Times forward earnings. It is in that range. I went to the Oxford English dictionary on my bloomberg terminal. Frothy. 1533 is the first definition. It says, frothy, their frothy waves. It is a frothy surveillance this morning. A frothy brees. Breeze. Economic data here in the u. S. We get producer pricing index. Janet yellen will be watching that. 9 15 Industrial Production. How much are Companies Operating . The beige book at 2 00 p. M. Earnings before the bell. Blackrock in bank of america. Scarlet, you will be breaking bank of america. Can we have a moment of silence for scarlet fu . She rocked it yesterday. Jpmorgan, goldman sachs, it was awesome. It was a pretty busy day. I like that. False, brands get two thirds of their business outside of the u. S. Tubing items of note. Two items of note. Janet yellen testifying before congress for the second day in a row. 15 years ago today, jfk juniors plane crashed off marthas vineyard. That was terrible. No other way to put it. That is the morning brief. Equities, bonds, currencies, commodities. Some interest today. We advanced. Dow futures up 52. Ican oil. Turns on amer the vix doing better than good yesterday. I stand corrected. A pullback after the yellen comments. But well above. Gold futures under 1300. Some of the risk on appeal. I want to spend three seconds on this. This is Apple Computer after the festivities late yesterday afternoon. World is going to end. 56. World is going to end. Apple is dead. Tim cook is a failure. He is terrible. Boom. We are about to go through 700. They are inky. International Business Machines corporation. Yes. That was a stroke of brilliance. Coming together. Here is scarlet fu. We will start with geopolitics. What ceasefire . Hamas rejected the egyptian plan. Palestinians resumed rocket launches and that resumed israel launching more air raids. Israel suffered its first civilian death. This morning a sort of, now what . In all of my reading. Will israel send Ground Troops into gaza . It has not happened yet. More than 200 palestinians have been killed. What will be the relationship with israel . It also begs the question given the fact that the white house mideast coordinator phil gordon was suggesting that perhaps withdrawing from the west bank would lead to stability and Prime Minister netanyahu said that was the last thing were going to do. The secular egypt. Secular egypt was put in their place by hamas. We will discuss this with Phil Mattingly, our white house correspondent, in the next hour of surveillance. We want to get to our second frontpage story. Apple and ibm ending a rivalry that began 30 years ago that began 30 years ago. The guys in blue. That is the one. Had won a lot of awards. Got a lot of attention. Apple and ibm are now partnering up. Apple gets access to industries that has never focused on. Health care, banking, enterprises. When this ad ran, we stood still. There was no youtube, no repeats. You stood still when you watched it. It was mustsee tv. Who is the director . Ridley scott. Who went on to director many multihits. Ginny and tim cook post for a picture together because of this alliance. We will discuss it further with David Kirkpatrick. It is a big move. Third front page. We stay with the tech industry. Yahoo will return at least half the cash to investors. This matters. For theis yahoo if not 30 stake at alibaba . I think it is something around 23 . They will keep a bigger stake in ali baba after it goes public. We know the stock has done phenomenally well. She was spirited about the revenue line. This segment is not doing well. Banner ads. Stabilizing. There shares are down in the free market. Yahoo reported sales that fell last quarter. Operationally, there are still some issues. Earnings growth that yahoo this year, based on consensus estimates, 3 . That is it. That tells you what you need to know. Those are the frontpage story. An optimistic view on the American Economy. We are thrilled to bring you on short notice. David kirkpatrick. Bloomberg to meaning editor on apple contributing editor on apple and ibm. I want to talk about yahoo first. Is it still a train wreck . I dont think of it as a train wreck, but a company that is trying to find its way through transition that nobody has the formula for. I have had a number of people say that Marissa Mayer my number doing that great of a job, but who can do a better job . Who can say this company . They are trying to become a media company. They have a new deal to do live broadcasts and concerts and they are thinking of ways to amplify their media. I think they are doing a decent job. The problem is that the traditional banner ads in the kind of ads have been diminishing in importance. Who is the David Kirkpatrick merger that is the best outcome . Who should buy them . Or who should they buy . I dont think aol. If that is part of what you are asking. 1 plus 1 equals 2. I cant think of one. That is the headline. That is the headline. Especially on the heels of the appleibm partnership. You wonder if there are other unlikely tech alliances that could give the struggling big Old Tech Companies a bit of a left. Wouldve alibaba bought yahoo . Their ambitions are so gigantic. You keep hearing about it. They are doing all kinds of stuff, distributing video, they have a cable channel. That is like a child eating its mother. It is kind of like that. Alibaba has global ambitions. At some point, maybe they would getmaybe they would want to a hold of it in the United States. If you look at the Revenue Breakdown in yahoo , it works out to be 44 display ads, 34 search ads, and then the balance, 27 marketing and other stuff. Is the ad display model broken . Displayraditional ad model is broken, in my opinion. We are into a new targeted era where the people with the most data when and they display ads in all kinds of creative new ways and yahoo does not have the most data. Looking at other parts of technology was chair yellen yesterday and her Federal Reserve. I dont believe Alan Greenspan ever did Sector Analysis of the s p 500. Were you surprised that an economist would weigh in on sector specific valuations . Im glad she is still at the fed. If i was competing with her in institutional investors, she would be better. Absolutely. This is unusual. In the minutes, they have been talking about stretch valuations for some time now. I was not as surprised as some participants were. For her to name industries. The biotech industry has been on fire for quite some time now. Is stretch valuations a new word for bubble . Not necessarily. It is the early stages of potential bubblelike behavior. Boy, are we splitting hairs. Neil dutta is with us and he will continue to split hairs with us. Right now, she does not have a split end, company news from scarlet fu. Thank you, tom. So show aeports coverup. New york times used the freedom of information act to get the documents. Two Family Companies making your business bet. The cash deal is worth 4. 7 million. Google picks up an auto expert as it tries to develop self driving cars. Alan mulally is joining googles board. His engineering background is credited for fords return to profitability. That is the company news. David kirkpatrick is with us. I was thunderstruck at the quality of googles board. It is interesting. I think alan mulally is a fantastic person to join. Googles ambitions are spanning the economy more and more. He has done a fantastic job afford. At ford. I think all of these companies will move in this direction. Ford has been doing things better. Do you think mr. Mulally will drive a tesla nobody goes to google. Methingll point out so interesting. Fords operating system has had a lot of difficulties. The fact that he is now on googles board is a directional indicator of something that might not be sewed good for microsoft. So good for microsoft. Something else am i not be a good indicator for microsoft is apple and ibm. Coming together and taking on the corporate markets. If that is something we will talk about. In light of that deal, who is the next Big Tech Partnership . This is bloomberg surveillance. We are on Bloomberg Television, streaming on your tablet, your phone. If you are there, we are there. One of the most interesting gentleman and finance. In finance. Wilbur ross on m a, banking. It 00 a. M. This morning. In the loop with betty liu. Bank of america earnings and about 45 minutes. Another transaction. More like a partnership. Shares of apple and ibm are both trading higher. The longtime rivals are joining forces. The goal is to expand the Business Market for mobile devices. We have David Kirkpatrick and the founder and ceo of tech onomy. Bring your own device . Employees insist they use that device for everything. It is like the employees over the will of the cio pulled apple into the enterprise. That is the world we are in. Useybody has wanted to apple in this enterprise for some time. A lot of people. For a five years ago, i moderated a panel and the guy was telling me he had helped a Major Media Company give ipads to its Senior Leadership and it was the first time in all of his work as a cio that he had ever seen true enthusiasm among the tech clients inside the company. When you give them an ipad, they light up. The security is not as tight as say a blackberry or other devices. It needs to get tighter. Alled the iphone a National Security concern. The knock against every kind ofs kind of Technology Today is that security needs to get tighter. Ibm has an extraordinary global sales force. They have all kinds of forces they can bring to increase the apple market share. Now they can really go in wholesale. Ow they can really go inhere of wholesale. What is the response here of the other Major Players . It is google scratching their head and saying, could we link up with oracle . I dont know. There has to be some with a google could respond. Ugo has major designs on the Enterprise Market that they have made some inroads in. Is definitely not thrilled by this announcement. If you look at what the ceo did putting office on the ipad, it is the same impulse. It is giving the individual control. Scarlet mentioned security. There was the issue with china saying there was a real problem. Is that real . Is that a legit concern . I dont work in the nsa, so i cant really tell you. I know it is a real concern in china. It is a perfect, strategic, competitive effort for them to make to earn American Companies and advantaged chinese companies. It is logical from a competitive point of view. Apple products have been so popular inside china. I was surprised they would do that because the enthusiasm for apple and china is phenomenal. It is kind of an anticitizen thing for the government to say that. At my come back to its own agenda. They are promoting their own companies. They are getting more companies that can compete headtohead. , and incoming nyu sterns Global Business professor will join us. To make sense of all of the bank results we have gotten so far. Bank of america will also be reporting. We will be all over that. Morning, everyone. Bloomberg surveillance. Del futures up 52 this morning. Lets get right to a morning must listen. Former senator am a former first Lady Hillary Clinton was on the daily show yesterday. Here is what she told jon stewart about whether she will run into one the 16. In 2016. Here is the book you have written. It is called hard choices. A lot of hard choices. Not for your editor. It is an incredibly complex and well reasoned and eyewitness view to the history of those four years. I speak for everybody when i say no one cares, they just want to know if you are running for president. [laughter] are you . I was going to make an announcement, but you kind of spoiled it. How long can she play coy for . The criticism is that she rewrote history with the book and tried to paint a more attractive picture. With her vote for the iraq war. The effect that the president had with hope and audacity was profound. Vision ived a outlaid a vision instead of looking back. This was also not her first book. She published another book. She has several pieces of work out there. David kirkpatrick, his acclaimed the facebook effect. A thick is it to take book and make it a reasonable read . Not for your editor. [laughter] basically, we know when the steve jobs book came out, we know that it was so long because they had to rush into print. The facebookop effect . I wish it had been thinner than it is, but they did not chop it that much. I had fantastic editing. It is hard to take something long and make it short and that is where your real clarity of thinking has to arrive. Was their clarity of thinking in the feds statement yesterday when janet yellen testified . She thinks that bio talk and smallcap stocks are overvalued. That is clear. We will discuss market reactions next. Good morning. Bloomberg surveillance. Scarlet fu is ready for bank of america earnings. In about 30 minutes. Adam johnson is with us as well. Higher is where we are today. Janet yellen put a blanket on the market. And the Federal Reserve will soon be behind the proverbial eightball. If the American Economy improves, that is the case of optimistic economists. Likes what he saw in retail sales yesterday. He will hang on every word of chair yellens q a this morning. I was thunderstruck by the variance of Economic Opinion on retail sales yesterday. You took a positive spin. Why . The people who took a negative spin done on how to calculate gdp. Retail sales go into gdp. Those were strongerthanexpected. Auto sales were strongerthanexpected. Those also contribute. Some of these arguments with bearish folks are getting tired and increasingly pointless. Within that and Janet Yellens focus on slack, would you suggest that she and the fed have to migrate away from the comfortable theme that resonates with some the americans . I think that you opened by saying that the fed is getting behind the eight ball. That is their policy. How far behind the curve rather the going to let themselves get . Are they going to get themselves get . I happen to think that janet yellen is a fairly traditional central banker, in contrast to the portrait of her in the new yorker recently. The economy is improving. Between now and the end of the year, that is a long time. We will have a more rapid progression to the feds subject of us than many of the markets are anticipating. Lets take her at her word. She said six months that a reason. I think a secondquarter rate hike is absolutely correct. Second quarter of 2015. I think you are seeing more folks come around to that view and i think it is only a matter of time before the markets do that as well. Historically when the fed has started raising rates and waited too long to do so, what has been the slingshot effect . How quickly has inflation accelerated . Inflation never just hits the fed target and sits there. It is usually going higher for a time. That is probably what will happen. Something slightly above 2 this time next year. That is not terrible in the scheme of things. I do think there is a bit of a symmetry in the feds goal. They are comfortable with inflation moderately below 2 than above it. Otherwise, why would they be tapering . Those who think the fed will go late in 2015, early 2016 that is a question they cannot answer. Why are they even talking about rate hikes next year . Janet yellen is trying to revamp the bed, wire the fed, why are they not raising their inflation targets . I think she is a traditional banker. They are talking about stress valuations. Jerry allen made the comments about jerry ellen made comments about chair yellen made comments about valuations. Valuations appear stretched. Issuance has been brisk. Accordingly, we are closely thetoring developments in Leveraged Loan Market and are working to enhance the effectiveness of our supervisory guidance. Stretch valuations in junk bonds, in small cap social media, biotech. What is the fed trying to signal here . That the fed understands that investors are concerned about the markets . That its policy has costs and benefits. There are benefits and the macroeconomy. There are costs with respect to financial markets. People do take risks when volatility is low. The fed is keeping an i on those risks. This is all part of macro provincial regulation. Macro prudential radiation. Regulation. This is not unlike what we saw last year with the tapered tantrum. They willingly traded growth for Financial Stability last year. Shed knowledge is that the big spike in rates slow the housing markets. And yet it took some froth out of certain markets. It is not entirely clear to me that she has used this as a negative thing. Charles schumer and janet yellen going together. Mean for thes average guy out there in america . It is a lot of monetary mumbojumbo. Issue a liberal, a conservative, a monetarist . What does it mean for the average person . This debate we have seen. The average person should know you have nothing you have to fear at the moment from the fed. The fed is not going to dramatically adjust Interest Rates higher anytime soon. I happen to think it will be a bit sooner than people expect, but they will still be pursuing a very accommodative sense of Monetary Policy. They will let this run. Saying they will maintain extreme accommodation for elong period of time does not keep rate hikes off the table. The semantics are important to rid important. A constructive view on certain stocks. Ibm shares rising along with apple. We will continue our discussion about how thes