Transcripts For BLOOMBERG Bloomberg Best 20160306 : vimarsan

Productivity is dead in the water. Dont be moving around in the markets. Bit e we talk order talk auto business at the motor show. All coming up on bloomberg best. Francine hello, i am francine lacqua. Best abloomberg weekly review of the most important Business Analysis from Bloomberg Television around the world. But stick on lets take a day by day look. This is a bold policy step from the bank of china. The big story is the Chinese Central Bank is cutting the reserve requirement, reducing the amount of capital that the banks need to hold in reserve. This is hot on the heels of one of the biggest months of new credit growth in china. Is that a story . Jonathan this is both a significant surprise and a significant move, especially when you consider the amount of liquidity they have already pumped into the system. In the near term, that will add , andedit growth in china of course that will help the economy grow, in the short term at least. And of course, it comes at a time when they are suffering from record capital outflow, not so much just because of pressure. This will put pressure on the china for exchange. Foreign exchange. This is a bit of a sugar hit for the economy. This could cost them further problems down the line, the bouncing that is going on here. Jonathan what signal are they sending . Enda we dont have a good picture. Because of the Lunar New Year holiday, we do not have a good read. We havent been able to look at the big three indicators. What we have had are some private readings on the business commissions. They have all disappointed. The China Economy hasnt gotten off to a good start. Are perhaps suggesting they are not confident either. Francine apple and the fbi have been testifying on capitol hill. We see obviously in isils efforts to reach into this country, using mobile encrypted messaging, have is to kill people in the United States. That is a huge feature of our National Security work and impediment to our security work. Even with a court order, what we get is unreadable. Francine we are joined by New York County District Attorney cyrus fan. The inability of Law Enforcement to access devices where a judge has determined that there is evidence in those devices that may relate to a crime, whether it is murder or sex crimes, is having an impact on our ability to do our job. I think it is having an overall negative impact on Public Safety. We ought to push rapidly for a federal legislative solution to this issue. I believe that the twin interests of private and Public Safety can be balanced. I do not think it is acceptable to have these devices knowing that they contain information that is so viable and important to protect the rights of victims , simply set limits because simply set them offlimits because private Companies Want them to be. I think Congress Needs to strike the balance that has been taken away with recent moves by apple and google. That is where we need help. Francine lets turn to the race for the white house. , which isuper tuesday still only yesterday for megan murphy who has not slept. Jumped to aton has big delegate lead. The matchup has won seven states and taken a significant lead over his closest competitor, ted cruz, who won three states. How does the Strategy Change now . Megan the strategy has changed radically. This is why. We expected donald trump to do well. We didnt expect ted cruz to perform as well as he did. He got alaska in a barnburner of a race. Marco rubio had a tough night. The establishment is now left with this option of, do we start to think about getting behind donald trump or do we have sitting lawmakers saying this is not what the Republican Party represents, we need to put our firepower between marco rubio or ted cruz . Marco rubio not shown he can win a state. The only won minnesota. How beneficial is it that Hillary Clinton can now sit back and start to plan ahead for november . For shes got more breathing room, but Bernie Sanders has a lot of money. Hes going to stay in this race and make his message. The cofounder and former chief executive has been indicted on the conspiracy charge. The u. S. Government says Aubrey Mcclendon orchestrated a sting between two large Gas Companies to not bid against each other. Francine they are intertwined, which is how he got himself in this pickle. Built his company from nothing into the second largest producer of natural gas in the United States, only behind exxon. He is the public face of the gas revolution. To see him face these charges is an interesting turn of events. Francine breaking news now. Aubrey mcclendon is dead. He was killed in a car crash in oklahoma city. Of course, the man was indicted yesterday. U. S. Prosecutors say he was involved in bidrigging. Sayingissued a statement the car he was in, alone, a chevy tahoe was going faster than the speed limit and was engulfed in flames when it crashed into an abatement will an embankment wall. He was one of the real leaders in what is now the shell revolution. We all know that the degree to the degree of turnaround in u. S. Production driven by technology, not by government but by technology in oneprivate sector, has been of the most Remarkable Economic Development in years. That his longtime friend of Opry Mcclendon of Aubrey Mcclendon. Ive had the privilege of being his friend for 23 years. What happens with tom ward . The case against mcclendon will be dropped because he is passed away has passed away. The investigation into this matter continues. Sandridge wasnt named in the indictment specifically, but bloomberg reported they were the mcclendonany that conspired with. The investigation will have to continue. We will see whether there are other indictments that come with this. 242,000, that is the number for the month of february. A 47,000 increase over what the median forecast in our survey said. If you include provisions for the month of february and january, job creation is on a 228,000 average monthly pace matching what we saw in the year 2015. Are these good jobs we are creating . That is the question, are they good jobs . I suspect that some of them are not great jobs. Some of them are minimum wage and a little bit higher. It is the average income of American Workers that is perceived as higher, but not that is proceeding higher, but not at a very high pace. Tion rate isa up, and i think we should be heartened by that. It means more and more people are coming back into the workforce, and it takes pressure off of their phillips curve and taylor model. Modelnot exactly a robust from the standpoint of a hike. It may be a robust model from the standpoint of increasing economic growth, which i expect to be about to present about 2 . One of the numbers i look at is total hours of work, aggregate hours, which was down 4 10 of a percent. Despite the jump, the work week has declined. More people came into the labor force, but people are working fewer hours. That could be an interesting development, whether there is more work sharing, where peoples work hours have declined. Unless we see wages pickup, that means that incomes will also not be keeping pace. Will have much more on the apple privacy case later in the program, and exclusive interviews with Loretta Lynch and apples lawyer ted olson. , aing up on bloomberg best look at the weeks most important any news company news. Toncine welcome back bloomberg best. We learned that Barclays Bank will be closing up shop in africa. Commodity markets have finally hit bottom. But lets take a look at the roundup of company news with a major move from one of asias largest automakers. Nissan shares are having absolute flyer at the moment. They are up the most in seven years. This is one of the biggest ever share buybacks, worth tree . 5 million. 3. 5 b this is a little bit of a departure, this is the first time that the company has bought back shares since 2011. This represents a bet by the board that these fears of the company hitting a peak or maybe overdone. Re maybeayba overdone. Barclays has said it will sell down interest in its african operations. It posted its fouryear adjusted profits at 5. 4 billion pounds. That compares the estimates of 5. 6 7 billion pounds. But it to the ceo, jeff bailey lets go to the ceo, jeff bailey. Can you talk to us about the reasoning . A fireare saying this is sale, and you hope to do it over a period of time. Do you have anything to show in terms of assets . It is a difficult decision. Barclays has been in africa for 100 years. Team ofan enthusiastic colleagues. It is a difficult decision. As you noted, we have 62. 3 of barclays africa. In terms of hand, how regulators think about ownership, we own 100 in terms of liability. You look at the capital charges that we have, funding charges, etc. It is hard to own 622 of a business where you have 100 of of aiability 62 business where you have 100 of the liability. G right . S i. T. Why does he think it is bottoming and things will get better from here . We saw manufacturers all of the world thdestocking. They could feel metal prices going down. Nobody wants to hold onto expensive metal. They destock as fast as they can. When the cycle ends, and we think it is ending, prices start to lift. We already have seen some restocking in china. Maybe not as fast as in past cycles, but is still happening it is still happening. How much more do you think there is on the upside . It is really easy to sell the stuff too early. Glencore has done really well, exceptionally managing this downpour. Is not that bad, it is a slightly different sort of growth. This is more of a consumer oriented growth, but it is still there. Sports authority is filing for chapter 11. They dont have a growth strategy, in a category that has been the biggest Success Story among apparel. There is no excuse, this is a fail of execution a failure of execution. It is remarkable, in 2006 it was bought by private equity. Was aboutint, dick;s even. Now they have hundreds of more stores and twice the revenue. What happened to sports authority, and cannot be saved . Can it be saved . Its all about execution. Marginsas grown, their are good, and if youre in the Sporting Goods area, you have to hit a home run. It is not fathomable that these guys would hit such a hard time. Alibabas jack meyer said his eye is on another media outlet. In the beijing business magazine and publisher, tell us about this magazine and how it is perceived in beijing . It has quite a good reputation. She looked about five years ago to start up caixin which means financial news. That ininteresting is the past year or so, they have been moving into areas of Financial Data. This is not unusual for alibaba. They have bought into media before. The question is, why add another publisher . Theyre going after the media empire in china, and actually trying to tap into more than just publishing, but the Financial Data there. They have announced recently that they are moving into a deal between other organizations, and they have bought basically a Credit Rating agency. Theyre dealing with the company and Financial Databases and research. Xiaping is adding a lot more data in the offering to the client. Shares are tumbling today after the company stated it overstated the growth of its consumer base. We have been digging deep into the story this morning. They made a mistake. They put bad numbers out there in the conference call. Is a psychological native, the shares really took a hit when it first came out, but it sort of bounced back, and people are telling us that this is not a gap issue. Not appear that this feeds into the biggest accusations against the companies, that is a pyramid scheme. This does not look good for a company that is under suspicion, but it is not sort of a major problem, as far as nubbers are concerned. What is bill ackman thinking today . We have not heard from ackman himself. Obviously the stock is down, and this is what he wants. Hearing initially is that this does not sort of feet into the idea that this is a pyramid scheme, it is a mistake, a big mistake. Saying 70 when the numbers were actually 30 or 16 when the numbers were 3 . Not good. Francine you are watching bloomberg best. Warren buffett released his annual letter to shareholders this week, and its wisdom was especially welcome by shareholders who were concerned about market volatility. We analyzed his letter and spoke with others about coping with unsettling levels of uncertainty. Warren buffetts animal letter went beyond berkshires and into the state of president ial politics. He says the rhetoric on the campaign trail has been negative, and heres a direct quote. As a result of this negative drumbeat, Many Americans now believe their children will not live as well as they themselves do. That is wrong, the americans being born today are the luckiest crop in history. That is a strong statement. Is quite forceful. He really went above and beyond in this years letter. Americass why he thinks is so great, and it really does boil down to the fact that we have a capitalist system that keeps marching toward more and more productivity. For buffett, that is just the key factor. He says basically to shareholders, and he is speaking to a wider audience here, that politicians should put aside the state of the economy right now, because over a longer time. Over a long time period, amerco works out for society. America works out for society. Intoas been wading politics and has been very clear that he supports hilly quinton and expects her to win the clinton andhillary expects her to win the campaign. The subtext is that he was making some political statements here. Given the volatility that we sign chinese markets, are you still a buyer of chinese stocks . Do you understand what the exact and game from chinese authorities is . We are buying very selectively. This is the time and all emergent markets that you have to be very selective. We are a buyer of select chinese stocks. You have people saying, they are cheap. But at the same time, there is no growth coming in. It depends on where you are looking. I just came back from brazil, and they are very sad. That is a wonderful time to be buying, when everybody is sad and negative about the country. Brazil is not going away, they are going to a lot of reforms. Through a lot of reforms. What do you want to buy throughout china and around the world . You are forever the optimist. Some people are saying this will turn out badly. We love this time in the markets. When things look so bad, it is usually time to be looking at the bargains. The things were looking at are the strong, consumeroriented companies, companies that have a good market share, growing their market share as a result of disturbances in their industry. They are buying competitors, competitors are going out of business. Those of the kinds of companies we are looking at. Punters cares about how you are making Capital Allocation decisions i am curious about how youre making Capital Allocation decisions. Prices have been moving a lot more erratically than the transatlantic values of those businesses. In the european Financial Sector , brief the words negative Interest Rates and that causes a decline in the Financial Services companies. Low rates and negative rates dont help lending spreads, however, that is not the whole story. You have increases in loan expansion, lower costs, lower loan losses. Combined this with the way that prices have been slammed since the beginning of the year, and we think there is great opportunity, especially when you consider that most of these large banks are in a stronger Capital Position than they have been in a long, long time. You have much safer balance sheets, lower loan losses, lower costs, better credit expansion, and yet you have a collapse of these prices, mostly due to the spear of negative Interest Rates , which we would see as a transitory factor. Wears the opportunity to make any money . Where is the opportunity to make any money . Through cost cuts and credit expansion. Is going to be narrower, but it is going to be narrower not forever, not into perpetuity, like mr. Market believes. Narrower untilbe these Central Banks keep the momentum going and jump start the economys. Economies. Inwill be see consolidation the Banking Sector of europe because there has been pressure on your rivals . In general, the european Banking System is clearly at capacity. We have learned from the mistakes of the past that not everything should try to copy the other, but rather that everything has to find its own way to lead through the next phase. That means focusing on what you stand for, what you are good at, either by job if he or client service. Your competitors are slashing i would particular note mr. , cryan at deutsche bank, very strong language. What Everyone Wants to know is how are you going to retain your intellectual and your trading and your banking firepower . What are you going to do in the next six months to keep that talent . Sergio the Investment Banking, because this idea of onestop shop is dead, i cannot really buy the story that when people are commenting on on competitors exiting. Youre are going to pick up the market share. Actually, i think there is very little to gain if you do not have the full capacity, and also in certain businesses, the reality is that Capital Requirements make certain businesses structurally unprofitable. Therefore, i think you can retain an Investment Banking franchise and expertise, but you need to pick up which segments you want to be good at. Francine coming up, more expert insight on Financial Markets and economic policies from alan greenspan. And legendary investor ray dalia. Plus, Critical Issues of Cyber Security that have apple at odds with the u. S. Government. That is all straight ahead on bloomberg best. Francine welcome back to bloomberg best. I am francine lacqua. Among this weeks top interviews on bloomberg tv, an exclusive conversation with alan greenspan, who led the u. S. Federal reserve for 20 years. My colleagues tom keene and Michael Mckee sat down with him in washington this week and discussed a growing trend in monetary policy. That is negative Interest Rates. Alan up to a point, negative Interest Rates have no effect. Why . Because people are willing to accept, essentially, a negative Interest Rate to hold the claims of these particular countries. That is going to change if we go on indefinitely. Because somebody is going to start to move. We do not know what happens when that happens. Michael is it dangerous, do you think, a dangerous experiment for so many Central Banks to be doing this . Does it call to mind the beggar thy neighbor currency policies of the 1930s . Alan i do not know if the word dangerous, but it is clearly nonproductive. That is to have this type of , situation is a distortion. And really the big argument , about excessive low Interest Rates for a very long period of time is it work warps real investment. Clearly, if you have negative Interest Rates, people who can raise funds with negative Interest Rates, their Capital Investment projects are going to be warped. Tom the corporations you follow with your data analysis, are they acting in an unhealthy or improper manner because they have a free lunch from low Interest Rates . Alan the problem basically is, and im sure theyre doing it because you can tell what happened as the qes opened up and the priceearnings ratios rose, we are getting signals, which are distorted because Interest Rates are too low. People are investing in longterm assets when they do invest in longterm assets under the mistaken view as to what the rates of return have to be. And that means you are going to get misuse of capital. Michael the markets these days seem to be telling us that we are in trouble. Are we . Alan yep. We are in trouble basically because productivity is dead in the water. Francine in another Bloomberg Television exclusive this week, Bridgewater Associates founder ray dalio shares his thoughts on the fate of the Global Economy with erik schatzker. Ray you asked me about investors, so im trying to back to what investors should do. Erik what you think is appropriate, and what they should do. Ray i want to convey the average investor. I think of the average investor, most everybody, do not compete against pros like ourselves or other people. They are not making tactical asset allegations on the market and moving around in the markets because you are probably going to lose. You have to have a balanced portfolio. In other words, think about how you will get a balanced portfolio. What you know is that asset class as a whole over a period of time is going to thing you outperform cash. Is going to that is the thing you can be most comfortable with. If they do not, then you have a depression. The only time that has not happened. To know how to achieve a balanced portfolio and that is a whole other subject i do not know if you want to go through. If you are talking about tactical debts in other words, i , could come on the show and say, i think this is good, but if i come on a month later and change my mind because something has happened, i am going to mislead people. So the tactical bets i do not think are going to be helpful. I would say that we are in an environment in which it is very important to have a well diversified and that will include assets like, to some extent, maybe a little bit of gold in your portfolio. In other words what can i tell , investors . Try to achieve balance in various ways that is a whole subject about how to do it. And also, i think gold at 5 of your portfolio, 5 or 10 of your portfolio, under the circumstances would be also a prudent thing to do. Prudence is the important thing to do. The reason i am also referring to that is we have a situation where debt is money. In other words we have a fiat , monetary system. So we are having problems as the Central Banks operate. And so think of it as another , form of cash. And when cash has 0 Interest Rates for less, think of it as one of those possibilities in terms of, how do you create diversification . Francine this week, the House Judiciary Committee question questioned representatives from apple and the fbi over their dispute of Digital Privacy and National Security, and we were out looking for answers as well. Bloomberg west anchor emily chang dug deep into the debate with the former nsa director, apples lawyer, and the attorney general of the United States. Keith in my opinion, the question is not who is right but how do we solve this so we have both . Protection of Civil Liberties and privacy, and how do we ensure our security as a country . Emily is it possible to have both . Keith all things are possible. What i would say, get the greatest minds in industry to work with the government. To come up with a solution. It could be laid out to the American People in a way that does both. Emily do you think apple is being arrogant . Keith i think there is a lot at stake. And i can see apples concern saying if you do one, it is a gateway to many. I can see the fbis concern, if you do not do this, we will have a problem in the future. That gets back to the beginning. Emily if apple does this for the u. S. Government, who is to say they cant do this for the Chinese Government or the russian government . Keith if we come up with a solution that we the United States can put forward a , balanced solution, perhaps that is the solution that we can help apple, facebook, and google in europe, asia, and other places. We have had too big a disconnect between industry and government. I am not for a backdoor. I am for a transparent front door that tells the American People first how to solve this problem. And then second, take it to our allies and say, is this an International Solution that we can work with . Emily you say there is a middle ground between apple and the fbi. And i would love some specifics. If there is a middle ground, where is it . We feel the middle ground is rain apple and the fbi, or Law Enforcement and any company, is the court. That is who we go to to arbitrate these disputes. We have a difference of opinion as for what the law means, we go to court, and that is what we think is the current state of affairs. That is where we think this dispute is going to play out. However, as we discussed, there is the middle ground of discussing this in the larger forum of ideas in our country. Having a discussion about what it means to have both privacy and security. We do it all the time. People expect it of us. And we can do it in this case also. Emily but Facebook Says there is no middle ground that does not put everybody at risk. It is not just about one phone, it is about every phone, and it is about the future. How do you respond to that . Ag lynch in the present, we see how we do in fact balance privacy and security every day. In fact until recently, apple , was able to comply with our requests, and they have some of the strongest security out there, and we have not seen that parade of horrible cases in seo either and seo either i think. I think we have seen it done. We have our finance companies, our health care companies, all important sectors of the economy depend upon security to protect all of us, every single one of us, but they need to manage that data to also keep us safe and secure. Emily what does a compromise look like to you . How does this play out . It really is about how do we , access evidence anywhere . We are applying the same principles as if we are trying to go into a home and look at a file full of certain kinds of papers. We go to a court and say there is a narrow set of evidence that we need, and here is where it is located. I think in this case, it is important to note that the customer, the actual customer of the phone is the one who has requested apples help. So one way to simply resolve this is for apple to work with its own customer and work out a way to resolve this issue. Ted the government does not have the authority to require apple to redesign its iphone to disable the characteristics that it put into the system, which is what its customers wanted. There is no Legal Authority for that now, and one judge has only already held that. So there has to be some discussion about how to solve this problem, if there is, but you cannot conscript a private company such as apple to do something to change its products. There are we have civil rights , to prevent that sort of thing. Emily i spoke with attorney general Loretta Lynch yesterday, who said the middle ground is the courts. Let this be decided on a casebycase basis, as it already is, in the judicial system. Under any circumstance, will that satisfy apple . Ted i am amazed that she would say that. It would not solve anybodys problem. You might have one court going one way and another court going another way. Fbi director comey himself yesterday said this is a problem. He said it is one of the most difficult problems, or the most difficult problem i have ever faced as fbi director, before that, he was Deputy Attorney general. This is something Congress Needs to debate one way or the other. If you do on a casebycase basis, you are going to have different outcomes in Different Cases in different parts of the country. Director comey says they have 12 or 13 other cases in which they are trying to do this in federal courts. The manhattan District Attorney said he had 205 iphones he wanted into. You can imagine, multiply that by every jurisdiction in the country, a casebycase solution is no way to go about this at all, and i am amazed that the attorney general would say that. Emily is there a middle ground . Because it sounds like apple is saying there is not. Ted well, there is not a middle ground that i know of that requires apple to go to work for the government. We have a constitution. The constitution does not allow the government to conscript private citizens to invent products or to change the products that they have invented in order for the government to look into the product or to cause the product to do what it wants. Francine you are watching bloomberg best. I am francine lacqua. The annual Geneva Motor Show is usually a selling platform for manufacturers to introduce new car models and talk up the hottest auto concepts. But this year, the shadow of the vw emissions scandal also hung over the event. Ryan chilcote spoke with many top Auto Executives this week in geneva, starting with volkswagens ceo. Matthias the investigations are going on, and we are in contact with all of the authorities, especially in the United States, so were looking forward to have results as soon as possible. Reporter there is this idea that you will come up with a plan by march 24. Are you confident you can come you can come clued or come up with a plan that will satisfy u. S. Authorities in a months time . Matthias the dialogue makes some progress, so we will see what happens during the next weeks and months. Ryan where are you going to find the money to pay for this scandal . You have already said that some of the money that you set aside will not be enough. You talked about the need to reduce some of the models that vw produces, costcutting efficiencies. Where are you going to find all the money . Matthias a very interesting question, but you can suppose that volkswagen is a company which is able to handle the money, and one of the most important things will be to set priorities to the things for the future, kind of Product Program and kind of autonomous driving, and kind of realization or mobility so we will do that and , that will be a progressive issue. Ryan does what we have seen with vw and the whole diesel emissions scandal add new injured see urgency into the push for electric cars . Carlos we attract attention on the fact that even though the regulators are trying to do the best in order to say what is acceptable and what is not acceptable in terms of emissions, there will always be conditions that the regulators cannot regulate. So if you really worry about the emissions the only solution is , the electric car. You have zero emissions and nothing to measure. On top of this, as you know cops 21 has come to the conclusion that we cannot afford to have more than two degrees of the heating of the planet, and this means more and more zero emission cars. Ryan i am not suggesting you are predatorial, but does this present you with an opportunity . Carlos without any doubt. Ryan what is that . They will be strapped for cash as they worry about the 46 billion in fines that they may have to pay. Carlos i do not want to mention the competitors themselves, but what i am saying is the fact that emissions have become a concern of many people, and a lot of people do not understand exactly what is going on. This creates a space for electric cars. Because here you have zero emissions. Karlthomas of course is all of this discussion about diesel and emissions is helping to think more and is moving toward electric cars. Nevertheless, the majority of the market is still combustion engines, and that is why it is important that we also invest in combustion engines. And like the gt for example, the planet has a threecylinder very efficient turbo engine. Ryan to what extent is this an advantage for a company like like yours . Karlthomas i do not intend to see the discussion and scandal as an advantage. Ryan not that you are predatorial or anything. Karlthomas it is an issue for the industry, because it looks as if we were all cheating, which is not the case. We have invested tremendous amounts of money to do clean diesel and clean gas engines, and they are important for the future. So that is why i think it is not a good thing for the industry, not for anyone. Francine as we wrap up this edition of bloomberg best, lets take a look at some of the charts that tell the story of the week in business. Mark Leonardo Dicaprio is one to win an oscar. Well done. Well done. I was thinking, how can we make money out of mr. Dicaprio . How about this . If you bought the s p 500 in these years, you would have made money, because the first year he was nominated was 1993. That year, the s p rose 7 . And he was nominated for the aviator, rising 3 . Then blood diamond up 3. 5 . , 2007, wolf of wall street, up by 11 . If you buy the s p on years that leo was nominated, you sat on gains. If you bought the s p the year leo was bored, you sat on a 30 loss. By the way, the year he won an oscar, the s p 500 is down. Long story short, buy when he is nominated. Joe so for a long time it looked like the bank of england might hike imminently. Their Employment Data is good, the economy has been approving, but things have really changed the last few months. This chart i saw from asset management, this is Morgan Stanleys measure of marketimplied months to first hike. So for a long time last summer, the market was implying about 10 months to the first boe hike. While the ecb was more around 30 months to the first rate hike. Since the start of the year, it has absolutely surged at the now the market does , not see a hike for about 50 months, more than the ecb with brexit concerns about the economy, messages about the boe people have really push back , their timing for a hike. Scarlet costco posted secondquarter earnings that trailed analysts estimates. The stock falling as much as 3. 5 . Lets see what the numbers say. Today the numbers dont lie. Costco is the largest Warehouse Club with more than 116 billion in annual revenue, but the strength of the u. S. Dollar as well as falling gasoline prices are hurting costcos comparable sales growth. The orange line tracks sales fuel, at about 5 . That is a drop from last quarter. The white line shows all sales including gasoline which dipped , into the red but has recovered to about a 1 pace. Despite these headwinds, costco is expanding and has almost 700 stores in the u. S. And internationally. They are targeting new store expansion as the primary source of revenue growth. So where is it all happening . Costco has about half the market share on the west coast, so it is clearly dominant there. It has room to grow the south, midwest, and especially the northeast, where bjs is the biggest player. Expansion, of course, costs a lot of money, and costcos plan is to add about 20 new stores a year. Here is how much it has increased Capital Expenditures spending. The forecast of almost 3 billion this year is more than double the 1. 3 billion five years ago. Warehouse clubs like costco can rely on recurring revenue stream and that is members, because at , the end of the fourth quarter, paid had 16. 4 million memberships, representing 26,000 new members each week. Executive members pay the highest fees, and they make up more than 1 3 of costcos member base. Investors are worried that these members might not be showing a slowdown in spending. Francine that is all for this edition of bloomberg best. Remember, you can always find the latest Business News around the world at bloomberg. Com. Im francine lacqua. Thanks for watching Bloomberg Television. Announcer Brilliant Ideas is powered by hyundai motors. Narrator the contemporary art world is vibrant and booming as never before. It is the 21st century phenomenon, a Global Industry in its own right. Brilliant ideas looks at the artists at the heart of this. Artists with a unique power to astonish, challenge and surprise. We take a close look at ns harsha