Transcripts For BLOOMBERG Street Smart 20150326

Bell. The german wings crash on tuesday that killed all 150 people on board appears to have been orchestrated by the copilot. He apparently deliberately flew the aircraft into a mountain after locking the captain from the cockpit according to french prosecutors. The investigation is ongoing. Billionaire leon cooperman telling clients as firm has been subpoenaed by the sec. The agency is seeking information on certain securities. A tumble in biotechnology stocks entering a fourth day. Investors with drawing more than 420 million from biotech in the past four days. Thats the most since last april. Less than an hour until the close of trading. I want to get right to the latest. Scarlet, its a lackluster day for the market considering that make selloff yesterday. Scarlet at one point today it just looked like we were going to recover. The dow got as much as 41 points in the plus column before giving that all up. Right now you can see we are lower by 33 point. If you look at treasuries, for a second day, relatively weak demand. Todays 5year note fell yesterday. The least amount demand since 2009. The market is unconvinced as to when the Federal Reserve will actually raise Interest Rates. Dennis lockhart talked about the prospect of handling higher borrowing costs. If you look at whats been going on here today, we are little changed now with the s p 500 up and down. It is basically unchanged at this point. Only the nasdaq is firmly in the green but this week selling has moved it farther away from its record high. I want to point out some of the victims from higher oil prices. That would be airlines. The bloomberg u. S. Airline index declining by 1. 25 . Including American Airlines off by 1. 6 and jetblue losing 1. 3 . Alix we will check back in with you later in the show. At any moment, senator john mccain will hold a News Conference and is expected to address the ongoing crisis in yemen. We expect he will be critical of president obama. Peter cook has more for us. Peter what we have heard from john mccain over the past 24 hours, he has first been very supportive of the saudis and their airstrikes in yemen, their decision to launch those airstrikes against the militants, and highly questioning the administration over its strategy not just in yemen but in the broader middle east. Accusing the administration of leading from behind and not doing enough to address the situation. Not just in yemen but in iraq and the fight against Islamic State. Senator mccain has been very critical of the administrations strategy. He will be joined eyes senator Lindsey Graham and other members of the Armed Services committee. Well see if theyre calling on the United States to provide more than logistical and intelligence support or more direct action which the white house is making clear is not happening in terms of the u. S. Military in yemen. We will hear from senator mccain in just a little bit. They are about to have a twoweek recess so this is one of the final opportunities for john mccain to get a word in on this conflict. Alix saudi arabia and its allies begin a second night of airstrikes in yemen. Planes have reportedly bombed locations in the capital and the countrys northwest. The movement is associated with iraq because its followers follow a form of the shiite branch of islam. This is not the first time the Saudi Air Force has attacked these positions. Oil surging on the news after the saudi attacks, up as much a 6 on the day. Joining me to discuss all the implications is catherine specter of Cibc World Markets and an adviser on middle eastern and south asian affairs. He joins us from our toronto newsroom. With me in new york city is willem marx. I would like for you to outline who the players are and work the board for us a little bit. The movement started off as a group of disenfranchised people in the northwest of yemen who belong to a minority religious group. That has expanded to include a coalition of Political Parties people disenchanted with the current government in yemen. On the other side you have the legitimate yemen president and the growing coalition of saudi partners that includes the united arab emirates, sudan, morocco, one country not involved is oman, which is staying neutral. Alix when you look at the relationship between the houthis and iran, where does iran sit . Iran does support them. The question is how. Are they getting a lot of cash from the iranians . I dont think so. Iran is pretty cashstrapped itself. Yemen is really far away from iran. Yemen is not iraq, certainly not syria or lebanon. Its in the backyard of the saudis. Its an area that is not really accessible to the iranians, but yet they smuggle weapons. There is a political relationship but im skeptical in terms of how much support the iranians can offer the houthis. You have to bear in mind that these weapons supplies going to the rebels from iran have been to the west of yemen, opposite egypt. Now egypt is getting involved in the conflict, they are sending it doesnt fighter jets and a naval frigate to patrol that region of the coast. For the iranians to get anything to the rebels, its got to be coming all the way around the other side of the peninsula. Alix catherine, that leads us to your expertise. You are one of the most accurate forecasters for oil prices over the last few years. Why is oil up on this news . Yemen doesnt even have that much oil. Catherine what captured the markets imagination today is yemens potential to disrupt shipping. There is a Narrow Strait that connects the gulf of aden to the red sea. At the end of the day, this is not the number one chokepoint in the world and there are alternatives. Oil can transit around the port of africa and north from there. It takes longer, but its doable. But thats really what the market is looking at. It is yemens position as a potential chokepoint. Alix when you look at the players in yemen, saudi arabia seems very late to the game. Does it create more an opportunity for the houthis to gain more traction . That is true. The saudis have been preoccupied. It would be fair to say the saudis have been shouldering responsibility for much of the region to make sure the arab spring and its fallout does not lead to more regimes collapsing. They have been dealing with efforts to topple assad in syria. Yemen has been low on their priority, but more importantly, the saudi way of handling human playing factions off, has weakened the yemeni state and does came the arab state and they had to ease out the president and bring in his successor. That situation has allowed the houthis to expand and project power from the northwest of the country. Wanted the ironies is the position who left his position in 2012 after his palace was attacked in the capital, he was bombing the houthis in the northwest. He is now allied with them because he wants to maintain his status in yemen. If the president does now there is well, its a very good inc. A good example of the saudis wanting to maintain their influence in yemen. Alix president obama has said in the past that yemen was a model for u. S. Efforts to fight terrorism by relying on training allied forces rather than risking american lives. This at hold any water, and does a strategy had to be changed . Thats another irony, the seemingly natural allies of the United States in fighting jihad in yemen, and now with iis trying to expand its footprint it is a houthi movement. They are the enemies of the jihadists. It was a confusing situation where the United States is also supporting the saudi effort for intelligence and Logistical Support against the houthis while it needs them to fight the jihadists. Its a difficult balancing act. Alix a confusing situation. You said it all there. When you look at the oil market how long do you think the risk premium in the Geopolitical Market will last, and how much will it account for . Todays risk is probably overdone given the risk of disruption due to exports in the gulf. While we cannot rule it out entirely, we think that trait route a trade route will be protected and they have the means to do so. We think the probability of that is quite low. We had a lot of short positions in the market. Alix and what happens if it draws in iran even closer as well as saudi arabia becoming that proxy battle. Do you think thats an actual possibility that the conflict play out more on the ground in yemen . It is already playing out. The fact that the houthis have risen and the saudis have put together coalition to defeat a group that is not as allowed as a light as they thought. That speaks volumes about how the geo sectarian conflict is playing itself out. It is a fullblown conflict. Alix thank you so much for all your insight and thanks for joining me. After the break, we will get an update on the germanwings mistry. I will speak with afghanistans ceo, his take on the situation in yemen and the Financial Outlook for his country. Alix major developments from the investigation of the germanwings crash that killed 150 people in the french alps. French prosecutors saying the copilot most likely made the plane crashed deliberately and the pilot had been locked out of the cockpit. A 28yearold german citizen and the ceo of lufthansa said in a News Conference today there is no indication that the crash was an act of terrorism, and that the pilot was deemed 100 to fly. Mark, any word on possible motivation why this happened . Mark the German Authorities are now investigating the background and the mental state and any concerns along those lines of the copilot. What is clear is that the french authorities released information they found in the voice recorder in the black box today. It was clear that the copilot had control of the plane at the time of the dissent. He overrode the autopilot and action the steady descent of the plane at full speed into the mountainside. He also kept out the commander the captain of the plane, who had left the cockpit briefly probably to go to the washroom. So this seems like a deliberate act to say it properly, prosecutors said it was a delivered act on the part of the copilot and they do not have more on motivation at this time. That is now over to the German Authorities to investigate that. Alix more stunning headlines and more questions than answers. Coming up next, american air power joins the iran backed defensive in iraq. Will be efforts be enough to topple Islamic State control in the region . Alix here are the top stories ahead of the closing bell. Vladimir putin is accusing western spies of plotting to destabilize russia before elections. He targeted organizations that receive foreign funding adding moscow will not relax security over their activity. According to the associated press, the u. S. Is considering letting iran run hundreds of centrifuges at one secret underground bunker in exchange for limits on centrifuge work that could lead to an atomic bomb. According to a filing, montag was awarded 14 million in total compensation for last year compared with 13 million for moynahan. Staying in the middle east, u. S. Warplanes joining the assault on saddam husseins hometown. Footage showed american jets bombing targets integrate overnight. Iraqi forces are trying to retake the city from Islamic State militants. Still with me is katherine specter and stephen cook, senior fellow for middle Eastern Studies with the council for foreign relations. Thank you both for being here. Stephen, lets start with you. Wasnt getting to create under control to post supposed to be the easy thing that would happen in iraq . Stephen the operation was begun without the coordination of the United States. There was a lot of optimism on the part of the militias that took part in the operation. Of course that now bald down against the Islamic State and the United States has used the opportunity to insert its influence and authority there and is now using airstrikes to try to dislodge the remaining isis fighters. Alix what is the relationship on the ground that they seemingly have the common goal of fighting islamic militants . Steven the administration has been careful to say there has been no coordination. Central command has done the same. There are reports that the u. S. Demanded iranian commanders to leave the area before it would undertake strikes against Islamic State. What a funny thing happened on the battlefield. As your moving people around and youre both undertaking air strikes and artillery strikes there has got to be some coordination going on. It stands to reason there is at least at some level some communication here. Alix katherine, tikrit was supposed to be something that could be managed. What is the state of Oil Production in iraq . Experts were supposed to be 3. 3 Million Barrels a day on average. Katherine iraq is an ironic situation. Last year, normally we expect geopolitical strife is bad for Oil Production. Last year because the kurds made a good showing against isis, they were rewarded by baghdad with the ability to exports and oil from the North Country which they had not been allowed to do in the past. We actually saw more oil coming to market from iraq. There is some risk in both directions in this case. Alix where would you place your bets . The fighting continues in tikrit and multiple as well. And mosul as well. Katherine iraq has the potential to grow their production. I would say the risk is to the upside. Alix i went to get your take on iran. Stephen, do you think we will have a nuclear deal by march 29 or the 31st, as the u. S. Has been pushing for . Stephen it is hard to tell. Reports today would suggest the u. S. Is making a certain number of concessions in order to censure deal. When you speak to people who are in the know on this issue, they say when he comes to negotiations sometimes you know things will go positively and sometimes negatively. In this case, we dont know, it could go either direction. Alix even if there was a deal, it would be hard to sell in iran and the u. S. Because of the right wing. Katherine that is an issue for both sides of the negotiation on selling a deal at home. The devil is also in the details. We will still have several months to work out the technical details, and thats where we would get the real information about what might happen in alix it was great to have you, thanks for joining us. Coming up next, todays move into safe haven traits, we are counting down to the close. We will talk currencies, coming up next. Alix here are the top stories were watching ahead of the closing bell. Indiana governor mike pence signing into law a religious objections will. Some leaders oppose the bill because it can allow discrimination against gay people. The measure would prohibit state and local laws that substantially burden the ability of people including businesses and associations, to follow their religious beliefs. There is some backlash already. Attention tech ceos, Pay Attention to what is happening in indiana and how it will impact your employees and customers. General motors ceo encouraging women to take on new challenges from studying science to accepting jobs that are outside their area of expertise. She told women, dont be afraid. Identity newscast will be produced a daily newscast. Where just under 30 minutes until the close of trading. Lets go back to the breaking news dest where scarlet fu is looking at the latest movers. Scarlet come inside the bloomberg terminal and start with the share price this afternoon. Over the last six months, trading at a record high. Want to show you the bottom part of the screen, which gives a picture of the volume here. 10 million shares changing hands , which is more than three times the daily average. So a heavy volume on a stock that is now trading at a record high. There was an ftc notice that there was an offshore fund potential deal with starwood. Its not clear what type of transaction was approved, but there is speculation that because it is an activist fund, there might be some momentum building their and thats why the stock is trading higher. Starwood did not respond to requests for comment. Other hotels shares are moving up, names like hilton, hyatt, and marriott. Gains of at least 3. 75 for hyatt hotels. Alix staying focused on the markets, investors are looking for safe havens. Gold, swiss francs, u. S. Treasury, to name just three. Oil prices advancing after bombing targets in yemen. Global stocks falling the s p erasing its gains for the year. What is it about the crisis in yemen that is having such significant repercussions all around the globe . Im here with the chief economist at Pine Ridge Investments and katherine spector. What do you make of this flight to safety . It never really lost its status. After s p remove the peg it was just revalued. There were lots of positions put on while the peg was on and it was removed without notice. It took a couple of weeks before the market settled back at the normal level. Alix what do you think is the most popular safe haven now . Markus its hard to buy a lot of swiss francs or swiss bonds especially with swiss bond deals in negative territory. You cant invest in anything anymore because of the low value. If you look at aaa rated securities, so much of the safe haven waves build into other assets. Alix also weve seen flows into the dollar. What becomes the relationship between safe haven inflows into the dollar and oil . Katherine it comes and goes and the dollar has rallied. That has been one of the variables contributing to oil prices. Today is a little bit different because of the geopolitical risk that maybe forcing people to save havens is perceived as a bullish risk for oils. Its a common nation of things. Certainly fundamentals determined direction of oil, but sometimes other factors can play in two momentum in velocity. Over the last couple of months there is significant inflows of retail money into Exchange Traded products. That has been something that has given a little bit of lift from the lows. On the other side of that we have a lot of other matched money positions that got shorter and shorter. Alix if you look at the markets in general it started with oil then bled over into emerging market assets and then currencies. Is it hard to find a safe haven when there is so much volatility on a daytoday basis . Markus im not sure its a question of where the safe haven flows would go. What happened was we saw a somewhat delayed reaction to the end of qe in the u. S. It has flown into commodities as a big recipient, emerging markets were a big recipient. The reversal of those flows was triggered in october and november, economies were improving around the world. It is a reflection of flows. Alix does that mean that it doesnt really matter if the fed ends qe . Markus we expect the fed will start raising rates this year but we dont we have a target of 225 at the end of the year. We see a very modest increase much more in line with a modest increase in confidence about the economy. Alix thank you so much for joining us. Coming up next, greeks are pulling money from their banks as it is nearing a monday deadline to convince brussels for more bailout funds. Will the ecb keep supporting greek banks even if it doesnt support greece . Plus, i will speak with afghanistans ceo. His take on u. S. Troops presence in the country. Alix breaking news, a major Building Collapse in the east bill. Scarlet fu, what can you tell us . Scarlet the address is 125 2nd avenue. Its in Downtown Manhattan. 30 people injured, according to the New York Post. This is a Building Collapse, im looking on twitter, you can see the smoke billowing into the air. We will continue to keep you posted. We dont know the cause of it just yet. The latest count is 30 people injured in this Building Collapse. In Downtown Manhattan on 2nd avenue near 7th street and saint marks place. Alix scarlet, thank you so much for that update. Illinois plugging a 1. 6 billion hole in the states budget. The agreement amounts to only a partial solution to the states financial crisis. Illinois has a 6. 2 billion budget shortfall. The unit may have a valuation of 5 billion and the deal may be a few weeks away for hewlettpackard. Dov charney seeking damages for being ousted from the company he founded. More trouble for athens. Week and deposits plunging to their lowest level in 10 years. Greek greece pulling 15 of the total deposit base that greek lenders have been depending on the ecb for survival. Is time running out . Athens has only until monday to convince brussels to release more bailout funds. Im joined by the chief economist of pine bridge investments. How patient do you think the eu will continue to be with greece . Markus the pregnant pause is because i think the problem is some of the deadlines are very imminent. Even know there is a great level of patience, decisions have to be made eminently to avoid some of the triggers that could push greece into a fall. I think the europeans have enough patience to keep rolling the problems over until a broader agreement is reached. Alix can greek banks survive without the emergency liquidity assistance . Markus technically not. The withdrawal of deposits will essentially bankrupt the banks. But we saw the same thing in 2010 and 2011 when it was the spanish and the portuguese who were taking out a lot more in terms of euros. The discrepancies between Bank Deposits in spain and germany were much wider than they are now with greece. Europe helped the spanish Banking System then, so i see no reason why i think capital controls would be counterproductive. Capital controls here would be opening the door for other countries to potentially do something similar that would be disruptive to that market. Alix should mario draghi be as involved in regional politics as he is . Referring to when he said we will not accept debt from greece into you get some kind of reforms. Markus europe speaks with many voices, which is sometimes confusing. You have the ecb, the various brussels institutions. They are all trying to put enough pressure on greece to come up with solutions so the crisis level will receive somewhat and maybe markets will move on and look somewhere else for problems. We should not forget that mario draghi is not an elected representative for the eu. In that regard, he should be a little more cautious and let the eu institutions in brussels do most of the talking. Alix thank you so much. Coming up after the break, if you think you cant make money with a strong dollar, think again. Well talk about why investors are plowing money into this sector. Will be right back. Alix a major Building Collapse in the east village. Scarlet a three alarm emergency, a major link collapse at 125 2nd avenue. This is a mixed occupancy village. There are apartments on the upper floors. There were reports of explosion received at 3 20 p. M. And more than 120 firefighters were dispatched to the scene. The fire then spread to the neighboring buildings. Firefighters are working to keep it from spreading to other buildings. You can see the smoke billowing into the sky. No official word on injuries, but the New York Post has reported up to 30 people injured. Alix you can watch the latest on this three alarm emergency at our live event channel at bloomberg. Com tv. The u. S. Dollar is the strongest in more than a decade and investors are looking for ways to make returns on Central Banks devaluing the currencies. Currency hedged etfs have benefited enormously in the first six weeks of the year. Here to tell us about this sector is r etf analyst. For those of us who do not know the language, what is occurrence he hedged etf . Its just like any other etf. It goes long eurozone stocks. Its like a regular etf that way, but it neutralizes the currency. Its the equivalent of shorting the currency. By doing that, you act like youre investing in europe using euros. What happens with international investing, and a case where the dollar is rising, if the stocks to do well in europe but when you exchange that euros for dollars, you lose all of your gains. Ill just give you some return numbers. This etf is a big one. Its up 17 this year. The one that does not hedge is a 7 . If you go back one year its at 25 . The one that does not hedge is down 3 . Thats a 28 swing. They account for only 2 of the assets. Alix thats a fascinating number. If you do end up playing in this hedged market, does it create volatility at the end of the day . Markus it could be that some of the positions being taken on it currencies, more from the hedging side of the investment industry. That could be true. But for retail investors, it makes a lot of sense. Eric described it very well. Qe devalues the currency. Japan has seen germany has seen something similar. From a u. S. Dollar perspective the investment wasnt that great. As long as Interest Rate levels are more or less the same everywhere hedging costs are incredibly low. Its a profitable way of locking in the stock market. Eric right now we are in a currency hedged state of mind. We know these things are temporary. If it goes the other Way Investors get burned. Ive heard the case that most people have International Investments in dollars. By diversifying a little, it could be a way to divert the currency risk longterm. When japan faltered a bit, this one retained a lot of its value. Alix great to have you here. We will be back. Alix welcome to our viewers around the globe. This is street smart. Stocks are fluctuating ahead of the closing bell. A tech rebound offsetting a slump in airlines. Crude oil seeing a fiveday rally. Lets get right to scarlet fu at the breaking news desk. Scarlet omentum stocks have they lysed after leading yesterday. The nasdaq biotech index is little changed. Flash memory disk drive maker sandisk plunging tumbling 18 after cutting his First Quarter revenue forecast. Micron has just managed a come back into the green. Hewlettpackard all. 5 . It did get a shortlived pop. A deal could still be weeks away. I want to give in update on that Building Collapse in Lower Manhattan. It is a five alarm Emergency Care they have upgraded from a three alarm emergency. Its at 120 5 2nd avenue. The building is mixed occupancy. There were reports of an explosion at 3 20 p. M. Firefighters are on the scene trying to prevent it from spreading to more buildings. Alix here with me now David Sherman and the ceo ross garber. Thanks for joining me. We are looking at this market, i find it to be very confusing. Stocks are down, treasuries were down earlier in the day. The dollar was down and then rebounded. On explain it to me. David markets are not a closed system. The world is in flux. Things move back and forth. Its important for investors to fundamentally think about their investment. Noise creates opportunity to sell or to buy it gets undervalued. We saw that with the market plunging in the morning and coming back. What we are doing right now is going through a massive change from the post financial crisis Interest Rate era to a new era where americas more normalized. There is no historical precedent to draw from, so the market is nervous. Plunging oil is great in some ways but that in some ways for others. Were getting back to normal, but not on growth terms. The economy continues to just struggle along. We are just muddling along. Some of the uncertainty here we are seeing is geopolitics with oil and gold prices. The other conundrum now is how the fed is going to respond to an economy that is stuck at 2 growth or maybe even less in the current order. Economists have been downgrading their forecast over the past couple of days saying were not yet seeing how much for snap back we will get in the second quarter. We had better see the march and april data or back. Alix you have to wonder if it becomes a safe haven play with all the geopolitical turmoil. Were coming up on the closing bell. The s p trying to close around neutral territory. Premuch flat on the day. The dow off by about 33. We did have a bigger pullback earlier in the session the nasdaq off by about 13 points. Technology shares helping offset a drop in transportation companies. Joining me is David Sherman and ross garber. Lets talk about oil. Crude prices are rising investors worrying how the prices in yemen may impact major oil trade routes. Is there a little too much mixed in the market now . David you can take an event, a political event and say it is a longterm pattern. I generally think a lot of leverage has built up in the sector between high yields. People might take it as an opportunity thinking oil is up so they get involved in all this high yield paper. Im not sure that makes sense today. This is actually a big deal. We should not minimize what saudi arabia is doing. On their own, when is the last time saudi arabia attacked a foreign country . Its to their benefit in many ways, including raising the price of oil. They are drawing funds to pay their bills right now because oil prices have to be at a certain level. This new war is incredibly dangerous to the world. There is a direct conflict in yemen and this could get very ugly very soon. And it should be a big concern for investors who are concerned about oil. Alix you could argue that saudi arabia doesnt really even want high oil prices. Iran is the one that ends up needing high oil prices. If they work out a conflict, it could play out in the oil market. Every dollar for them is millions of dollars a day. They do want higher prices. Irans oil isnt even on the market yet. If we do a deal with iran, they have tons of oil that will come onto the market as well that they will sell because they need the money. Alix were going to move to the dollar in terms of a safe haven bet. You saw the gena dancing to it strongest level in more than a month, gold extending its longest run of gains in more than two years. Do you think as we see more bad news trickle out that the safe havens will catch fire more . Karl we have seen those flows and places already. The big three between ecb, bank of japan, and the fed. No one really wants strong currency here. Janet yellen has signaled, they always give us oil or plate language that theyre not targeting the currency, but there are increasingly aware of the ramifications if the dollars not the one strengthening and we start to see more strengthen the euro or yen. Japan and europe will have to do more in terms of quantitative easing to jumpstart their economy. If they are stagnating, they will have to maybe not double but increase the amount of leverage. That will create a conundrum for the fed. If my choice is buying unilever or Procter Gamble, the u. S. Dollar denominator debt is already much higher yield. I know they want to devalue the euro. Its going to bring flows to the United States in the fixed up fixed income and equity market. It has the most attractive yield and the strongest currency. When you have. 25 Interest Rates, how does qe2 even work when qe1 is just starting in your pushing from zero to zero . Its crazy to keep your money in euros versus buying corporate debt here in the United States. Alix you have to wonder when the high dollar starts to eat into s p returns. Investors may be starting to worry about that. One investment strategist said the dollars rise has become steep enough to create obstacles for the bull market in stocks. What do you think . Are we going to start seeing that into the market now . Carl all the earnings generated abroad are worth a lot less because of the currency moves. You have much weaker earnings coming from abroad. We may get a clue of that in the upcoming gdp numbers. Where there is a negative there is a positive. So the strong dollar has a positive effect, too. Its positive for people on the domestic economy side. Weve heard a whole slew of fed speak this week and were getting responses across the spectrum in terms of how concerned they are about the head when the economy is facing because of the stronger dollar. The dollar strengthening wont hurt them as much. Most of the issuers are domesticbased companies and they will continue to do well with strong dollar. Alix gamestop is out with earnings. Lets go back to scarlet for a quick look at the numbers. Scarlet gamestop reporting and earnings miss. The consensus was for a penny higher. Revenue lighter than anticipated. This was a bigger than expected drop. 3. 40 billion in the fourth order. The consensus was for 3. 6 billion from the same time year ago. Comparable sales came in as anticipated. The Company Coming out with its fullyear outlook for 2015. It sees revenues down 1 and up 4 a wide range partially because of the strong dollar. Gamestop relies on 20 of its sales in europe. The stronger dollar certainly ahead went for itself in that region. A negative effect on 2015 earnings per share. Alix its not just gamestop, it was tech companies, you name it. S p 500 companies are looking at two quarters of declining profits. A small data release that doesnt get a lot of traction the Kansas City Fed index released and in the anecdotal evidence, the company said a flood of foreign imports is sweeping our market. Thats true at the micro level and in the broader economy. I was in that company in kansas city last week. They said that chickens produced in brazil or cheaper to import to the United States than for us to produce our own chickens. Alix that is a long way to go to get to the u. S. Its not just chickens, its u. S. Workers. The cost of labor now becomes much cheaper abroad. So its not just the export story. The u. S. Worker just became 20 more expensive than their european counterparts. Alix Morgan Stanleys chief Investment Officer saying theres a chance the feds next Interest Rate move could be a cut. The u. S. Central bank next great shift is likely to be up. Is that crazy . It sounds like a currency war as we would call it in the oldfashioned days. Alix there are a lot of difficulties facing the fed that doesnt make this a cut and dried decision. Weve seen foreign Central Banks go into negative territory. It is within the realm of possibility. If they did have to backtrack, im not sure by no means am i making the call, but if it came down to it and they had to do something, i think another round of qe or delayed exit from qe would be more of the signal. The economy in the u. S. Is doing much better. We have job growth. They are not going to need a cut. The issue is whether they are going to raise rates or not. Are they going to raise rates in two or three month . This would be bad for the u. S. Economy. I think they have to wait a year. For all the reasons we are talking about. But things are not bad here, and we have to keep that in mind. Things are Getting Better in america right now. Were not going to really know the result for another six months. Alix also tomorrow well hear from janet yellen speaking at a San Francisco fed conference title the new normal for monetary policy. David, are you looking for anything specific from her on friday . David i think the feds boxed into a corner. Theyre basically being told have to raise rates. The market wanted them not to raise rates. I think what is good for the countrys to get on with it and get less interference by the central bank. Bloomberg get a great article on how even if the fed raises rates, it may not affect our yield curve. They need to at least start getting things back to normalcy and the sooner the better. Alix can we have centralbank divergence . Thats something weve been trying to address. We have to leave it there, but thank you so much for joining me carl, david, and ross. Thank you guys for coming. I will speak to afghanistans ceo, abdullah abdullah. How Many American troops are needed to secure his nation . I will last. Alix yesterday the afghan president saying he asked for continued military backing and offered thanks for 13 years of support in afghanistan. President obama responded accordingly. President obama i have consulted with general campbell in afghanistan and the National Security team and not decided we will maintain our current posture of 9000 troops through the end of this year. Alix joining me to discuss what afghanistan needs to achieve Economic Prosperity is dr. Abdullah abdullah. We appreciate you joining us. 9800 troops, is that enough . As far as 2015 is concerned, the challenges we are faced with , the mission is to train and assist. That will help us to deal with the challenges as well as achieve what we need in terms of training for our own Security Forces. The upcoming few months will be challenging times for afghanistan but our Security Forces with support from the current level of u. S. Forces will be able to address those challenges. Alix at some point when the u. S. Winds down its troops president obama does targeting only 1000 troops there by the end of his term. Are you going to need more continued support or will you be able to wind down u. S. Support troops . Dr. Abdullah i would save the cooperation will continue beyond 2016, but at the same time, the nature of that cooperation will be different. Therell be counterterrorism efforts and cooperation in a strategic hardship agreement. And in support of our National Security forces, national army, National Police and other elements of security institutions have to take responsibility. Alix what would you describe as the biggest difference now between afghanistans relationship with the u. S. Than it was a you years ago . Dr. Abdullah a few years ago unfortunately we did have unnecessary tensions. The bilateral Security Agreement was not signed and the tensions were rising between both countries. Those were the times, but with the inauguration of the new National Unity government we changed the spirit of partnership and set it back on the right track. The u. S. Has been helping afghanistan and has made many sacrifices alongside her own. We appreciate those efforts. The discussions were all in the spirit of partnership. It is a new chapter in our relations. The true spirit of partnership. Alix what about in afghanistan itself . It was a protracted postelection. How would you categorize your professional and personal relationship with your president . Dr. Abdullah the personal relation has always been good. The unity government, the president has his own role chief executive has its own role. It was a new experience and it is working, and it has been. The elections were contested and complicated but we decided to Work Together in the best interest of our people and it is working in the interest of our people. Alix i like to broaden the conversation up to general unrest in the middle east. What happens if fighting breaks out in . Yemen . What happens when fighting continues in iraq, what happens to afghanistan . Dr. Abdullah any escalation in war and violence or anything that will lead to isis becoming stronger than before will have an impact on a wide area including afghanistan. Because of insecurity in some parts of the country, there is a potential that isis can take advantage of this, but we have maintained the focus together with our partners on the ground not to let that potential grow. Isis is not considered to be an imminent or immediate threat but at the same time we cannot ignore it and we should maintain focus on it. Alix another issue is the taliban. What happens if pakistan winds up getting distracted, how does that affect negotiations with the taliban . Dr. Dula dr. Abdullah i didnt get that point right. Alix what if pakistan ends up getting distracted . Dr. Abdullah pakistan is dealing with the challenge of the taliban on its own oil. Thousands or tens of thousands of people have sought refuge on all her side. Also some of the terrorist groups have shifted inside afghanistan. The role of pakistan, they are maintaining pressure on the taliban to get to the negotiating table, that is recognized. Afghanistan is made some efforts , there have been several visit from pakistani high officials to afghanistan. We need to explore further areas of cooperation in terms of taliban sentries. And in other areas. The role of pakistan is critical, and hopefully the good signals sent are translated into sincere cooperation in dealing with the common challenge, which is terrorism and radicalism in our region. Alix thank you so much, dr. Abdullah abdullah. Thank you so much for joining us today. Stay with us. Alix day 24 jurors in San Francisco to describe a sex discrimination case that has captivated Silicon Valley. At issue is whether pao was fired because of her gender. Cory johnson is outside the Supreme Court in San Francisco with more. What is the significance here of this outcome for Silicon Valley . Cory i think its a big deal. Kleiner perkins is looked at as a firm that had the best record of employing women. 20 of the firm is women, much higher than the rest of the industry. In this case shes trying to prove she was discriminated against because she is a woman that the firm retaliated by not promoting her and not giving her a raise, and that the firm itself failed to protect her from that discrimination. Those are the four counts the jury is deliberating. We expect a verdict possibly this afternoon, maybe tomorrow. We will be here when that happens. Alix Kleiner Perkins has about 20 female. Thanks for joining us. Coming up next, craft and heinz team up to form north americas largest thirdlargest company. We will discuss that, coming up. Alix here are the top stories were watching after the closing bell. The germanwings crash appears to have been orchestrated by the copilot. He apparently deliberately leave the aircraft into a mountain after locking the captain from the cockpit, according to french prosecutors. The investigation is ongoing. Indiana governor mike pence signing into law a religious objections till. Indiana is the first state to enact such a thing this year. There has been some backlash already. Salesforce canceling worker travel plans to indiana. The ceo tweets gucci is revamping its brand management. The italian luxury brand appointed a new cheap consumer officer according to sources. The ceo looks to reignite sales is the 4 billion company after more than a year stagnation amid industry slowdowns. New york citys Fire Department reporting a major Building Collapse and seven alarm fire in Lower Manhattan. Scarlett has the latest. Scarlett it was updated to a seven alarm fire. It is in the east village of Lower Manhattan near Washington Square park. An explosion preceded the collapse of a mixed occupancy helping which spread next door to 121 2nd avenue. There were reports of multiple injuries, but no confirmation of an exact number. There are about 250 firefighters on the scene. We are looking at live shots of firefighters still battling that blaze. You can see the building collapsing before our eyes. According to a spokeswoman for con ed, crews have arrived at the building and are shutting off nearby gas service as firefighters continue to fight the blaze. She also said we do not have the cause yet but there are many uncomfortable reminders of a gas explosion in east harlem about a year ago that was caused by a gas leak. In that instance, con ed had received reports of a gas leak and arrived after the explosion. There again you see the smoke billowing out from the building. 125 2nd avenue has collapsed already. These are nearby buildings that firefighters are trying to rest due from having the fire spread to other buildings. The area is being evacuated. Alix those pictures are just mindboggling, the force of that water just seems to be breaking apart the buildings brick by brick. It just seems so fragile that it could just topple over at any second. Ive never really seen a fire like this in new york city and seen this sort of devastation with the buildings. It is unbelievable. Scarlett one thing you can says it did not happen in rush hour. Its not clear if there was anyone in the building. There are reports of one or more people critically injured. The New York Post had reported already people injured. That has not been confirmed. The buildings are so close together, and if one collapses the infrastructure of neighboring buildings are compromised. Alix how why does it look, its difficult to get a handle on just how big the fire was and how far it actually spread. You have that one building that looks like it is crumbling as we speak, and the one next to it appears to be fairly stable. Scarlet they are trying to rescue that one building, but it is falling apart from the force of the water and the fire that was raging through the area just moments before. Firefighters have been on the scene for almost an hour trying to make sure it doesnt get worse before they can stop it. Alix thank you for that update. Truly unbelievable pictures we are seeing from Lower Manhattan in that seven alarm fire. Moving on to valuations. One company is deciding to take an opposite strategy. The sixyearold financial lanning startup, what are they trying to get out of this 250 million deal . Lets ask the ceo of the start of who is joining us now. Thanks for joining us and congratulations on your deal. Thank you very much, its an exciting time. Its truly a marriage made in heaven in the sense that were going to get to be a standalone, independent company. We let our clients have unbiased access to financial products. They delivered 400,000 plans last year and can now deliver more because of our powerful technology. Alix wild me through what learnvest is. Is a Financial Planning software. Turbotax meets Financial Planning. You can say, i need to figure out exactly what to do with my finances. We connect you to an unbiased independent Financial Planner on our staff. You pay a Subscription Service each year. We have made Financial Planning accessible to the masses in the country. Its designed for people who could not get access to service prior. Alix how much does it end up costing . Is 299 for the first month and then 19 a month after that. Its like a gym membership about 500 a year. Making it really accessible for people like myself to be able to get access to financial advice. Alix are people taking more responsibility for their own decisions rather than seeking out advice . The Financial Planning industry, if you have a lot of money, you have great access to advice. In many ways, Financial Planning is a luxury auto. In general i have a strong view that Financial Planning should not be a luxury auto. It should be something that is accessible. We all have to file our taxes. We all should really have a financial plan. Every single American Household should have access to it. Thats what were trying to accelerate in this merger. Alix thank you so much. Coming up, can the market trust machines to be investing our money . Details after the break. Alix its the digital age of investing. No matter what you call it, the funds or attracting dollars. My next guest is a big believer in smart etfs. He links his methods to robot designing. Tom dorsey is behind one etf. Tom joins me now along with eric. Thanks for joining me, everyone. If im thinking robot investing, what does that mean . Tom cole and that has been misused. When people interview me everything we do is rulesbased. The computer understands 1s and 0s. We have rules that the computer follows. Maybe its whether or whatever it might be, for us, its saying take what we would do by hand which we have done by hand for 28 years its basic division. Its saying computer, do this basic division and create the charts and organize them. Theres no robots or anything like that. Alix so basically you could be on the beach and still making money. You dont have the Human Element in it. Tom the Human Element you are talking about is emotion. Thats the part that needs to be taken out of the equation to be successful. Alix these are really nothing new in the market. What is different right now . Eric these have been around for a while. The strategies have been happening in active management. When we look at the robot angle it was to say look, we are taking things that have worked well and attract dividends. Low volatility. Taking all these factors and pack packaging them into a lowercost vehicle, and the other part of the lack of emotion as we studied some of these is called disciplined rebalancing. Every quarter, rain or shine tom could be on the beach somewhere, that thing is going to rebound. Thats where you get your positive returns. Alix tom, what are you doing now . You went from renting them out to selling your whole business to the nasdaq. What is your game plan now . Tom we have a very good contract to further endorse the brand. Tammy has been with me since she was 16 years old. She is now running it. I wake up every morning and say this exactly the way i want my life to be. Alix thanks so much, a great profile i knew. Thanks for coming down. Always glad to have you here. Creative close for the creative young professional. Coming up, we speak to the cofounder of a menswear retailer about the importance of being an omnipresent brand. Alix here are the top stories were watching at the after the closing bell. New york citys Fire Department reporting a major Building Collapse a seven alarm fire in Lower Manhattan. Television images show the building engulfed in flames with ladder trucks nearby after a report of an explosion. 130 firefighters came to the scene. There are reports there maybe people trapped in the building. You are looking at a live shot of the site. Time warner is can searing considering broadening its plan according to people with knowledge of the plan. Former North Carolina basketball coach dean smith continued to get back to his players. In his will, the beloved coach left 200 to every player that lettered for him during his 36 year coaching career. All the young guns on wall street are wearing my next guest house clothes. If you dont know who they are, use and will because they are coming to a retailer near you. Joining me is the cofounder and ceo of the menswear retailer. Ethan, you are going from ecommerce to brick and mortar. Usually you hear of brick and mortar clamoring to get into online. Why are you making this kind of transition . Event weve always been about making shopping easy and fun for guys. We see a lot of innovation happening in the space. Alix youre picking where your location will be in a creative way. Ethan in some ways we say we are not the brand, the customer is the brand. Its up to them to decide. Alix how would my husband pick . Ethan you go online and select the city want us to move to. Alix is it going to be like a real store with lots of different choices, or more like a platform for you try on stuff and then go online to buy it . Ethan what is interesting commerce and media are becoming one. When you look at the internet, we realize we can do that in a store as well. A big portion of the store will be dedicated to content and doing live events are we have Live Programming in the store. Alix do you think of them as a retailer or a Media Company . The distinction is starting to blur. We see media and commerce as complement reap. For me, its all about building a brand. One thing they represent is authenticity in the way they speak to their community. Rates are creating content online video and articles, or creating fashion, its two sides of the same calling of the same coin. Alix are you guys profitable yet . Ethan the entire retail world is changing. We want to invest in the right places to build her lasting relationship with our customers. Alix how long are you willing to put money into it before you see a return . Venture capital has somewhere between five and 10 years investment horizon. We are thinking about the longterm opportunity to grow. When you compare their growth rate and innovation, theres a huge amount of Value Creation left. Ethan right now are not sharing any numbers on that. We have over 250,000 users on mobile apps and 1. 5 million members are active on our site. In the last three years, we have made leaps and bounds in terms of getting those customers. Alix how many of them are on wall street . Thanks so much, i really appreciate it. More coming up after the break. Well be right back on street smart. Alix breaking news, google will pay its new ceo 7 million. It includes a 5 million one time signing bonus. 65 million in restricted stock units. Whether philadelphia cream cheese or kraft salad dressing heinz is banking on the Consumer Staples to bring strong returns following a 46 billion merger. According to analysts, the deal was done in just 10 weeks. So what is next . Joining me is a partner and ceo with and Access Management firm. We dont have a position in kraft, but it highlights the values in our portfolio of a lot of Consumer Companies that we own. Alix some Consumer Staples are selling at premiums to the market. Where do you see evaluations in this market . When you look at margins they are quite high. We view the sector is actually being undervalued over a short time. Alix how do you see this playing out . Will it force consolidation in the m a space . It can be helpful in terms of having them look at the way they do their budgeting process. To give you an example of a company, pepsi has much better businesses than craft and now trades at it discount to where kraft is trading. They could do costcutting and end up with a better result alix . The trends change and its hard to change some of these huge companies. How do you turn around a huge . Ship theres a trend toward Healthy Living which does not really match up with kraft or pepsi. The trends longterm, there is a longterm trend toward healthy eating, but i think these companies are well positioned and relative to other businesses, why we like Consumer Product companies is, looking outside of 10 years, what are people going to eat . That is easier to answer than what kind of phone or computer device they will be using. Alix what about Procter Gamble, where does that leave them . Procter gamble is currently undergoing restructuring. The current ceo is consolidating down to a more manageable number of businesses where they have high market share. We think their prospects are great. Alix it seems like at some point you are only going to be able to cut cost so much. If youre going to grow, you have to buy to find that organic healthy growth. We like to look at other things, cash flow converting etfs into free cash. There should be a premium being paid for that stability and consistency of earnings and cash flow. Alix so you like pepsi and Procter Gamble . Those are our two favorite names in the consumer space. Alix that wraps it up here for street smart. Have a wonderful evening and we will see you back here tomorrow. With all due respect is coming up next. Have a great night. John and im john hailemann. Mark im mark halperin. And with all due respect get ready to ship pepperoni rolls to kentucky. Mark in our headings in, jebs meerkat, and animal house. Politics was rocked when the wall street journal reported a possible flipflop from scott walker. The journal quoted walker from