Transcripts For BLOOMBERG Bloomberg Bottom Line 20140522 : v

BLOOMBERG Bloomberg Bottom Line May 22, 2014

Vote on nsa surveillance practices. Yang yang is at mcdonalds headquarters in illinois, where workers took their fight for higher wages. We begin in kiev, just days before ukraines election. What is the latest on the ground . Another violent day in , according ukraine to a local official who just spoke on television. 16 people were killed by separatists. And this morning, a russian aircraft entered ukrainian airspace. Theres a growing divide between the two sides in this conflict and is no more apparent than in the city of donetsk. Donetsk is not exactly a city under siege, but with armed men now a commonars sight on the streets, its certainly a city on the edge. [chanting in Foreign Language donetsk city sits at the center of a vast province in Eastern Ukraine that borders russia. Recently, a group of prorussian renegades declared it separate on the rest of the country. A move the government in kiev swiftly condemned. I used to be a ukrainian, a separatist militia member told us at a checkpoint on donetsk outskirts. Now, i dont know what i am a separatist, a terrorist, one of the rebels, a lowlife, a progression activist . Anything but a ukrainian. After an army base in ukraine was ransacked, he got his gun for free. The independence declaration in donetsk has deeply divided residents here. Elena on the right is a 42yearold engineer who has often worked for major russian gas company, but she says the prorussian separatist are abandoning law. This woman disagrees. She said they are just sticking up for the people of donetsk and include the new leaders in key have are the real terminals. The new leaders in kiev are real criminals. Banks have been targeted throughout the donetsk republic. Visited,companies we like this logistics and delivery business, told us revenues have been cut in half since the start of the year. It is now just days until ukraine election, but theres no certainty the results will offer any solution in this time and if this standoff continues much longer, it may not be lives at risk here, but it may be jobs. What exact they are these separatists asking for . There is a real range when you talk to them. Some of them are saying they very much want an independent peoples republic of donetsk and nothing more to do with ukraine. There are some that want a more federalized ukraine, where we have a great deal of autonomy. And then there are those that say in an ideal world, we would be taken over by russia. Is russia actively involved in the separatist movement from what you saw and reported . That is an interesting question. Certainly, the new Prime Minister of this independent peoples republic of donetsk is himself a russian citizen, from moscow. Uniformsquipment and they are carrying they bought in russia. Were bought in russia. Whether they are actively involved or not, they certainly have a huge amount of influence over what happens there. Reporting live from kiev, willem, thank you so much. The National Association of realtors says there was a 1. 3 increase in sales last month as the industry kicked off the spring selling season. U. S. Lle meyer is a senior economist at bank of americamerrill lynch. She joins me here. Welcome back. Its good to see you. For time buyers, they represented 29 of all transactions last month. First time buyers, they represent 29 of all transactions last month. Are people turning to feel more confident . We have seen a little bit of the shift in firsttime home buying, but i would be careful. There are seasonal issues when you are looking at this share of buying that is going to firsttime buying. In the spring there is a seasonal pickup usually with firsttime homebuyers. If you look at the wrong longer trend, historically we are still at a low level for firsttime home buying. Investors accounted for 18 of the home purchases last month, up from 17 of month earlier. And as you just alluded to, seven out of 10 investors paid cash. Who are making these was making these purchases . Is Institutional Investors . Partly, but there are other investors who are looking to buy fixed assets. In this environment where it is difficult in terms of finding good investments, with longterm investments, housing has become very attractive housing attractive asset class. We have seen exactly that, those looking to buy real estate, particularly in those markets that have a good amount of distressed inventory, with the intent of renting out. It has been a pretty good trade. Compare with a year earlier, existing home purchases were down 7. 3 on an unadjusted basis. In april,h gain limited to stronger results in the west and the south. What accounts for the disparity, particularly in the northeast and the midwest . Was at the weather . Was it the weather . It was partly a weather issue, but im skeptical to say that all of the softness we saw was just weather related. Home sales have been softening now since the end of last summer. I think that the winter probably made the trend a bit worse and it probably hurt that downward itjectory, but i dont think is the whole weather story. People have said you cannot just blame it on the weather. There were other structural factors involved, as you said, evidence before we even hit the bad weather. How has this sector been spotted . In general, housing is recovering. We will continue to see an trajectory. It is a bumpy ride and a lot of challenges along the way. One of the challenges particularly for existing home sales is the increased Interest Rate that we experienced last summer. That coupled with the fact that housing prices have been rising this whole time, that has affected afford ability. It is still more affordable, but ig shift from the spring to the spring from last spring. A year ago, the number you alluded to was 3. 51 . How is the rise impacting housing overall . And will it make the fed rethink its strategy to raise its Interest Rates . When the fed raises Interest Rates, Mortgage Rates will go up and they could pry some people out of the market. Absolutely. , we areenvironment seeing some home buyer Interest Rates go up. Historically, it is four points 4. 5 . It is a good rate. With greater Income Growth and a stronger economy, expectations will turn higher and i think the Housing Market will be able to absorb the higher Interest Rate. But without a raise in the fundamentals, it will be challenging for the Housing Market. That is what the fed has to consider. They have to think about what the appropriate level of Interest Rates is broadly for the economy, and particularly for housing. The commerce department, their statistics about Residential Construction have can have contribute it to Economic Growth in the last two quarters. Is that a concern to you . Not only did it contribute, but it actually detracted from Economic Growth in the past two quarters. Residentialarter of investment is nonmortgage related transaction costs, which have been entirely tied to home sales. In addition, sales in the First Quarter were week. Part of that was weather related, but that entirely. We think we will see some positive gains for the rest of the year. Aggregate,nce on we think Residential Home growth a smally go up percentage. Are people getting attention from some of the funders, from the mortgage banks . Yes, it is starting to thaw. But on balance, bad credit is still a big challenge. The shell, its good to see you again. Coming up, we will look at how confident americans are at reaching their retirement goals. I will speak to the ceo of one of the top Asset Managers for Pension Funds when bottomline on Bloomberg Television continues in just a moment. U. S. Stocks are rallying, boosted by manufacturing and housing numbers released this morning. Lets look at what Institutional Investors are saying about investing in the stock market. Jeff becker, ceo of foia investing management, formally ing Investment Management. Mr. Becker, welcome to bottom line. Welcome to coming on today. Your company is a top Institutional Investor of assets. Where are you putting your money . If it is a participant retirement plan, they are putting money into fixed income assets, and more and more into target date funds, which is a onestop shop with asset allocation. Year to date, the dow industrials and the nasdaq are lower, but the s p is up over 2. 5 . The markets have been choppy this year, as you know. What is the outlook for equities and where are you looking to invest . Overseas or here in the u. S. . Predominantly the u. S. Overall, quarter one gdp was soft. Ofhave seen signs improvement in q2. Obviously, housing and asoyment, as a pickup they pick up him as your guest was just speaking about, we think that will keep the fed accommodative. We think that will be a net positive for the equity market. Speaking of longterm rates, that ties into fixed income. As you know, the fed will eventually have to raise Interest Rates. What are you investing in u. S. Treasuries . Think the question is why are u. S. Treasuries so low . Yes. It is a value play, given what has been happening overseas with the markets over there in e. Rms of the blend bund the yield on that right now is 2. 5. Think it is a false positive. Really echo investors are not seeing the return for the reliable needs. As a result, i think fixed. Ncome is exaggerated ultimately, they are looking for higher yield capabilities and we have some of those high yields in the bank loan, which is a floating rate offering rising rates. We have the mortgage derivatives, which are uncorrelated. Private placement of liquidity premium. And we have investors interested in seeing those packages in unconstrained fixed income. You are conducting a survey you just alluded to. What are the Main Findings of that survey . We had three Main Findings. First, we found that those who invested in target date funds were confident about achieving their retirement goals. Second, those participants are actually contributing more to their retirement plans. And lastly, that those participants want capital preservation at the retirement date. Oya Investment Management has a twotarget date. You didnt change or focus particularly when it came to retirement. It seems to be your breadandbutter. Are americans putting enough they areretirement . Clearly not. It has been spoken to has a Retirement Crisis in america. Looking at company that issue holistically and bringing all of our businesses and capabilities to bear for the Asset Management business and insurance business. We are trying to protect the accumulation phase and ultimately, the distribution phase. Where are they putting their money . You mean retirees generally echo generally . Putting into retirement date funds, which means at the expense of all other asset classes. The Financial Stability saidight council has been to need to let the sec takeover Asset Management rules. . Hat would that do what with that designation mean . That is a hotly debated issue right now, as you know. And we believe that ultimately, we are deploying capital for other institutions and we should not be considered systemically important in that regard. Why not . I think that ultimately at again, we the day, are deploying institutions capital in that regard. And moneye processes through the system that are well controlled and regarded. He sec can monitor that risk appropriate the and we dont need another oversight involved. Jeff becker, thank you for joining me. The house of representatives votes on a bill to end the nsas bold election bulk collection of americas phone records. What it means for you. Friday night on Political Capital with al hunt, iraq and afghanistan veterans ceo paul wyckoff will discuss Embattled Veterans Affairs secretary eric chin says air missions of the eric k. Shinseki and the controversy currently on the hill. Today in theed first legislative response since Edward Snowden started leaking and nsa documents about a year ago. Critics say the changes dont go far enough. Peter cook is live on capitol hill. Good afternoon. An important moment here on the floor of the house of representatives today. Response,concrete coming as you said, since about about over the revelation the u. S. Spying techniques. The majority overwhelmingly voted in favor of this bill. Both democrats and republicans were backing this bill. But there were questions about some of the wording. For the first time, it bars the government from collecting american phone records and old collection of any records whatsoever. Instead it asks the phone companies to retain that data and the government can still query that data under court order if it expects someone is tied to terrorism. Suspects someone is tied to terrorism. But it has to get a court order. Theres also Greater Transparency for the technology companies. They can disclose more information on when the Government Asks them for some of this data. But again, the vote could have been Even Stronger had it not been for some lastminute changes lobbied for by the intelligence community. Billsupporters of this ended up being opponents because of it. Played outg debate on the floor. Let me be clear, i wish this bill did more. To my colleagues who will amend the changes, i agree with you. To privacy groups that are upset about lost provisions, i share your disappointment. The negotiations for this bill were intense. We had to make compromises. But this bill still does deserve support. Still allowslation the government to collect everything they want against americans, to treat americans as suspects first and citizens second. Coalition of Nine Technology companies, including google, apple, and microsoft, they were pushing for this bill and ended up being against it, critical of some of the lastminute changes. It is headed now over to the senate. If the white house back this bill, we could see this become law why the end of the year. Eater cook live on capitol hill peter cook live on capitol hill, thanks. It is 26 past the hour and alix steel is standing by with more on the markets. Good afternoon. Tradingin trading has around the highs of the session. Stabilizing, april increasing for the first time in four months. Employer manufacturing read in may also good. A couple of movers you want to highlight for you. First, General Electric is extending its 17 billion offer to june. This is at the request of the french government. Set toad been to expire early next week. Beatingtronics chain quarterly estimates. Again in 30ts minutes. More bottom line next. Welcome back to the second halfhour of bottom line and im a content. Im are has crumpton. The army has staged its coup in thailand. The army chief took control of the government after detaining leaders of political rivals. A political been in crisis the last six months. Russia and china have vetoed a Un Security Council resolution, referring the crisis in serious to the International Criminal board for an investigation of possible war crimes. This is the fourth time russia and china have used their beats their veto power as Permanent Council members to deflect action against the government of president bashar assad. The number of people seeking Unemployment Benefits in the u. S. Jumped last week, but remained at a low level, suggesting hiring should remain steady. The Labor Department said applications rose 28,000 to a seasonally adjusted 326,000. Applicationster fell to their lowest level since may of cook of 2007 two weeks ago. Seattle is leading the charge for higher wages. Mayor ed murray recently announced a plan to raise the minimum wage in his city to 15 an hour over the next three to seven years, making it the highest rate of any major american city. The mayor joins me now. Thank you for your time today. Thank you for having me on. Why do you think seattle should lead this fight . I think cities in general have always been laboratories of democracy. We are in a country right now where the federal government is somewhat frozen. The middleclass has been declining for the past three decades. This is our opportunity to lead the way in doing something about rebuilding that middleclass, by mid by raising the minimum wage. But by doing it smart, doing it over seven years. Even you have expressed concerns that a raise in minimum wage could hurt the economy or kill jobs. What has the Business Community been telling you . I believe that if we are smart about how we increase the minimum wage, and those things wont happen. Studies have shown in San Francisco and santa fe, where they have higher minimum wages, that those things have not happened. We have nonprofit groups and labor leaders that have come together and all but three endorsed the proposal i put together. Some businesses are supportive. Some are neutral. And some are opposed. What about employees who make tips or receive benefits versus those who do not . How would they be impacted by a minimum wage increase . Compare that to a state law that does not require a permanent require in minimum wage for its workers . Its different than the state law, which does not permit it. But local

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