For you nestors Restoration Hardware is coming after the bell. Lets do a data check. Interesting market. Futures up 5. The yield moved lower over the last 24 hours. Dollar, weaker at 1. 37. Crude back to 100 and barrel. Finally weakens today after a good 6, 7day bout of strength. The yen was stronger earlier, it has given up back. Look at gold, under 1300. Look at the gold chart. Heres the surge in gold. The big rollover from june 2012. This is 1400. Here was the bull dash. People getting feverish about gold. We just bounced right off that. And curious that gold could not get up through that area up. As the vix was pushing you look at gold, and clearly, not the case. Three or four tough days for gold. We have scoured the newspapers and the web for what is important for your front page. First frontpage story is citigroup. The bank failed the Federal Reserve stress test for second time in three years because of concerns about the quality of their process. What does that mean . That meets management got some problems. They do, apparently, because this is a big blow to the ceo. Corbat has said theyre very disappointed with the results. They have yet to resubmit a plan. Phase a lot of obstacles clearly, the banks raise a lot of obstacles. Is it that citigroup is now bundled with the other x number of banks that did not pass as well . There are a number of other banks. A number of u. S. Banks whose First Mission did not quite pass, so they had to resubmit with lower plans. Or reduced plans for deploying cash. Eventually, they got their payout plan accused. Citi is the only major u. S. Bank that created the dual structure and now that is the one that is still having problems. Theyre also very much exposed to the rest of the robed browse the other big banks arent. This from camilla hall, needing more attention and found fault with sees ability to estimate revenue and loss projections. This is something we will take what with the noted bank dealer. Bank of america will be paying 9. 5 billion to settle fannie and freddie mortgages. Remember ken lewis . He agreed to a threeyear ban on serving as a Public Companies officer or director. He is also going to pay 10 million personally . Misled. He. Massive asterisk mr. Lewis agreed to pay the 10 lane dollar fine him a bank of america is expected to pay mr. Lewiss portion. That is part of an employee agreement. So not much personally. That hurts. Im sorry. That is upsetting. Our third frontpage story, taking a turn, kings digital. The maker of candy crush got crushed yesterday. Biggest a client of any newly listed u. S. Company this year. This comes even after king prices of the discount reflecting the concerns about it being a onehit wonder. What is the why . You mean, why you care . No, why it went down. 70 comes from candy crush. And the question is expected to generate revenues of 618 im sorry, 6 million a day. Revenues of six money dollars a day. If youre generating that revenue on again, you have nowhere to go but down. The growth has already come down. Theres a reason why this was brought to market at 9. 2 times for earnings. Which banks screwed up here . Jpmorgan led the ipo. But i dont know if you can blame the banks or a case of the timing. I was offered 50,000 shares and i took 60. A month ago, nobody was talking about this. Three weeks ago, we got the announcement, king digital wade, who . They did it that pass. Any time a dough comes together that fast, you have to wonder what is happening. Those are our frontpage stories. Our guest host from barclays, managing director, head of research. Also a professor at New York University and management and organization. Larry, i want to get you. You look at the ipo market. It is a frothy market. Is it a frothy to your equity groups . Companies are starting to take risk, but remember, theyre coming from a very conservative starting point. Tesla and netflix are not conservative. King digital is not conservative. You asif you look at corporate sector as a whole, he came from a conservative place. Even today, theyre not hiring much or spending much on. The sector we would say still pretty safe. We are starting to see evidence of access. The cash balances have gone down. When you look at the whole sector, theyre depending more on shortterm capital. But it is too early in that cycle to get really nervous. You can pick names as you did, but at this point, still looks pretty good. Edgars. Bring in jp i want to talk about microsoft. Satya nadella will be making his first big media presentation to unveil microsoft for apple. The question is, is he too late on this . The tablets have been out. People felt comfortable using them. They really need Microsoft Office and excel on their tablets . It would be better for microsoft if they have been there earlier, but at the same time, we are coming through days one with the tablets, which is a online, check things this idea that we will move to the tablet moore is an actual business divisive people use it much more frequently, that is the time in office these to be there can be accessible. What stuns me about this, what took so long for microsoft to get on an apple platform. What is the why there . This has been microsofts strategy, use the monopoly power. Monopoly power in one apart of their markets to basically help growth in other parts. If we restrict Microsoft Office to only being on the Windows Mobile platform, this will help sales of Windows Mobile, which is what helps the growth pattern there. This is a huge blow for microsoft, for mobile because now it will take away enormous reasons weight, strength the members in numbers. Time, because of googles relationship and the way it builds a platform, it has been a good work process but microsoft is never gone down the path of opening things up. Apple mostly hasnt either except for a few key decisions. Smart article this morning, larry, goes to your world, or the tech boys take a shot at the nba crew at barclays and said they would not be caught dead using the apple product. Used to live in an xl world. Excel still live in an world. True thatt it microsoft still depends much more in the Enterprise Business and the consumer business . To large very true extent, in sterling terms of growth at this point in time. But i think theres a sense that theyre hitched windows and office together so closely am especially with the mobile platform right now, it was either going to go up together were down together. It looks like its going down together, so we might as well pull the one piece out that we know will have broader appeal for longer period of time and have that be successful. If there is a longterm decline as the pc market declines, we will separate that from the business. They cant afford to leave the consumer behind. That is a given. Larry kantor can get 19. 5 minutes more as a Research Analyst if they have excel on the ipad. Youre not sleeping on the plane. You cant really use your finger to swipe anything. You still need your keypad. You still need your mouse. Laptop. You have your tweet as. I would like to see toms big fingers use excel on a tablet. It will be the tom keene macro. Fascinating. Lets get the company news. Traders in new york, switzerland, and singapore. Ubs began investigating its currency operations last year after bloomberg reported traders and industry colluded to rate a benchmark for exchange rate. Authorities in the u. K. , u. S. Car and other countries are looking at a possible rate fixing as well. Charlie ergen sets his sights on directv. The chairman of the dish Network Recently contacted the ceo of the satellitetv competitor to talk merger according to people with knowledge of the matter. You said to have made them earn just made the move he is said to have made the move. The Second Biggest Bank in the second offer was two decades, financial increase in base pay by half of 20 and bonuses will increase by 5 . This comes as the Prime Minister callsign companies to boost wages to help sustain japans economy. That is todays company news. Coming up, five years after the financial crisis. Citigroup failed the bank stress test. We will discuss the Management Issues with chris wheeler. Struggling. This is bloomberg surveillance. Good morning, bloomberg surveillance. We welcome all of you worldwide. Coming up, Timothy Armstrong of aol, bloomberg west. This is bloomberg surveillance. Im tom keene with scarlet fu and adam johnson. Scarlet, you will get a started on a stressful morning. For citigroup. Shares are down 58 in premarket after they fill the fed stress test for second time in three inrs shares are down 5 premarket after they failed the stress test for second time in three years. Faceows how banks obstacles. Bankswheeler covers the and joins us on the phone this morning from london. There are so many directions we can take this in, but the overarching picture is more than five years after the financial crisis, these stress tests are supposed to be perfunctory yet five big banks other capital plans rejected, couple of them are submitted and were proved later on. Is the federal bidding the goal post . Yes, i think they probably are. What we said all along, and we see this in europe as well, banks are being pushed to build up their capital to much higher levels of leverage to lower levels than we sell precrisis. I think once the relators got them to those levels, saying anything above what happens to be, you can be paid baxter shareholders. The view is, lets just hold on a little bit and be a little conservative. Lets go deeper into citigroup. What is it about their structure or processes that makes it more vulnerable to filling the stress test . I think it is the sheer scale and geographic and business obviously, as you said, he wasnt the only one. Also werepean banks told the procedures were not adequate and they needed to go back and rework them. We saw this last year with Goldman Sachs and j. P. Morgan. Obviously, we are further down the line and everybody is hoping people are used to this process. Invest a citi had to number of its japanese assets several years ago. What comes next . It is difficult to say. I think theyre still running down the noncore business. I dont think theres anything that sticks out that they said they dont want, but i think therell be a reassessment as racing in so many banks across the globe who thought they got to the shape they wanted to be in. A lot of them are being hurt, citi included, are the much lower making investment. Banking investment. I think this goes to the heart larry kantor with us as well. Larry, you are knee deep in this. Is this is his solution or rbs or hsbc, they just have to go hire more people to help with these processes . Just to be clear, what they mean by internal processes, from what i can see, the banks have some leeway here in terms of how they conduct the test. The fed set certain parameters and says extreme stresses may be 11. 5 to plummet rate, the stock number goes down a certain percent, but the bank itself has to said other parameters of what extreme stress means. Then they have to do the calculations. How this affects capital and pnl and so forth. Then the fed checks, how do they do this . I like that idea. Chris wheeler, is this a manpower issue or a structural behavioral issue . Today justine more bodies . I think part of it is needing more bodies. Is a matter of actually saying, we need to be more efficient in the way we run these processes. This is no longer just a regulator popping in and reviewing our books, but a much more detailed process and we have to be absolutely on top of it so we can prove what were anding them is a genuine accurate view of what could occur under these conditions. s point aboutntor the fed effectively saying to the bank, we dont necessarily agree with your methodology, what does citi need to do to change its methodology in order to get the fed to say, ok, now you get our vote . One analyst overnight made the point, obviously, the report between citibank and the regulator is not as good as it should be. That is part of the process. The need to sit down with him and say, what is it you have a problem with and what should we be doing . Then they need to review and say, now we will put in place procedures that reflects what you want to see or what you feel is appropriate for a bank of our scale. It is Enormous Bank and quite likely they feel theyre been conservative. Chris wheeler, thank you for joining us. Larry kantor, thank you for commenting. You did not have to do that. Thank you. Hour weg up in the next are hungry. The waffle taco has made its debut. With his trying to win latest invention. This comes as food prices are rising. Hungry yet . Oh, yeah. This is bloomberg surveillance. Good morning, bloomberg surveillance. Adam Johnson Johnson has our top headlines. Thailand satellites have captured images of more than 300 objects in the southern indian ocean youre the search area for the missing malaysia and airline jet. Claims had to suspend their search due to poor weather and poor visibility. Ships continued on with the search effort, scouring the indian ocean are possible debris from the jet. Is meeting with pope francis at the vatican today. Economic inequity, poverty, and the situation in ukraine are among the various topics they will discuss. It is the second official trip to the vatican for the president. He met with Pope Benedict almost five years ago on a stop in italy. Youll also be within a Prime Minister renzi. Lowest. Experienced the Publishing International causes and 35 years lester. Had the fewest births since 1998 as people are being cautious following the recession. The u. S. Recorded the most deaths in history. The lighting fertility rate is seen as a drag on the economy the lighting fertility rate is seen as a drag on the economy. It is not just the u. S. , it is across the world. Lets get to the morning rest read. This jumped at me. E you have it incredible to think about that. , your take on two very different situations . There differences between culture and within the company, but when you think about the example youre setting for your own organization in some ways about what responsibility means within your organization and how you think of conveying bad news, look, its its a signal for how bad news should be conveyed within an organization if youre sending it out by text message. It is not about taking us possibility you have to put a human face on it. You have to be willing to step up and say when it is a problem that has that you have caused that leads to this, hiding behind the screen and say, look, we should just be a little walk away. Jp eggers our guest host for the hour along with larry kantor. We will be right back. Also, the imf throwing ukraine a financial wifi. For geopolitical tensions affect the Global Market outlook in the next on bloomberg surveillance. Good morning, bloomberg surveillance. The most interesting part of europe, and that would be vatican city. The president is meeting with the pope. 110 acres separate and discrete from rome. Those the store guards. The president for the second time meets with the pope will stop this time pope francis. Meets with the pope. This time, pope francis. This is bloomberg surveillance. Good morning to all of you worldwide. I am tom keene with scarlet fu and adam johnson. Quick data check. A little bit of an up feel. I saw a nervousness, maybe a little off the ukraine. And we also have Economic Data coming out, pending home sells later this morning, questions about the strength of the economic recovery. We want to highlight some gainers and losers from yesterdays trading. We have to go back to keene digital. Even though tom and adam del play candy crush, it was a big mover in yesterdays trading. It went public at 22. 50 a share. Which was only 9. 2 times earnings. Theoretical earnings for this year. Bankers is tothe know the market. Just ugly. But facebook down 7 . It made that 2 billion purchase of the Virtual Reality headset maker that hasnt actually sold any devices to consumers yet. Basically in beta. A cool thing, but it is weird. Do you really need a virtual headset . Investors not liking that. Not so far. To europe. Hans nichols is giving us great perspective. Is thursday, it must be vatican city. The president meets with the pope. Hans nichols has followed the president from the hague to brussels. Each and every moment, ukraine is front and center. I saw a gentle but real market reaction. What is the back story on the set of Russian Troops wrapped around the Ukrainian Border . Well, what markets are looking for here is a little bit of intelligence. They wish they had the satellite maps the pentagon has. There was a report yesterday that show the troop buildup was just a little bit stronger and a little more pronounced than it rigorously thought. That, along with a pretty dour speech by president obama, seen to rattle markets a little bit. Different viewy on the speech. I heard a president vowing not to use military force over ukraine or crimea. He said it three or four times. What is the state of nato . In the newspapers, i would suggest a real debate is it nato alone or nato led by the United States . Which is it . Theres not that much of a difference. The other countries dont have the assets, which is why president obama was chiding and prodding his nato allies to spend more. There are other countries that have bases, but u. S. Has contracted its nato footprint as well. Its not like we have a massive. Mount of assets in germany most of them are in germany. Thee a few planes outside, germany and u. K. And that is it. You dont have a huge troop presence for many reasons. The pivot to china, to asia, the wars in afghanistan and iraq are probably chief among those. There is not a massive nato presence in europe the way there was 20 years ago. As punters the quiet. What are people telling you about is likely next move . Is his way of saying he is ignoring all the noise coming out of the west. For him, it is business as usual. I would not reach you much into his quietness aside from the fact i would not read too much into his quietness. Tois in anything he needs react to. He doesnt really want to dignify it with a response. Nice update. Thank you, hans nichols