Transcripts For BLOOMBERG Bloomberg Surveillance 20140717 :

BLOOMBERG Bloomberg Surveillance July 17, 2014

Economic data in the u. S. Here is what we have got. Initial jobless claims and Building Permits. 9 45, the hits keep coming, bloomberg comfort index, the 10 00, the Philadelphia Fed business outlook. Earnings, danaher, Morgan Stanley 7 15. And blackstone, a big one before the bell. After the bell, ibm and google. Say know what ibm will they changed the conversation. The Conference Call will be about looking forward and what kind of appreciation to come out of the deal. Items to note the Senate Transportation subcommittee hearing on gm. Are they going to recall a corvette . They are recalling jimmy ramadi wake up. On the brain. Mary barra has been before congress four or five times. Present obama will be speaking at the port of wellington on infrastructure at 2 10, and Angela Merkel turning 60 today. The british open also begins. Doesnt be president make his way to new york this evening as well . Be a mess. T will do not go anywhere tonight in new york city. Just stay in your apartment and hunker down. And on a thursday, this is a huge eel for the vast elite that watch bloomberg surveillance. Airspace is close from 3 00 p. M. Until 11 00 p. M. I try to get the surveillance sikorsky and they just said no. We are not going to the hamptons. Literally they shut down the airspace, didnt they . I was going to see the red sox, but you cannot do it. And what a shame because it will be a beautiful evening. You could have flown without any clouds. That is the morning brief. Data check, we look at equities, bonds, currencies, commodities. S p 500 down seven big points there, worth watching. 10year yield at to 2. 49, a lot different than two dollar 2. 50. Oil elevated. This is the first day we have seen oil pickup. Our next screen, the vix a solid 11. 00. There is the dow, nicely above 17,000, the yen 101. 50. It has been stronger versus euro in the recent days as well. The front pages, boy, did they change starting yesterday with time warner and fox. We look at todays front pages. Here is scarlet fu. We will go big and broad. The United States and eu have hit russia with more sanctions over ukraine. Among the company that the u. S. Is targeting is russias biggest oil company, rosneft, also the thirdbiggest bank, gazprombank, certainlso blacklisted companies but they were less specific than the United States. Some with a less stringent as well. Obviously they go after the Capital Markets and their axes away from shortterm commercial paper. How do you respond with a global American Business . Who can you talk to, who can you not talk to . Who am i going to get into trouble with about the business trip . It will be interesting to see how this plays out when Companies Report their earnings and talk about how operations are affected by the slowdown we are already seeing in russia and less encouragement to do business. By the way, you can understand why the europeans would be less stringent they depend upon russia for energy. Europe gets about a third of its natural gas effectively from russia through pipelines. You have got to kind of play nice and make it work. What is the next page . Dow jones industrial average setting a record. Yesterday 17,138. A number of reasons janet yellen was speaking again for a second day. Fed sugar. Asset is not out of line with his oracle norms, she mentioned. You mentioned time warner fox. 20 century fox willing to pay. [tom humming] that is from the New York Times business section. Rice by the way, i just ordered watching game of thrones, and i am loving it. It only took me four years, but i will give you a hint. I am messing it up for you. Everyone dies. Just so you know. Twice. Twice. Third front page. We go back to banks. We mentioned how Morgan Stanley will be returning reporting earnings. They go america said prosecutors bank of america we have learned they are at odds over the settlement. They have over 13 billion, but the government wants a 17 billion, so the fact that they cannot reach an agreement means that maybe prosecutors will sue. Increases the likelihood of that happening. What happens if the bank just says no to these lawsuit. They go to court . Presumably. Has anybody just said no . People have said no as part of the negotiations. Jpmorgan agreed to settle last november with 13 billion, and of course citigroup reached a settlement of 7 billion. Remember what happened to gm bondholders when they said no. They got the cram down and the administration said you will take this deal whether you like it or not, so im not sure you can necessarily go up against this administration. For better or worse. The administration is eager for this to blow over. Forbfa has been an issue years now. In any case, there is our front page story. Very good. International relations america confronts a broad set of international sanctions. Last evening, the president directed his attention to punishment for russia as Vladimir Putin is in eastern ukraine. The europe and u. S. Continue to punish. Ian bremmer is with the razor group. With the eurasia group. Ian, what is different this time, this moment for israel . For israel, there is a lot of pressure domestically to actually engage in ground strikes. That is kind of surprising. Netanyahu is the one that usually has been the hawkish and out there in front with the more military stance. Actually a lot of popular rhythm. He does not see a benefit as strongly in taking ground steps, but there is no question that the other big thing that has changed for israel is that the consequence of hitting hamas hamas hasly been completely cut off resident cc because in egypt is very different from , has cutm brotherhood off all of their economic lifetime and considers them a terrorist organization. It is very hard for them to do anything to respond to Israeli Military strikes. Had he studied the effectiveness of Israeli Ground troops as they go into gaza if that was to happen . Look, the thing about gaza is they note every inch of that territory, their ability to engage in close knit, very densely populated urban fighting in some of the highest and most effective in the world, but the point is it is going to be costly both from a u. N. Perspective as well as financially. This is not something they can do in a few days. Ground troops would require at least a few days. And the International Program in response to that would not be insignificant. Ian, quickly on russia as we look at these new sanctions, do sanctions work . Know, after the 12 round of sanctions, you have to start to think that they are not getting the behavior from the russians that the americans had wanted. ,he two things to focus on here first, the mounting of frustration from the u. S. Every time we say there are consequences, the russian response has been to proceed that they have i had every intent to engage in ukraine. Secondly, we are having a harder and harder time even maintaining the europeans being in lockstep with us on these sanctions against russia, which of course thean enormous part of initial policy when we started implementing those sanctions several months ago. Ian, you mentioned the fiction of thinking that the eu d u. S. Are in lockstep. There are tennant companys on a list that are sanctioned, the u. S. Much less stringent. What is the possibility of the rest to lose business, that europe will slip in and go where they cannot . Companies are already losing new business and opportunities to European Companies and others around the world. The biggest american firms are important to the russian economy. People look at exxon mobil, which putin names directly in his commentary yesterday in response to those sanctions. It is certainly possible that putin will decide that he wants to do something important and symbolic to hit one or more of americas key companies. Also, American Brands. Nationalism in russia is at a fever pitch, and certainly you can imagine public demonstrations against visible American Brands in russia. If you are an american ceo operating there, you have to take steps to respond to that. Dr. Ian bremmer, thank you very much, of the eurasia group. We are also pleased to welcome our guest host of the hour, howard london, and also brian white of cantor fitzgerald. Gentlemen, i want to start with our front page story. You have megamergers between time warner and fox. Is this the top of the market . Timed of cannot help of warner and aol. It is 2014 and it feels like 1994 if you look at the alltime high list of stocks. I have never owned this at the same time i owned apple, microsoft, google. I do not own ibm, but while. Intel i should own. They are all of 8 yesterday, microsoft and intel. With of this has to do money flow. A lot of this has to do with microsoft, the new ceo. The way they monetize their software products, but it is really not a top. I have never seen anything like this, so i do not know how to call a stop on something. Brian . What we are seeing in the tech world is a rotation into these mega cap tech stocks. I think that will be the case going forward. We will talk about this later in the hour on bloomberg surveillance. Are we going to have a silly season with time warner . You not only get the shift what you get the market with the emotion, do you get the pendulum so far out that we become silly and our evaluations . It generally speaking in my area, valuations for a lot of these emerging highgrowth companies peaked in february. My mega cap stocks are very cheap, and a discount in the s p 500, ibm how under value they are. Which is exactly how words point, how can you have a market top when some of these companies are very cheap. Just look at apple. Our twitter question of the day if content is king, what is the crown jewel . It is the millenials. They have tools that we do not have. Go pro, youtube, netflix and amazon. If i were going to go create a business channel, i would go create 80 americana shows that my kids could watch for 100 years. It is not about creating 24hour television. No offense, you guys are right. It is about craving content ah. Tweet us if content is king, what is the crown jewel . bsurveillance. What are we looking to hear from a jenny ramadi in her new deal with apple . You do not know this. Good morning, everyone. Bloomberg surveillance. Joe torre. You think he is a manager of the yankees. Forget about it, he is a nine time allstar. He will be on in the loop lows quote with betty liu. He will be on in the loop with betty liu. Home of the dreaded new york yankees. Dreaded, dreaded . This is bloomberg surveillance. I am tom keene. With me, scarlet fu. Adam johnson also with us. Get us started, scarlet. Ibm, the former pc maker and now software and services company, will report earnings after the bell. The interesting thing about ibm is how it transformed itself. It was a pc maker data became a club company. Now with a partnership with apple, it is trying to make a dent in mobile enterprise. We will check with brian way of brian whiteld of cant surface cantor fitzgerald. Going through a transition, and it was a first time in ibm ceo ever mated to the mobile world congress, and she gave a keynote. Really they opened up to developers to develop mobile apps, and that is part of what she was talking about. Their reas of focus big data, cloud, they acquired software, social, and also mobility. Big areas of focus. Are they under investing she has so much pressure to keep shareholders happy, she is building free cash flow, but she is not investing. Think they are investing in areas that make sense. The problem is the stock is only up 3 to 4 since the end of 2011 when she took over in january 2012. S p is up 56 . This is an issue with investors. Something has to happen or there will be a shakeout. I think they are at an inflection point. Theiry are getting rid of semiconductor making unit, they pceady got urid of their section. Did they exit these two early october did they exit these two early . No. That isthey do exactly in the Semiconductor Business . Hardware made 1. 6 billion and then lost pcs are not dead. It is priced into microsoft and i intel. It is ugly. Tot is your device Ginni Rometty . Oh. Shiningeet is really brightly on google ventures, on the venture on some of these companies. I think ibm is going to have to step up to the plate and really show their vision with some acquisitions and spend some money, sprinkle down from big cap tech onto what is new and cool in till they can integrate some of these companies. I think marissa is being punished at yahoo because she is maybe making the wrong type of investment. All right, brian white, we want to thank you for joining us as morning on ibm and apple, especially with ibms results later today, and of course will be with us for the next hour. Nardelli, robert o will be joining us as the guest host. This is bloomberg surveillance. We are on Bloomberg Television, streaming on your tablet, your smartphone, and bloomberg. Com. Good morning, everyone. Bloomberg surveillance. Time for a morning mustread. Here is scarlet fu. It is actually a morning must listen. Goober whothe ceo of was speaking in hong kong. The companies valued at nearly 17 billion and he was talking to bloomberg about the possibility of going public or not. The other thing that happens when he raised 1. 2 billion dollars in private markets is you do not have to go public, so until it becomes a strategic imperative for us to go public, we are just not. He does not have to go public. Howard lindzon, cofounder and chairman of stocktwits, you say he owes you five dollars, but you do invest in uber through a small fund. Couldthe way, anybody have gone in. The deal was on angel list, and other investment of mine, so the original investment was at a 4 million valuation on angel list, so yes, that was open to a lot of accredited investors. At this point, this is probably going to become one of the best returns of all time, especially since it was available to all people. But they are going public. And at 17 billion compared to amazon going public at six under Million Dollars in 1998, 19 99, they are public. But why a dispatch company which is basically what uber is, they dont even own cars why is a dispatch Company Worth 17 billion. And cannotho is 14 speaking was would have a better answer. But he can program, right guy would pull up and do magic, this is magic in the rural life everyday. I push a button, the car shows up, tax is included, the driver is registered. It is a phenomenon. So magic is being created, and it is also productivity being created. A 50yearold driver can rent a car, does not pay for the car, huber pays for the car for them, and he pays nine dollars a day to run a business. It is entrepreneurship. It is an entrepreneurial combustion engine. Nobody predicted this, and that is how you get to 17 billion. I love that you cannot put a price tag on magic. Full disclosure, i just became an uber vip. Coming up on surveillance, we will discuss how investors are reacting to the time warner cablefox proposal. That brings us to our reporter question of the day if content is king, what is the crown jewel . Good thursday morning. Gorgeousness of a cool new york. Im talking about the temperature. Wasnt there a polar vortex earlier this week . We are redefining polar vortex. It feels like san diego. 57 degrees this morning. Just beautiful. What a shock. Citigroup there in front on the stateide of the empire building. Love it. Good morning, everyone. This is bloomberg surveillance. I am tom keene. Let me get to a data check. Ortho is moving, and some of afghanistan. Oil 102. 12. 9 thisted a solid morning and equities come up a little bit. I do not want to make too much about it, but there is a little bit in the market right now, adam. Says no toe warner fox as investors say please. They push the shares up 90 yesterday. Howard lindzon witnessed the reaction firsthand, the founder of stocktwits. His website lit up. Sift through all of the excitement and buzz. We have had a lot of deals happening in the media. From this one potentially two direct to become a at t, comcast, time warner cable, what is happening right now . I take you back a year and a half ago to Richard Bransons island where i bought some netflix at 80 a share after the felt soeal, and i smart, and im sitting around branson and a bunch of very some people, and arent as smart in their bathing suits, no matter what past the age of 50. Everybody thought i was an idiot for buying netflix, so i came home from my trip, i sold mine a i sold my 84 netflix at 84, so i would say nobody knows anything about media in 2015. Time warner knows nothing, too, so lets take that away. I think you have the bank saying we can make up trading profits by doing deal profits here. I think there are all kinds of undercurrents going on. Get paid. W bankers this is easy money. The numbers are made to see whatever they want. Listen, this is a golden areera of content. I just wanted to piggyback on what you were saying. If no one knows anything, the thing everyone seems convinced of is getting bigger is the key. Sure, banks are behind that. The scale seems to give everyone leverage. Rich greenfield pushes back against that. He told the ft that our gust is that wellpositioned Media Companies should resist the urge to merge simply to increase scale. When is gail bad in media . Scale that in media . I think it is bad now. Netflix, amazon, super vision, bloomberg with their loan shows on apple tv, magnificent stuff. That is the future that is timeless so kids can learn and everyone can share together and atch and discover throughout Remote Control that finally works. We still live in an era with a poor Remote Control and we are all aggravated to get on netflix. I think like facebook splitting up with apps, media should be splitting up and really going tactical around content. We are at a moment where we literally copyright matters. To me it was the cbsviacom split off, realizing what i worth. Cy is these are Balance Sheets constructed on content and on copyright. Will google want to that . That is a question we are talking about. You know, you hope they dont. To make a case where it makes sense for google t

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