Transcripts For BLOOMBERG Bloomberg Surveillance 20150527

A crackdown on corruption in soccer. Nine soccer officials and five Corporate Executives have been charged. They call it a 24yearlong conspiracy involving 150 million in kickbacks. In zurich switzerland, fifa is holding a News Conference. Earlier, swiss Police Arrested six officials. Fifa has been accused of corruption for years. Russia and qatar have been named top posts. This firs for fifa is good. It is, in terms of cleaning up and everything of what it is, in terms of the process, it is good. Vonnie we have more on this in a few minutes and all morning. Time is running short for greece. Greek officials are meeting in brussels. Greece must pay the imf 8 billion early next month. Bloomberg news reports little has been found in recent talks. Greece is balking at making reforms in labor laws and sales tax. Cyber crooks have used the irs website to steal information on more than 100,000 taxpayers. They used that data to file face to file fake tax returns and irs Officials Say they remove the website function that allows the thieves access. Taxpayers have been urged to use Online Services rather than the telephone line. Floating around houston floating around houston has receded. Traffic has been brought to a stenciling people have been killed. 12 people have been missing throughout texas. In hockey, the nhls Eastern Conference Finals head to a winner take all game seven. The new york rangers beat the Tampa Bay Lightning 73. Game seven is friday night at Madison Square garden. We are keeping our eye on that. What else is friday is the fifa agm, which is going ahead. Tom game seven is another classic. Brendan game seven, Madison Square garden, amazing words to go together. Tom this is rangers, lightning, and they will go whoever wins against whoever wins in the ducks blackhawks series. Brendan there was a great tweet this money from a New York Times reporter camped out at a hotel. Evidently the swiss police who were doing the raid were pretty laid back. The people getting arrested were laidback. The hotel staff were freaking out. Tom we will have a lot on this this morning. To explain as well to you what is going on in brooklyn, in the Eastern District of our federal court in new york city later this morning. Right now we need a data check. Equities, bonds, currencies commodities. Futures advance a little bit. Euro 1. 0900. Out of the second board, not much to talk about. Their goal 11. 86 per ounce continues to decline gold, 11. 86 per ounce, continues to decline. Lets go right to the bloomberg terminal. Quickly, this is the korean juan, japanese korea. Here is 1997 this is be no mix here. This is be no mix here. This is the reality of when you do policy. You do all be noabenomics and it crushes reality. Brendan we really get a sense of 1994, how they have been competing with each other, not just in terms of Industrial Production but cultural influence over china. What we are talking about is competing with china here. And now what has happened, you want to talk about this on surveillance, in china they are no longer watching japanese material, they are watching korean soap operas, listening to korean pop music. That is huge. Tom ian bremmer will join us in the next hour. This is a fun celebration. Jason joins us this morning celebrating his opus, my side of the street. We will speak of the defense of in the hour. But we need an up date on our continued great distortion with the market that will not correct, and of course cash flows ever rising. You still have faith in the equity market. Though double bloom does not worry you . Jason i tend to think of equity prices almost as countercyclical , just from a basic point of view. The fed and other Central Banks if they are easing, i do not want to pick fights with the other Financial Institutions that have unlimited financial resources. Tom George Magnus is saying we have a temper tantrum, so what did you learn from those tantrums that allows you to stay in the markets. Jason there is really few signs of inflation. There are people taking big victory laps about the virtues of quantitative easing. I tend to have a different view. I see it suffices, but there are very few right now devices are not very apparent, and the virtues are being celebrated. In that regard, it is a very positive environment for financial assets, particularly stocks. Brendan one of the things we have to figure out is what with things look like, what is the natural rate of inflation. The new york fed has a new model negative for several years right now. What do you use to measure that . Jason you generally would use unit labor cost and productivity to find out what the right inflation rate would be. There is big debate as to what the proper inflation rate is in terms of price stability. There has been a view that price stability should be 2 . In this fed in the modern era after the financial crisis people are wondering, maybe the right rate is more like three or four. I think janet yellen and other central bankers brendan we cannot even get to 2. Jason you mentioned jack lew before. In my view, no offense against jack lew but for most institutional investors, he has been in the witness protection program. There is no one there is too much emphasis on monetary policy. There is not enough focus on other parts of policy that can get growth going. There is too much pressure on Central Banks. That worries me because when things go wrong, the Central Banks will get blamed, and that will cause other problems. It will be less independent. Brendan but we have to say this two times a week on surveillance. There is no fiscal policy. Jason there is no other policy i could not agree more. It is dangerous to be relying too much on that one wheel. Tom lets talk about reality. This is the atlanta fed. The atlanta fed, the smart guys down there say gdp is a little bit lower than what we are talking about here. Tell me about the market and the fed right now. How far apart is your world from Janet Yellens world . Jason i think janet yellen is probably where we are, somewhat surprised that they are down here. I think people are surprised in many ways that the gas pumps have not really translated into retail sales. People are surprised that higher wages and stronger employment is resulting in more saving as opposed to more spending. We are of the view that that is good news delayed that that will happen in the second half of the year, but that is the debate. Why are people saving instead of spending . It could be that so it could be that people are so scarred. Tom where celebrating his book my side of the street. There it is, the s p 500 back 10 years. It is the Jason Trennert decade. It is up, up, and away you this anybody younger than me know what a bear market is . Jason a lot of guys do not know what a bear market is. I feel sadly about this for younger guys in my office. They have never felt the joy of a bull market either. This has in some ways been one of the most unloved bull markets in history. No one quite leaves it. If you look at mutual fund flows, the Retail Investors are pretty much out of this market, have not been participating in any meaningful way. It is a strange market, to put it mildly, and it certainly has not been smooth sailing. Tom Jason Trennert goes after the media crew including michael wolff, and the wolves. Brendan im glad he will be here for the hour because we talk so much about numbers, we do not talk about culture. Coming up, fee for implodes fifa implodes. Raids, Bank Accounts being opened up. We will learn a lot that we have not known about before but only suspected. Soccer officials under arrest in switzerland. That brings us to our twitter question of the day. Will russia and qatar lose their world cups . Let us know bsurveillance. Tom good morning, everyone. Bloomberg surveillance. We welcome all of you from around the world. Amazing football, soccer news this morning. Lets get to top headlines with vonnie quinn. Vonnie we are also following ebay. Merchants will be paid for ads only if they lead to actual sales. Ebay sellers will be a will to specify what percent of a Product Sales price they will pay to run an ad. The higher the percentage, the more prominent the ad will be. The Airline Industry in the u. S. Has been flying high, now in a bear market. The index has fallen for a 12th straight day. Investors are concerned that they are adding too many seats too soon. Plus, fuel prices are rising. Oil is up 34 since the middle of march. In london, ford is offering drivers to share cars, not by them. It is the automakers attempt to tap into the growing market for ondemand driving. Others, like bmw and the parent of mercedes have been offering car rentals by the minute. You would have to be pretty exact to rent by the minute. Tom absolutely absurd. The queen will speak today. Francine lacqua will give us important spin from london as the queen speaks to her government. The worlds richest colleges, Brendan Greeley all over this. This is a surprising thing on our endowments what are colleges are doing with their many billions of endowment money. In defense of wall street, Jason Trennert out with his new book as well, my side of the street. We will be interested to talk about the Partnership Structure which is important. Brendan greeley getting us fee for coverage. Fifa coverage. Brendan six officials were arrested from fifa. The six will now be extradited to the u. S. And will face racketeering charges from the Justice Department. This was also rated fifas headquarters in a separate investigation the untouchable fifa has been touched. You have written about fifa in the past. I need to get a sense of the scale of this to an american audience. Is it fair to say that if you care about this game today, it is christmas . Well, for soccer, this is a huge event because on friday fifa was a thats was supposed to reelect will probably reelect its president , who was running world soccer for quite a long time, and who presided over those votes to grant the world cups to russia and qatar. But now he will probably not get to be reelected after the arrests, so this is a huge destructive event for global soccer. Brendan and the spokesman for fifa has confirmed that those votes will take place friday. You wrote last year and i am courting from the title of your article, soccer needs to kick out its dictator. Explain why septicsepp blatter, in your words, is a dictator. Leonid he has mastered the political arts of satisfying all the different interests that converge to make fifa and to run world soccer. He really is the accomplished functionary. There is nobody else inside fifa who could step up to him. And he has been around too long. Brendan he has been president since 1998. There are allegations of vote rigging that go back to that election. Help me understand the International Aspect of what is going on, which is that the 2018 and 2022 world cups were awarded together. 2018 went to russia. Vladimir putin had a personal hand in lobbying for that world cup. What does this mean to him . What does that world cup mean to Vladimir Putin . Leonid it means less to him than it did in 2010 one russia actually won that did because back then we cared much more what the world thinks about him. Back then he cared much more what the world thinks about him. It is not as important for him as winning the bid for the sochi olympics that took place last year. It was a major chance for him to show off his achievements, which have sort of failed since with the oil price going down in the invasion of ukraine. But it is still very important for russia to keep the 2018 world cup, and it probably will because the bigger problem is with the qatar world cup, the 2022 world cup. Brendan thank you for joining us this morning. Our twitter question of the day we asked, will russia and qatar lose their world cups . You just heard how important this was to Vladimir Putin. It is not just important to soccer, it has diplomatic consequences. This is bloomberg surveillance. Good morning. Tom good morning, everyone. Bloomberg surveillance. Tom keene and Brendan Greeley. Brendan will have much more on fifa here. We have Jason Trennert here. Martin wolf writing it up today. Lets bring that up if we can. This is wolf. We have a great deal of evidence that too much finance damages economic finance and distorts the distribution of income under mise undermines confidence in market economy corrupts politics and leads to an explosive and in all probability ineffective rise in regulation. I have trouble with everybody in the sink, everybody in the bathtub on lets blame somebodys finance but at the end of the day there is too much money being chased. Jason the fed has taken its Balance Sheet from 800 billion to 4. 5 trillion. The European Central bank will take its Balance Sheet from 2 trillion euros to 3 trillion euros. There could have been certainly after the crisis, if there was the political will, the ability to take some of the capacity out of a financial business. Tom if we are going to get out of this mess, do we get back to what you and i knew, or do we go on to something new in our Global Finance . Jason i think i know what is most efficient, which would be Less Government intrusion and more independent markets. I think that gets us to a better allocation. Brendan his argument was that a crisis leads to regulatory intervention. The banks that can best escape the regulatory intervention are the largest ones that can lobby, thus perpetuating the cycle. Jason that is true, i would argue, in any business. The biggest beneficiaries in large government are the business are big businesses. Milton friedman used to say i am not probusiness, i am promarket area even though it is ugly and it creates brendan that cannot be said often enough. Barack obama said it once. Business is less important than markets. The queen speaks after the break. This is bloomberg surveillance. Tom it is her majestys most gracious speech at the house of lords. Of course, the lords and the members of the house of commons will meet and greet her in london as Queen Elizabeth ii begins i love this phrase her majestys most gracious speech. Now we have her majestys most racist headlines with vonnie quinn. Most gracious headlines with vonnie quinn. Vonnie this morning, swiss police raided a zurich hotel and arrested seven officials from fifa. Nine soccer officials have been indicted along with five Corporate Executives. Fifa has been accused of corruption for years. The vote named a five for a fifa spokesman was asked if they should be held accountable. If the president should be held accountable. He is not involved. How can you say he has two whatsoever, stepped down. He is the president , and in two days there are elections. If they reelect him, then he is the president for the next quarter years. Vonnie Authorities Say they have collected Bank Documents linked to the case. You later so clear the way for a huge takeover in the cigarette industry. Antitrust officials have approved reynolds americans acquisition of lorillard. Reynolds and lorillard will make about nine out of every 10 cigarettes sold in the u. S. Treasury secretary jack lew says greece has not made enough process progress resolving its cash crisis. He says hes concerned about what he calls an accident as both sides try to fix the problem. He also says that the contagion from greece has been contained. Greece needs to come up with the money to pay 1. 8 billion to the imf next month. Burger kings number two, beating wendys last year to retain its place as the second biggest burger seller in the u. S. Burger king added more menu items in 2014 and focused on value. Mcdonalds sales in the u. S. Are four times more than either burger king or wendys. In the pro basketball playoffs lebron james is headed back to a familiar place, the nba finals. He sort 23 points as the cavaliers beat the Atlanta Hawks , completing a fourgame sweep. This will be the fifth straight time james has played in the finals. No nba player has done that in almost 50 years. The cavaliers will play the winner of the golden state series. Tom very good vonnie. In basketball, the black rod. Brendan the queen is delivering her 64th queens speech. They will lay out the agenda for David Camerons conservative government. Lets appreciate the camera lets appreciate the tradition of this. What is going on . Francine britain at its best. We are looking at pictures. The state opening of parliament is a ceremony loaded with historic ritual. It has symbolic significance for the governance of the united kingdom. You can see her majesty is there. It may be her majesty that traveled froms speech but of course it is not hers at all, it is the Prime Ministers. It is to set out her agenda. I know i am repeating it but it will be very important, her tone. She reads the entire speech in formal tone, reflecting neither approval nor disapproval. Brendan she is literally reading it in the queens english. This is an amazing pageant. The one word we are listening for as she speaks is the word referendum. Francine that is high up on the list of the governments priority. David cameron did promise to renegotiate britains terms of membership. What we are watching out for and looking at some of the headlines is whether she gives indication on whether the referendum will be pulled forward. We heard germany asking britain to vote before 2017 the quest because the quicker you do it, the quicker it goes on the market. Tom is this speech radically different than if mr. Miliband had one bank . Francine i think so. There is the promise of the referendum, which of course mr. Miliband did not promise in his election campaign. Where also we are also expecting an antiextremism bill. This helps David Cameron reposition himself and not be considered to bank right wing. Too right wing. Brendan the reason tom ask you that question is that he is so on by the presence of the queen right now, he wonders if democracy even matters. I wonder about David Camerons travel plans. First off, he is going to denmark. That is not an accident, right . Francine that is not an accident at all. They may put forward they actually have a new day for the election on june 18, or july 18. The problem with this is that David Cameron has clear allies within the eurozone and within the eu. If he starts moving these allies with this vote in denmark, then it is going to hurt his ability to renegotiate, and he has to renegotiate to make sure the referendum is a yes when it goes through. Tom what is the strength of the monarchy right now . I think game of thrones is what we look at here. What is the linkage back to george and back to the war of the roses and all of that with elizabeth . Is there any linkage at all, or is it just theater and a set . Francine she is very well loved in the u. K. , and she keeps a check on things. Every week the Prime Minister goes to see her majesty the queen and gives his agenda. She will never say whether she approves or disapproves, but in intimate conversation, you can imagine her giving an opinion of some sort of what she sees as necessary for the good of britain as a whole. It is largely ceremonial, but she is there, she is present. Tom francine lacqua, thank you so much, from london, with her majestys most gracious speech. It is so foreign to anything we do. Brendan i forgot to set my watch on how long it would take you to say game of thrones. Tom you wonder about the linkage of it. Brendan i think when france i think when fran says this is britain at its best, i kind of agree. Tom we have breaking news. More on greece. We are going to leave the queen of england right now as she speaks, Queen Elizabeth ii, and look at the nonroyalty of greece, where they just finally delay. We are at a point, brendan where is the headline. Spreads are pretty good this morning. Brendan there is no good way to know whether the deadline is the actual deadline until it is too late. Tom i predict that we have to talk about Jason Trennerts book. Brendan we will be right back. Good morning. Tom good morning, everyone. Bloomberg surveillance. I am tom keene, and with me Brendan Greeley. Lets go to the collegiate chart. Brendan ranking the u. S. Wealthiest College Endowments also ranking the annualized returns and allocation details. Lauren designed the function and compile the data. She joins us with facing the best chart. Were looking at the 10year returns. Yale is winning, then columbia and m. I. T. Then notre dame and duke. Not there, harvard. What did they do wrong . Lauren in the last few years, harvard has not done so well. Some of their private equity thats have not paid off some of their private equity bets have not paid off. Tom Loren Coleman certainly we looked at Asset Allocations. We found that schools that have done best with private equity or hedge funds had performed the best. If they have made the right bets. Even staying in public stocks jason we have found that the actual allocations to public equities are actually quite low. The equity allocations are quite high, but public equity is very low. Do you see any sort of movement back toward more plainvanilla investments . Lauren no, and certainly in the larger Public Schools they have been slow to get out of public equities, but they are continuing getting away. Jason why hasnt and when why hasnt there been more of an interest . Lauren there is pressure to get high returns, and the public equities will not get you the doubledigit returns year after year. Brendan Jason Trennert is so curious because he is an alumnus of columbia university. Jason i feel very strongly that you cannot separate out public and private equity. Those returns are inextricably linked. It is a fantasy to think they are different. When David Swenson started doing private equity, he did it when no one else was doing it, and that is why it worked. Now there is 3. 5 trillion in private equity, unless rich close to five written close to 500 private equity firms. Are there any other surprises in the endowment data that you saw any schools that you would say i did not realize they did as well as they did or they did something very different . Lauren the interesting week the interesting thing we found over the short term was that cornell had the highest. Brendan tom i talked to larry court should once about uva, and he said it is about plane old securities analysis. Which is doing the straight and narrow traditional investment . Is it grinnell or somebody else . Lauren they have got some great private equity assets. I think it depends on the school , and it depends on Asset Allocation and the team. The cio of notre dame was on last weekend he said we have a really great team. We have had this team for a decade and we are run like a machine. Some schools have two people and it is much different. Brendan laurence tribe, it is truly amazing what i am looking at right now. Lauren strivereib. 600 turtles have been rescued after being smuggled from china. That happened. It is amazing. Humane Society International is looking to place them in sanctuaries. If you have one, get in touch. Number two, back to china. Somebody built a new company office. What does it look like . Tom . Tom i can see it right away. That is a real building . Brendan that is a real building. There is so much money in the world, it is amazing. They even had to seek permission from the owners of the star trek copyright trademark to build it. Our number one photo in london a lock of mozarts hair will be auctioned tomorrow. It is expected to be 15,000 to 18,000. We said, why is it that we even have this . Evidently it was common in the 18th century at 19th century to take a composers hair for keepsake. Tom very good. Brendan some of beethovens hair, worth less than mozarts. Coming up next, does wall street deserve its pariah status . This is bloomberg surveillance and global stock report, streaming on your tablet, your phone, and bloomberg. Com. Tom good morning, everyone. Bloomberg surveillance. Jason trennert is with us right now. Next hour, ian bremmer with eurasia group. Ian bremmer will be with us for the entire 7 00 hour, and we will speak on the Islamic State. Right now we speak of our top headlines with vonnie quinn. Vonnie u. S. And swiss authorities have launched an attack on what is being called rampant corruption in international soccer. This was arrested seven suspects after the u. S. Charged 14 people in a 24year corruption scheme. It all has to do with fifa soccers governing body. A News Conference will be held later today. The republican president ial field gets more crowded today. Former pennsylvania senator Rick Santorum is set to announce his white house bid. He finished second in the race for the partys 2012 nomination. And it is a great time for the great white wave. Attendance and Box Office Records were broken. The top 40 theaters drew 40 Million People and sold 1. 3 billion worth of tickets. A Pretty Amazing number for that one street. Tom very good. And the fifa story is moving front and center. Let me go forward on bloomberg surveillance, with ian bremmer joining us. We will touch on his book superpower america the great. And we will look further on the fifa press conference this morning. I believe it is the attorney general, the head of the fbi and the head of the irs. Rented kill 46 at my brendan 47 count 150 million in kickbacks. Tom we have that in the next hour as well. The romance of the investment business, Jason Trennert has written a book that describes the workload and the modern investment business. He comes to the defense of a better than good wall street. Jason trennert, chief investment strategist at strategas. The only way to do this is skin in the game and partnership. Why is this so hard for the rest of wall street to get . Why cant we get into the game . Jason there has been a push to have more permanent capital ever since. When you have more permanent capital, you can take more risk. One of the things i have learned running my own partnership over the past nine years is that you treat your own money differently than you treat other peoples money. Tom is the future ever core lazare ever core, lazare, and strategas . Jason there is a renaissance of private partnerships making their way on wall street that is coming back. It will be hard for them to have the capital to do the really big deals. It will be hard for them to be universal investment banks. By the same token, i would argue and i speak from my own book, i think that is the way it used to be, and it is in some ways more charming when it was like that. Brendan it sounds basically like youre saying there is too much debt and not enough equity on wall street. Jason i would argue too, that the equity is different. In a partnership the equity is the partners capital, so that is very different than when you have millions of faceless shareholders and things are going well for a long period of time and then they stopped going well. Whereas if it is your own capital, i can tell you, we know how much we spend on soda in our house. You are watching things especially in a difficult market, more closely than ordinarily. Tom an important quote from my side of the street i know mel gibson, i am not even charlie gibson, and avoiding makeup led me to the fate tricky deck suffered. I looked pale and sickly, no small task for someone who gets tanned from florescent lighting rig media has changed your world, hasnt it . Jason it has. I worked for a fellow men and hyman named ed hyman for many years. A serious financial analyst would not appear on television in those days. The idea is that you were giving away your research for free. When i started doing tv, which was the midtolate 1990s, that started to change. And of course financial analysts are on television on the time all the time. For a period of time, some of them were made almost superstars. I think lewis sure kaiser had lewis hirsch i would consider him the dean of financial television. In many ways, conversations had on that show were worth a lot of 24 seven coverage. Im not saying it could replace all of it, but the social science decisions required discussion. It is not always easy the answers are not always in a crossfire type of cannot always be achieved in a crossfire type of approach. Tom i love this quote, brendan. Masters of the universe do not represent the real wall street. Brendan it is important to understand the culture behind it. Tom my side of the street. Lets do a four x report. A weaker yen. 134 1. 3447. That is very close to weakness back to 2002. Stay with us. Ian bremmer, next. Tom the u. S. Justice department and swiss police expedite fee for officials to america. U. S. Banks were involved. Ian bremmer joins us for the entire hour on america, the superpower and the president and next resident must deal with the Islamic State. This is bloomberg surveillance, from our new york headquarters. Lets get to our top headlines. Vonnie the u. S. Attorney general says corruption and international spanned two decades. The u. S. Is charging 18 people with taking bribes and kickbacks. The Justice Department says the graft involves the world cup and other tournaments. Swiss prosecutors plan criminal proceedings. They say the way fifa fixed the 2018 and 2022 world cup selection was corrupt. A Spokesman Says the groups president is not involved. The president is not involved. He is the head of fifa but is not involved in any he has to step down. He is the president and in todays there are elections. They will reelect him and he is the president for the next four years. Vonnie u. S. Prosecutors say the scheming has gone on for 24 years. Greek officials are meeting with creditors today and brussels. The debt ridden country needs more bailout funds but greek is still bulking. It will oh the 1. 8 billion payment to the international owe the 1. 8 billion payment to the international fund. Investigators say the criminals collected 15 million in phony refunds. Taxpayers are being offered credit monitoring services. That was 100,000 taxpayers. The rivers near houston are receding but the city is at a virtual standstill. At least four people were killed in houston and 12 others are missing elsewhere. A do or die showdown is set for the nhl playoffs. The nhl rangers forced a game seven. They beat tampa 73. The finals are finally here. Tom thank you so much. The rangers last night, very exciting and friday we will see them in game seven. Lundquist looking very good. The tampa bay goalie was pulled late in the game 67 after many goals in the third. I want to go to this fifa indictment with Brendan Greeley. First, brooklyn this morning, we have gathered the attorney general the head of the fbi and to the irs, that is almost unprecedented. Brendan we will figure out the politics and a second but looking at the legal details, we have a full list of the people who will be extradited and a full list of the people who have already cooperated. Tom one guy paid 25 million. Brendan dale warner both sons of jack warner. He is from trinidad in tobago. His sons are cooperating as is Charles Blaser who was the former u. S. Representative. Tom he wore a microphone. Brendan he wore wire but the way to think about it is there are regional federations and they all feed up into fifa. Tom a soccer guy, does this involve univision, cbs, the other Sports Networks . Brendan i will not say any of those names but one of the things they are in trouble for, the indictment says that were bribes and kickbacks paid by media officials for transmissions rights. Tom it is an eight page document coming out and much more later this morning. It is a wednesday, may 2015. Maybe it is a good time to make a choice. We celebrate in bremners book superpower. The choices that have not been made by our politicians. Congratulations on the Time Magazine thing you are doing on superpowers. What are the choices our politicians have to make . Guest is interested that despite he has his top ratings his lowest ratings across the board on Foreign Policy. You see it in the campaign, the republicans and Hillary Clinton all saying things, talking about the fact that u. S. Leadership looks adrift. We have choices. Tom you and i studied the 1960s where president s talked about Foreign Policy. It was every paragraph. Why is it not like that now . Guest one reason, the soviet union collapsed and the United States one the cold war. It has been reactive. If you think of the last 20 years americans get themselves in trouble by overreacting to things whether you talk about ebola, isis or 9 11, no strategy coming in something hits the headlines and we all spend as much money on time or security to respond to that. Given the world on fire as many of the gop candidates had talked about, what is it the new american leader is going to do. Brendan i sense when i watch people talk in the Foreign Policy establishment, i sense they are still operating in a world where america has unlimited ability to shape the world and that has been severely constrained. Guest by americans themselves. There is a question of what we want to do and still for. Brendan you say it is a conscious pulling back . Guest i dont believe america is in decline and that is not what this is about. You look at the dollar and the role of energy food technology. It is hard to argue that america is incapable of driving decisions. It is true that our allies are less interested in supporting us , but do we want to destroy isis and what are we prepared to do . Do we want to make the russians pay for their invasion . Tom we will talk about superpower later and talk about Islamic State at the end of the hour. The most important sentence. Truman knew when to stop. Douglas macarthur did not. We now have a Foreign Policy that is almost herkyjerky. We dont know when to say no anymore. Guest i dont think we do. When talking about risk aversion it is we are putting tennis. We are trying to hit the ball back. That works against an eightyearold but not a decent player and that is the problem. We have seen that with the decision whether or not were going to move aside or punishment punish him. We are prepared to tell the iraqi armie you have to take care of this iraqi army you have to take care of this. Can they help america or are they in the way . Guest i think there is no question talking about china right now and the army of the one being undervalued. Imf is saying we want to inject value. The knotted states isnt the only player in town. Whether Christine Lagarde or that world bank players, the only country in the world with the global strategy is china. They are building the Infrastructure Bank and the bricks bank and the rest that are challenging the imf and making them weaker overtime. Brendan running out of time in this block, you talk about making a difference and punishing a sod, we are done letting people die a broad for a generation punishing asaad, we are done letting people die a broad for a generation. Guest on foreignpolicy matters, he is much less constrained by popular opinion. This is a place where the president actually matters. If you ask them to look at the range of folks running today the answer is no. Brendan the story of the day has political implications for our story of the day. Will russia or qatar lose their world cups or should they . Tom good morning everyone, this was just handed to me on fifa Us Press Release from switzerland and at the bottom are the sponsors. Adidas, cocacola, gasp from if i am cocacola do i want to be on this press release . Brendan absolutely not. This morning was a very awkward press conference. He had an adidas ball onset. Guest i think you have one sponsor who has no problem. Tom a terrific interview lined up in 15 minutes from brazil. Brendan from the financial times, a new global order of cities. International pollack talks politics beginning to address the is beginning to resemble the Hanseatic League of medieval cities with Global Centers trading and working together to address common problems and ways that large nations do not. Some are beginning to have more power than the states that surround them. Guest in a word world where states are completes increasingly bungled up with corruption and limited in their ability to represent larger and more diverse populations, of course you are seeing a lot of decentralization of power. Some of that is happening at the expense of power even the United States and some of that has happened proactively. In mongolia they have an experiment with a say we will devolve as much power as possible actively and it is working to diplomatically as well. Brendan the other point that they made was Climate Change which is that the city can make concessions that states are having a hard time doing. Tom that traditional system from other sentries are we going back to that with london new york, bombay and tokyo being the centers of elites that drive International Relations . Guest we are going back to that and places that have consolidated democracies. In those places, state power is actually consolidating. But evokes point but evos point, where we are seeing dynamism, it is not at the capital. Brendan our twitter question of the day links sports to international politics. Will russia and qatar lose their world cup . We will see. Tom good morning everyone, we are on fifa watch. Amazing headlines out of switzerland and brooklyn, new york. Here is bonnie on ebay. Vonnie ebay offering a new plan to attract advertisers. They will target advertisers only for ads that lead directly to sales. They will pick the percentage of the item price that they pay for the add. Most charge for a cost per click basis. U. S. Airlines once flying high are now a bear market. The u. S. Index fell for a sixth straight day. Investors worry that airlines are adding too many seats, too soon. Oil is up at 34 since midmarch. Ford is expanding its test run in the Car Sharing Market and the automaker is offering oneway rides. The ondemand ride program is called go drive. Programs are rolling out in germany, india and a few u. S. Cities. Tom with new cars, who knows. It is a car a day. Thank you so much and lets look forward here on bloomberg surveillance this morning. It is 7 35 and we are really driving into this discussion, a lineup of very important guests to give us perspective on the eightpage document out of Brooklyn Federal court, it is just remarkable. Certainly front and center with Foreign Policy and we will racking up wrap it up later with the g0 world as well. It was the American Century this week Time Magazine asks is america lost in the world, all part of our doubt. We have three choices and one of them is a path to an indispensable america. It is a favorite word of mine indispensable. You said the u. S. Is indispensable but we have not got the message yet. Guest i think it is one of our choices but the question is do we want the leadership to address it. It is also clear that if we dont play that role in the middle east or eurasia or asia no one else is going. Tom if we are going to be the adult in the room, we have to get everybody else to pony up. Americans criticize the europeans, japanese and others for not doing their fair share. Is that a valid criticism . Guest of course but if you have europeans not prepared to pony up there 2 of budgets for defense that our defense issues are not going to go away. Tom i love this idea of indispensability. This is not a call to return to a pass, we must build an and tyrell in American Foreign an entirely new American Foreignpolicy. Brendan if you will have a foreignpolicy you need to be elected on some sort of domestic approval, who will get together and support this. I did a nationwide poll with time and foreign magazine to ask what americans thought about these choices and questions that basically would support either of the orientations and what you find is it is Older Americans that are saying, i grew up, we had the cold war and we had that. Our values from democracy and a free market matter. The longer oriented and we will convince our allies to hedge. Brendan can we do anything actively or does that just happen accidentally . Guest we are gutting through europe right now, at the same time you have russian rt doing an incredible job a very different idea of what the world is like. Tom you take superpower and you have on young audience for. The leading republican candidates. They have a constituency that says lets stay on the borders how do you guest what is interesting today is it is not so partisan. Republicans and democrats are all over the map. Bernie sanders and rand paul are virtually identical. Jed bush sounds much more like obama has been weak and we have to stand for our allies and put some cost on the adversary. Certainly, marco rubio who has been the most coherent the most coherent thus far is advocating a very indispensable america approach. Hillary clinton is in a different position where she talked a moneyball approach. The pivot to asia, do more in some areas and much less and others. Dont lecture it. Lets have a reset with russia and not all of those things worked very well. Nonetheless she had an orientation which is different from someone like marco rubio. Brendan my grade unhurt time what is your grade on her time at state . Guest migrate for Hillary Clinton obamas entire foreignpolicy team, they were a competent and coherent group. We dont have that now. But Hillary Clinton as candidate has not answered many questions has been much less coherent. Tom Brendan Greeley on the Islamic State later. Brendan coming up next we will keep talking about soccer. It is about finance and justice. Tom it is about criminals. Tom good morning everyone we will rip up the scripts morning. Usually we go to the bloomberg terminal instead we go to the Justice Department press release. This is eight pages. Within this the stunning realities of what they have already done. One of them is jose ajuila, from brazil, he pay 25 million at the time of his plea. I think that means he is guilty. Brendan it does tell us a lot. If these five people, dylan warner, gary and warner a lot these from brazil, if they have cooperated there will be a lot backing up that indictment. I was just reading from one of our reporters in rio it is hard to overestimate how important posejose javila is in brazil. The actual media executives paying kickbacks according to the indictment. Brendan tom ian bremmer, this is not deflategate. Guest fifa will implode on this. I dont want to speak about the media organizations or how far that would go and even if there is corruption it doesnt necessarily involve the tops but when you talk about the organization itself, globally one of the most important in the Sports Network tom we will continue this discussion here in a bit, right now our top headlines. Vonnie lets give you the background. The Justin Artman Justice Department holding a News Conference to detail its crackdown on corruption in international soccer. The u. S. Is charging 18 people with taking bribes and kickbacks. The Justice Department said the graft involves the world cup and tournaments. Police from switzerland arrested seven people and are targeting the world governing body, fifa. They say the way fifa pegged the 2018 and 2022 world cup sites is corrupt. Fifa says it is cooperating. The Justice Department News Conference you can see live right here on bloomberg television. I huge takeover in the cigarette industry gets the green light from regulators. The 27 billion purchase from lorillard to reynolds american. They must sell four brands. They will make 90 of the cigarettes sold in the u. S. Speaking in london, jack lew says he is concerned about accidents. He does not think the contagions from greece have been contained and greece must soon pay one point 8 billion u. S. Dollars to the International Monetary fund. A change among the leaders bargaining burger king regained second place and our final story today is all about lebron. Making basketball history. Leading cleveland to a 30 point victory putting them in the championship round for the fifth straight season which hasnt happened in nearly 50 years. Golden state and houston fight it out in the west. It is not just about soccer today. Tom not just about basketball and hockey with that exciting game seven. New york transfixed by rangers and surprise last year and this year expected to do better than good. We have a game seven on friday. The data check this morning is real simple. Let me give it to you quickly and then i want to set up our next conversation. Futures up one. Nowhere near parity. Mark chandler yesterday it was stunning in his call for through parity and a much weaker euro over the next two years. If you would, the vicks 1406 showing some of the tension. Brendan, i want your summary of what you witnessed from zurich and brooklyn. Brendan i think this is unprecedented. Everyone has been waiting for this to happen for decades. It is so globally known or alleged to be a corrupt organization and investigation after investigation has been brushed off. Tom without leadership from the United States . Brendan i dont think it would have. I am interested to see the nature of the cooperation between the u. S. And the swiss. They coordinated closely and time to them two days before the president ial election. They are trying to force fifas hand. It is hard to explain how untouchable they are. Tom and brooklyn, the federal court with the attorney general and the head of the fbi and the head of the irs. Brendan this is bloomberg surveillance, the u. S. Justice department has unsealed its indictment. Six guess were led out of the hotel and now a third u. S. Raid in miami. The untouchable fifa is having a very bad morning. Whenever i want to understand global soccer i call terry in rio. A bloomberg Sports Reporter who just wrapped up a long speech about blatter, fifas president. He has brushed every other investigation off of his shoulders, can he do that this time . Reporter im sure he will try. That has been his modus operandi as long as i have covered him. He is assessed with one thing and that is to be the president of fifa. But something he has been for 17 years and as far as he is concerned he will be elected again on friday. All of the scandals and all of the stories in british newspapers. They dont seem to have made any fit. But this is unprecedented this morning. A joint operation involving u. S. Authorities and plain clothed swiss policeman in the hotel. Rating it, taking these guys away. It is deeply embarrassing more than that now. Brendan you have been following this story since it broke. Try to move it forward a little bit. What we are wondering about is russia and qatar. Any chance that those two events could not take place . Reporter pure speculation at this point. If you watch the fifa press conference as some commentators said it is quite a performance by the communications director. They are adamant that russia and qatar are going to go ahead. A big caveat, one of the rates it took place this morning was at fifas headquarters. They seized paperwork and banking data. They say that is in relation to possible criminal activity. Tom lets bring in ian bremmers books. Superpower. It is a government you suggested they could lose the world cup and what does that mean . Guest russia is soon and i dont know how you would quickly rebuild all of the stadiums that are being planned but there is no question that the impact that this will have on these countries, when you have people being paid tens of millions of dollars, clearly all of this will come out. But the russia tries and the qatar choice, the amount of focus that will go on the decisionmaking process that will probably embarrass leadership. Tom what will the money do . Cocacola is on the logo, how will cocacola and others respond to this moment . Reporter this is the thing. A very good question. We have had cocacola, adidas others, you name them, issuing press releases expressing disappointment but not actually doing anything. We had that in 2010. We had a in 2011 and they have done absolutely nothing apart from ask one of the watchdog members, nothing but lip service. They must do something now. The world cup is the premier sports event. If cocacola goes on arrival would appear and if adidas goes their arrival would appear. Everyone wants to be part of it. Brendan and adidas and uggla are shocked that there are allegations and cocacola are shocked that there are allegations of corruption. There is tremendous power in handing out money within fifa to all of the smaller countries. Reporter if you look at one of the stories we published this morning even after these arrests we had delegates who said blatter is still the man to take the foot forward. The issue is this to be the fifa president you need the votes of 209 members. Brendan i have to jump in and we have to leave it there vonnie we will see you again leave it there. We will see you again in about an hour and a half. Tom the number one story around the world multiple actions against the Soccer Federation fifa. This morning is unprecedented. The head of the fbi and the head of the irs will be in Eastern Federal Court in brooklyn, new york. Brendan this is just extraordinary news and is really hard to explain. Taking place on two confidence. You and i were talking this morning while looking for coffee that we could not believe this had finally happened. Guest it finally happened because so many have been waiting for the shoe to drop for years. The former prosecutor was hired by fifa to conduct an internal investigation into the allegations of vote rigging and that is correct, he resigned in disgust because he came to the conclusion that fifa was not taking the investigation seriously. I tried to put together a short list of recent investigations, 2011, 2012, 2015, in the past they have always been able to brush this off their shoulders, watching this this morning, not sepp blatter guest by the way, volta stood in front of an auditorium with 300 reporters, somebody knew this was coming and it wasnt walter, the men was thrown out to the lions looked a little rattled. It shouldve been sepp blatter or the fifa Vice President , instead it was the head of communications. Brendan if not for american leadership, where would we be . The american legal system really does matter. Guest we do still matter. Tom may i make the point the guy who started this process did not file taxes for years so they said your guilty put a mic on. Brendan Charles Blaser the u. S. Representative to conquer cap concacap. We will talk to chris garcia, not michael garcia. Another former prosecutor. Tom does sepp just say, get a garcia, we dont care which one . He will explain how they build a case like this and exists exerts its authority extraterritorial he extraterritorially. Extradition is required and it all has to do with the fact that the doj expects that alleged fraudulent payments went through u. S. Banks. There is a parallel investigation from the swiss Justice Department as well. Stay with bloomberg television. We will have live coverage at 10 30 a. M. Will they lose their world cups . Tweet us. Tom lets get right to our top headlines. Vonnie a bill that would allow guns on College Campuses advances in texas. It is headed for the state senate after passing easily in the house. He is the retired admiral who led the mission that killed osama bin laden. The republican president ial field is getting more crowded today. He finished second in the race santorum would be the seventh republican candidate. Britains hear from their queen. Queen elizabeth ii delivered a speech to open the british parliament. Sitting on the throne and wearing a diamond studded crown sheet read a proposal regarding the conservative government. The queen is 89 years old. You sit on a gilded throne sometimes tom. Tom it is the surveillance thrown. Brendan every morning we wait for toms speech. Tom at the age of 89 she is finally very elderly. Ian bremmer with us, she talked about early legislation to leave the unp and the european union. Guest we would like it earlier. The uncertainly uncertainty only hurts. Whether or not people think that you will continue to have a mobile Financial Capital in london. If it is his decision, why wait so long . Guest it is not his decision he has to get it to the house of lords or have a special agreement with parliament. Tom some heavy lifting needs to be done. Ian bremmer author of superpower. There is a small problem that has become a big problem where all of the middle east isis became isil, became the Islamic State. Perhaps it is from the other time a caliphate. Ian bremmer has considered the division of iraq into three java, is that the only solution . Guest into three geographies. Is that the only solution . Guest it is useful. Were starting to have a real debate. Do we want to destroy isis or not . What are the costs . It requires boots on the ground. A few republican candidates saying they would now support that. There is a contain isis strategy. They took out the cfo last week. That helps in terms of stocking stopping them from attacking too bradley. Broadly. Tom would that angry thing at the end of Lawrence Arabia where they make the map of your middle east . Guest our strategy as it is right now is effectively the iraqis are ineffective and it is a sectarian war that we will have to publicly support and that means iraq does not hold together as a country. Whether or not we accept that they be independent watch all of the kurds retire on consulting gigs right now. They will start publicly saying that the kurds need to have their own state. You will not be able to hold this country together in this environment. If you are saying that we cannot make any progress without Ground Troops in iraq does that also mean our current strategy of drones and special operators is pointless . Guest i didnt say that. I said we cannot destroy isis. No one on the ground is going to do it. The iraqi armies made that very clear. The white house said we understand they are not up to fighting. You dont if your policy is were going to destroy them. Most americans, we want them destroyed when we see them blasted over news channels but when we see what it will cost we say maybe we want someone else. Tom we are showing incredible blackandwhite videos of some of the bombing going on. The technology within all of your books makes all of these conflicts and wars immediate. There was an teed him and now it is iraq anteetum, now it is iraq. Guest i think the problem is absent a strategy even with effective drones, surveillance and special forces taking out these guys the next time you get a couple americans with heads cut off or a car bomb that hits the Shopping Mall with americans in it, the response from the u. S. Will be lets spend crazy amounts of money. Tom you see a strategy . Brendan what do you do about recruitment. We talked about soft power. You could assume the cool thing in the world is american hiphop. That is not true anymore. What is going on in the Islamic State is cool, they want to be a part of it. Guest lets be clear american hiphop is so much cooler than joining the Islamic State. Foremost people on the ground in the middle east that is true. The threat for isis recruitment is primarily iraq and the middle east. Secondarily in russia. Only in a tertiary way to americans in the United States. We have to ask how much are we willing to pay to reduce that threat from small to nothing. No one wants to have that debate. Tom is saudi arabia your final focus . If i could lift this into your world is g0 for the middle east saudi arabia . Are they the last adult in the middle east . Guest they are adults but also focusing not on a longterm but on security. Less on diversifying the economy. In an environment of energy rices going down Battery Technology improving, i look at saudi arabia and i say, these guys are seriously screwed. Absolutely the u. S. Policy and relationship is going to get weaker and more stressed and that is before you have an i wrong deal iran deal. I say i cannot count on the americans the way i used to and i need to engage myself and with my sunni arab friends to take Security Matters in my own hands. Tom we havent mentioned iran at all. The wall street journal has a shia led militia with the americans moving west, can that be sustained . Guest when you see that the operation to retake ramadi is being called grace to shia, this is not what the americans want to see. Tom are you optimistic they can retake the city . Guest absolutely but i am not optimistic that leads to anything that looks like coordinated federal governments. Governance. Tom Walter Isaacson and others saying ian bremmers superpower, is something to read. What a response on twitter. Vonnie we did ask what will happen in terms of the soccer fiasco that started out this morning, will russia and qatar lose their world cup . The huge response. Fifa it would have to admit shenanigans, not likely. Brendan fifa is not a shenanigans admit or. Admitter. Vonnie the second answer, 2022 will be in the usa the only way these allegations go away. Brendan i cannot imagine how that goes over. If it is a u. S. Investigation that brings the cup to the u. S. Vonnie always awkward to take a product away from the constant after he or she has paid for it. Brendan there were several tweets in this vein. Is a very elegant way of giving a perfectly legal payment to fifa. Vonnie cooper on why he is so genius because he knows guest both sides when. Win. It is a gray zone. Brendan we will build new expensive stadiums like every other world cup. Tom thank you for your responses today. Further coverage, 10 30 this morning an historic News Conference. Ian bremmer, thank you so much. Brendan stay with us. Live from bloomberg headquarters in new york, this is Market Makers with Erik Schatzker and stephanie ruhle. Stephanie good wednesday morning. Erik soccer world live this morning. She fumbled the headlines. Police raids, accusations of millions of dollars in bribes. Stephanie i read this headline. It is no dream. Lets get you started here. Erik fans call soccer the beautiful game. So often, it is. Perhaps not today. The politics of the game are anything but beautiful. Nine soccer officials and five others were charged in what is called a bribery scheme. Swiss police raided a hotel and arrested six officials from viva. Fifa. Fifa has been ac