. I dont need to sell it, but it is very cool. And youke volkswagen guys are really going for it as far as the hybrid technology. Is that the way forward . There will always be for technologies to get done. There will always be advancements with Combustion Engines as we know them today. Carbon fiber, tdi, what you see here. We have had great success. Looking back to the car, 50 50 of its sales got stronger, plugins, eventually full batteries. Full battery electric vehicles. As you know, you will need full battery manufacturers. But we think that a nice transition strategy in terms of technology is the plugin. It starts to give you the full, but it also gives you consistency. Know, you europeans guys do a lot of racing with hybrid technology. I am thinking about lamont cars. Exactly right. It started with t fsi technology. Then it went to pure tdi. As you know. What it has done is we have 12 or 14. This technology works. Audi has made this technology work. Look, the initial buzz . People cannot wait to drive it. How are you doing in the race for the luxury car market here . The classic story for the last couple of years is audi versus bmw. Monthnth you are up, one you are down, what does it look like . Globally we were up, then bmw came in march and just got ahead. In the states . Yes. Look, we have a plan. This is a Business Plan where our customers are satisfied and that is what we want to do. Concerned not as about who has the number one in this race . What concerns me is if our customers are satisfied and if we are making great cars with great products on the road. That concerns me. I have got to say, you and i are getting together in a couple of weeks. Going to behink is faster around the track . You going to school me . Are you coming as an individual . Or a journalist . As a journalist i will have to let you kill me. I will take off my press hat. No, you have to do a lot of testing and that is one of the ways where you sort of figure out what technology will flow down into the car is the normal people drive around . Absolutely. It is a fantastic place with tons of elevation. A technical track, lots of turning. Exactly what we like. It is going to be a blast. Have a nice,ll tight race. Looking forward to it. Trish, should i bring you along . I am so in. You have to let me win, though. Much. Tt, thank you so all right, guys. For more coverage of the new York Auto Show, check out our special channel on bloomberg tv for apple, ipad, and amazon fire. Coming up next, kfc sandwiches, just part of todays roundup, next. All right, time for the roundup, stories that we are talking about ahead of tomorrow. We have the bloomberg contributing editor and host, he is ready. I am wound up. Julius kicking it off. Bank of america, selling its its since june after surprise loss tied to mortgages speeds. The lender has racked up to 2 Million Dollars in Legal Expenses since the financial crisis. Fourth loss since Brian Moynihan took the top job. Jpmorgan has of course had big legal costs as well. A lot of these guys, the financial crisis is not over yet. For years and years. But it has been good to the government, right . Yes. They got their money back from tarp. They never should have done the bad loans to begin with. That is what got us into this mess. The hysterical thing about the release today was they said they had to relive reserve another 2. 4 billion in Legal Expenses for previously disclosed issues, but we cant tell you what the issues are, you know they are predisposed. Investorsas scratching their heads, because they want to buy the story that bank of america is done with these, but then every now and then you get these bizarre statements. We dont want to cause more attention to that at all. Legal fees . For that much . That is a lot. You might have to take a test or two. You might be taking a new sat. Knowledge of obscure words will be a lot less in port and when citing evidence to back up dancers. Questions were released today by the owner of the entrance exam, showing the scope of the first redesign since 2005, showing students mastering concepts taught in High School Rather than skills and words that they might never use in real life. They have been you losing market share to their competitor , but as i understand it, they are going to get rid of the essay, which i would only argue probably helps to show peoples thinking skills and reasoning ability, as opposed to a multiplechoice. Of these things are basically cosmetic. It does nothing to address the main problem we are having with the education system. You can rejigger, rework the test, they get easier or more complex, but at the end of the day it comes down to where you went to high school. If you went to a good school, you will probably get into a good college. Did you took take the a cd or sat . S. A. T. The a cte. Why . That is apparently big in the midwest . Vct is located in iowa, that is probably the real reason, but i have no idea. I did not want to take any of them and i did not know that there is any real value. Ad really, did it make difference in everything you did, seriously . It could. You are either smart or stupid. Thats not true. The problem is that those test dont measure it. They are not actually measuring how smart you are. If you can afford the prep course, you will help your score. It makes a big difference on scholarships. I do know a number of kids who have scored perfect and gone through school tom a totally paid for and Everything Else. Plus the crew. You know who else is not scoring perfectly . Wilbur. Decided tocourt has ban cars from using ubers taxi app, seen as a threat by some traditional taxi drivers who say that they are bound to rules that do not apply to the smart phone based system. The french president tried to impose a 15 minute pickup delay and other private car services, struck down by a private court. Is fairness. E taxis have to pay 20,000 20,000 euros to get a medallion. It is a lot. They have to pay a lot of money to be on the street. How do you fix that . They should be regulated in some way. Just like in new york or some other city. But typically you have a lot of local politics in these areas. Even in lhasa vegas you cannot get u las vegas you cannot get uber. Of the company is doing a good job at providing a good service and customers know that . They feel they have an unfair advantage over taxis. If youre going to regulate everybody, regulate everybody. Right. . Axidrivers already exist that is the problem. Maybe he does, but then what do you do with the existing medallion system . There is a regulated market in place already. You change, right . Its not like you are going to displace a lot of workers. They can still go and do the same job. In new york is going to change. I was talking to the uber driver this afternoon, it is going to change the way it is priced. It cost about 2 million to get a medallion. I think that that is going to come down, but that is what the Free Enterprise system should be about. They should be regulated, they should be safe. I am saying that maybe it can come up to the private industry who will ensure that the cars are safe. In the long run it is, but it is up to government officials to protect citizens when it comes to transportation. To some extent, even the rates are involved. I dont know. I dont know. Lets talk about Something Else that is dealing with a lot of regulatory hurdles. More than two thirds of new jersey is in favor of lessening pot addled these. Democratic lawmakers are floating a measure to let citizens sell and use the drug. Governor Chris Christie has promised to veto the bill, democrats see an opportunity to rally support, more so perhaps because of the republican governors opposition, saying that new jersey could taken twice as much revenue as colorado. Take that, colorado. They are much bigger stoners. Much bigger potheads in new jersey. Know, i am still the governor christie on this. I know that there are people who are smoking that should not be smoking for medicinal reasons. Do you know how much money we spend as a nation just trying to police this . 10 billion per year. An excellent point. Chris christie said that the war on drugs is failing, yet he is promising to veto any bill legalizing pot. I dont mind imposing higher penalties if you get caught smoking it. People who oppose higher penalties, why . So that you can put someone in jail who is basically then a drain on the system because they are costing us money . I think that you should find them into oblivion. That is what you do with cigarettes and what you do with pot. I dont like people going to jail for what i consider some other trivial crime, but it is still a crime. You know it is the most profitable in the world . If it were legal, it would change those numbers. Here, it isere to like a commodity, like Everything Else. The fact that it is legal, criminal, and a huge bonus to the criminals who want to be in this business. Great to have you here. Pimm fox has a look at what is coming up next. Thank you very much. Some smallbusiness, you may yahoo , thet as Online Search engine and site, the reviews about their businesses have been wiped out, apparently, after a partnership with yelp. We have both sides telling us what this means for their business. Plus, paul stanley, the musicians, will be talking about his induction into the rock n roll hall of aim and his life and new book. That is coming up at 5 p. M. Eastern here on taking stock. Coming up next, more street smart yurko. Google has been going on a spending spree, putting major cash into drones, phones, and google glass. Today were looking at five of their investments in the future. Ok, tomorrow, dave cody is joining us. Dont miss that. It is coming up on 56 minutes past the hour. It means a Bloomberg Television is on the markets. I am julie hyman. Where did stocks close out the session . We had a rally today. A couple of things lending itself to better than estimated Industrial Production with comeback on those momentum stocks we have been watching recently, janet yellen indicating the fed is there to help the economy if it needs it. We have a lot of earnings after the bell. I want to highlight two of them in particular. Google, disappointing investors, the Company Coming out with sales in particular missing but analysts had estimated. The company has seen costs rising, people shifting over into mobile with the number of paid clicks not rising enough to make up for a nine percent drop in cost per click. We also heard ibm reporting its numbers, the eighth straight drop in sales for the company. Sales came in below what analysts had estimated for that company as well. The ceo has a profit goal for ibm it may be difficult to reach with these flagging sales. Technology has been all over the place, recently. Intong to put some money the nasdaq . Adam johnson may have some stocks you might want to look into. We are searching for value after a very ugly selloff. Time for insight in action. It not curious that the nasdaq stopped exactly where it is supposed to . The upward sloping long trend line. A number of strategists have said that this is where it should stop. They are not necessarily saying that altogether we had a definitive bottom. Chris baroni said you might still have weakness, but it is time to put together a shopping list. Here is what we did. We looked at the nasdaq composite, stocks that were down 20 over the past month, where sales of the company were up 20 . This is very important, where earnings estimates are rising. Throwing out the baby with the bathwater, those are the names we are looking for. Let me share three of them with you that made the cut. A relative newcomer to the nasdaq, yes, there is hair on all three of these names. A 1. 1 billion dollars secondary after having gone up fourfold. Look at its sales, four percent. At netflix there is talk of a potential apple comcast deal. A little bit hairy, yet so yet sales are up. Rocket field, need i say more . Digital overload . Look, sales are up 80 . There are 22 names actually,. 3, that i posted on twitter there are real reasons to buy each of these companies. Check it out, put together a shopping list. Thank you so much for that, adam. Another stock that we were watching a bloomberg has been a victim of the lip sawing in. Ecent weeks, boneless it climbed on the first a of trading. Shares were priced at 25 apiece, raising less than anticipated. Moelis thought that appetite was strong for the shares. This is the first time an Investment Bank has gone public since 2007. We will be four on the markets, i am julie hyman. This is taking stock for wednesday, april 16, 2014. Im pimm fox. Todays theme is twisted. Some Small Business owners feel a bit twisted by yahoo and yell. Theyre upset that local Online Reviews are being wiped out after yahoo partnered with yelp. Were going to have both sides of the story. Plus, the kiss lead singer, paul stanley, has provided us with decades of twisted music. But hes going to talk today about his induction into the rock n roll hall of fame, as well as his new book. And the