I hope you invited her to fix it. She will be a guest. 2020. Theres always hope. Japan and china agreed to meet with south korea. They will try to figure out these territorial disputes, including the china sea, drilling rights. In the u. S. , we have retail sales that 8 30. That is important. 56 of u. S. Gdp is due to consumer spending. Add in health care and you get close to 70. Darden restaurants will also have earnings at 7 00. One item of note this is big. We all need new iphones because the new phones are going on sale. You can preorder. I am not sure when you can pick it up. A couple weeks from now. Ear was an indication, it could be a couple months. We heard the site was down this morning. It is up now. I talked to josh. He made clear the big one. Big battery. It is all about the battery. That is the extent of my knowledge. It is bigger so i can play spider solitaire. I want to play destiny. Minecraft . Lets do a data check. It is a big nothing screen. There is a lot more going on, besides the euro. Go to the next screen. Vix is showing some of the pressure from the week. The two year yield is a. 57, rounded up. We have higher twoyear yields. When will the fed acts begin . Nicely situated. Ruvell is front and center. Russian central bank kept their rate at 8 . U. S. Is zero bound. Paper, witness litmus 37. 25. Here is the asian crisis. S is yen versus the streets ofn south korea selling their bracelets. So, Asian Financial crisis. Here is korean strength. Japanese strength this is the tension now. How about jon ferro in london . These interdependencies of currency markets show that they are in now. Especially with exporters fighting off. Is that a good friday turn . Front page. Russia is threatening to retaliate following sanctions. Added companies to the list of those affected. T are trans the u. S. Will deepen and broaden its sanctions against the defense industries. Neft. In the case of some of these Oil Companies, their subsidiaries. In some cases. You wonder if there is some wiggle room. I was surprised by this. I thought bloomberg captured this, how finely the eeo got out in front of putins dialogue. Maybe what we are just now staying seeing. Government officials, five killed in the ceasefire. Some 800. 800 injured. Thank you, tanya. 873 in ukraine. There is a ceasefire. By the way, we saw the same thing when the ceasefire was announced in the west bank. Officially, there is a ceasefire, yet shots are being fired. Arab nations are signing on to join the u. S. To fight against Islamic State history ms. Extremists. Their shareee to do and contribute to the military campaign as appropriate. No one is saying what that means. It is hard to quantify. Lack of specifics. Paul brummer will join us. Talk about a controversial figure. He will join us at the top of the next hour for an extended conversation on this phrase, boots on the ground. What john boehner said yesterday we will go to Phil Mattingly on this. He says there cannot be an f16 war. Even if it were, you still need boots on the ground too. Withpaints the targets lasers so the bombs can go where they need to go. It is day 2. It will be a lot longer. Paul is joining us in the next hour to discuss this further. Our third frontpage story the government threatened the yahoo with a fine. Im glad you bring the separate this comes from documents that yahoo released yesterday. On for theve permissi release. Theyre partially redacted rid yahoo eventually gave in and the data was used in the nsa program. I dont see Marissa Mayers name here. This was pre2000 and eight. It was something all the Big Tech Companies were dealing with. Why are we surprised . We are also priced at the extent to which the government was pushing the Tech Companies to give up data. It is all coming out now, especially as we try to figure out how much cyber workers are taking place. Very good. The Associated Press reported earlier this morning on these new sanctions. Theyre enforced against russias previous penalties. What value have they been . We go to hans nichols to link in the sanctions with the president s news in ukraine. What is different this time . First. , the eu went this is really them going ahead of the u. S. The sanctions prevent subsidiaries from raising funds. They promote longer maturity than 30 days in europe. Something similar to obama later today. Can russia retaliate . Yes, and that is what everyone is waiting for here. An, these sanctions have been talked about for the better part of two weeks. They were finally published in a brussels register. Does russia retaliate beyond cars . They are talking used cars and clothing. Do they control airspace . Do they know u. S. Originated flights that fly over Russian Airspace . Be a significant escalation. You reported extensively on the relationship between Angela Merkel and russia. She is curiously absent in these most recent talks. I would not goal so far to say as absent. When this asummit, gelled together there was a big dispute on whether or not to implement them, because theres a ceasefire. The ceasefire is not exactly durable. It is not a ceasefire in the literal sense. Use all over the last couple of days, cameron and merkel made sure that the sanctions were published in the official eu speech. Now, do you have an off ramp from the sanctions . At the end of september, that will be reviewed. Would we expect to hear from putin on this friday or into the weekend . I suspect we will hear from putin. He is in the eastern part of his country today and he is traveling back. He is not someone with a great deal of authority. Hans nichols from the news bureau in berlin, thank you so much. Lets turn to the u. S. Market. They have been higher. They go from the lower left to the upper right. It will always be good and better in their dna. Earnings growth has continued. It is absolutely an uncorrected, perfect bull market. Golub is a genius until september. We make fun of it, but it has been an extra ordinary run. There are a couple of things. The economy is showing signs of improvement. Expectations are that we will have gdp jump from 2 over the last couple years. We think we will have 119 this year. 130 next year. Percentage this year will go up 8 . Next year, about 9 . This is critical. Really important is thinking earnings over Revenue Growth. What is your Revenue Growth estimate . Revenue growth has been about 4 . 6 over the next year. That is just critical. That is the heart of the matter. Given all of that where are you most worried . We talked about investors climbing because there is uncertainty. What are you worried about . Probably the biggest worry on investors minds we dont know what the fed will look like. If inflation picks up, the fed will be forced to move faster. In my worried, probably not. Is that priced in . It is probably priced in that inflation is tame. Some people will love it. On the top line of Revenue Growth a piece must be a bout of inflation. You just heard jonathan say that earnings in 2015 or 130. In 2010, there were 80. Are you doing math on a friday . Im doing that. You are a ceo at a fortune 500 company. Why are we hearing more companies doing victory laps . Or is that the wrong tone right now . I think the mood is up. It is up across the board. You used to say that zero is the new 3 or 4. Overall, i think people are wary enthusiastic. There is still always worry. We got ahead of ourselves a little bit. Then, snapped back. I think people are trying to be very reserved. Ok, Jeffrey Hayzlett is with us. Scarlet fu, help me here. It is a firstperson shooter video . Were talking about the game of the moment. We will talk about the profitable industry, minecraft. We will discuss what is going on here. This is bloomberg surveillance. Here is adam. I wish. Good morning everyone. President ial envoy in 2003. We will talk to paul bremmer about what they would be doing. Maybe that is john kerry in 2014. An important conversation with the always controversial paul bremmer. Look for that at the top of the 7 00 hour. This is bloomberg surveillance. We say good morning to you. I am tom keene, with me scarlet fu in adam johnson. News, wereny looking at the bank ability of video games. The destiny game is on track to become the most profitable game ever, succeeding halo. The first to share raked in 500 million on its first day on the market. Our guest, Jeffrey Hayzlett, no summer. He voices one of the sol diers in destiny. It is like, i am running out of ammunition, more, more, more. Everyone talks about the imminent death of gaming consoles, right . Everything is going mobile. Zynga has been one of the big sellers. Why are they so resilient . You to play this at home. I know these gamers. I see them and they play all my long. They play across the internet with many people. You cannot do that as much are they scarlet fus kids and jonathan golombs kids . These are people 1840. This is the market that all the people are chasing. Huge. So, it is more than just a gaming platform. It is part of your living room. Big tech is taking video games for a seriously. Microsoft is in talks to buy the maker of minecraft. Amazon bought twitch. Facebook bought oculus. Why is big tech seeing gaming as part of their strategy . They have to have the games for their platform. They went and did this game with destiny. They used to do the halo game. They bought that and destiny was able to produce there for a while. Were talking about big investment across the board. They have been beating microsoft for the last 10 months on those consuls. John, it to me it is about margin. Retail, two cents on the dollar. Apple brings it down to a . 25. Apple is an amateur compared to the margins these guys make. That is why people of the Software Business in general. Whether it is Internet Companies . 60 on the dollar . It has to be higher. 500 million to make it market destiny. Doesnt it generate 500 million in revenue . Units across the thing is 60 per piece. By point of contrast, the top grossing is dirty and the galaxy, raining and almost 300 million. This is a hits generated business. What i thought was interesting is the way they market this game. They kept this locked down. It was secret. I did the voiceover and i could not talk about it. Is that a shameless plug . What to do when you do a voiceover for a game . They go into a little recording studio, next door. Paul mccartney was recording the sound. Paul mccartney . They say pretend you have been shot, pretend you havent stamped. Give us 3, 2 you have been invited to come on surveillance, your response . Same thing. Is there a Steven Spielberg of this racket . There are tons of these folks who are worshiped by these guys. What are we doing . We have great jobs. We are stiffs in suits. When do gamers make the transition to movies . You have seen some of those with tomb raider and others that have come out. You will see more and more. Interactivity is the key. These are cults. They are into it, they are doing it. That is waht that they do. Peter king kludge dinkl age . Jeffrey hayzlett is one of our guest hosts. Kodak. Ceo of eastman twitter question of the day who was the most effective this week . President obama, tim cook, or jack ma . Tweet us. We will be right back. It is a friday in the nations capital. Here is a gorgeous sunrise. They are moving forward from the president s speech. We will go to Bloomberg Politics for their perspective over the last 48 hours on the president s important comments. Good morning everyone. The media to a morning mustread right now, out of washington. Appear because of the postamerican world. I think it is a terrific effort, little bit dated. Here we go again. And then later on, in this essay, the u. S. Has declared war on another terrorist group. The military intervention in the region will work only if there is an equivalent, more intense, political intervention. This sets us up for Paul Brummer Bremer in the next hour. There are some in the questions. The white house had indicated that this conflict probably not. The idea of a short war this is a generational struggle. It is becoming a multigenerational struggle. We were in iraq for what . 10 years . We could not fix it then. I dont know why we think we can fix it now. Did they even want us . We are americans. We are different. Their regional barrier, we will talk to paul about the great controversy. And of course, he will be our guest in the next hour. That is coming up at 7 00. That does bring us to the twitter question of the day. Ddress,he president s a who was the most effective . Ma . A tim cook, or jack i think it was jeff paisley. Tweet us. Good morning everyone. We are at our World Headquarters in new york city. Foreign exchange ever weaker russian ruble. Decidedly on the move this point. This is bloomberg surveillance. We will be driving a motorcycle later in this hour. Right now, top headlines with adam johnson. Has beenpistorius found guilty of culpable homicide and the shooting death of his girlfriend. Culpable homicide . That is equivalent to manslaughter in the u. S. The judge had already ruled that he was not guilty of murder. He could actually gets 15 years for culpable homicide. And arab nations are promising to do their part for Islamic State extremists. Leaders met with john kerry in saudi arabia. They called for a coordinated military campaign. It is not certain what they will do. And, in pro football, the Baltimore Ravens criticized the ray rice controversy last night. They beat the Pittsburgh Steelers handily. The win came three days after rices contract was terminated for punching a woman who was his wife. Single best chart, 17,049 this is on the market super cylc. E our question goes to john golub. Chart tracks the Dow Jones Industrial average back to 1904. History shows that it is typical for the stock market to experience prolonged periods of flat returns. I remember that in 1925. Followed by 1020 year periods of powerful returns. Was shortecent period compared to the 60s and early 80s. Does that mean that this return rate that we are in it will be short as well . It is hard to know. What it does tell you is that if we had 200 return in five and a half years, it is not unreasonable to say that we could have years of well above average returns and i think that is the key take away. Theres a disconnect. The economy is growing at 23 . Investors have got to be scratching their heads here. If you look at that chart, the key driver is valuation. If you look at the 1980s and 1990s, we started with a pe of 6. So, it is earnings, and then you add the valuation. Why did we have a flat period . It negated all of the earnings. It is really this long run on valuations that matters. Valuation matters speak to this. Productivity. What we are seeing now is unlike what we have seen in the past, would you agree . Yes and no. If you look at productivity, my grandmother told me that the greatest gainer in her lifetime was Power Production that could be brought to an outlet in her home. You would not have a refrigerator or a telephone or Television Without it. But, is it different . I am not sure. The guadalcanal rally we had a war to get ourselves out of. Say we are inhey search of another area to get us going again. Do you observe in american corporations that they can sustain that Economic Growth . The Biggest Issue now is that there is a lack of confidence in the longterm trajectory of growth. You were talking about 2 gdp. Companies need to be confident that this thing is turning up. We are seeing some signs to reinvest. Business confidence surveys are taking up. Were seeing a pickup in m a. But the immovable force is where hayslip lives. You dont know that he was down in chelsea or granite you are out in the dakotas. That is where a lot of growth is happening. That is where people will be safe and have growth. We have seen that in south dakota and north dakota with the oil business. They are not necessarily investing in the stock market. Everyone talks about this being an unloved bull market. There is not a lot of volume. What does that say for a selloff . It is all about fundamentals. If you look at the value of stock versus bonds, stock is very inexpensive. If the economy does what is expected, that is really big, relevant change, that should fuel another like him market. Are investors buying into this . They are a lot of them have not participated. Long only guys they are in. They dont have a choice. They have to. And, hedge funds are playing as well. Hedge funds are completely missed out. You look your returns on the hedge fund indices. Single digit returns for three years in a row. What are they missing . It is really hard if you are alongshort. You are fighting for the difference between these ideas. As opposed to the market, which has been providing the big returns. In a flat market, hedge funds look brilliant. It is harder for them. Do they deserve their fees of 2 . Those that are able to deliver the numbers, yes. Those that dont that. Rehearsed one things we have not mentioned is the federal reserve. If you look at junkbond interest in the market, they are all kind of rushing to raise some cash. They are levering up before the window of opportunity closes. To see that same rush to leverage up in the equity market at all . You are seeing large u. S. Corporations. They are issuing debts and then the cash balances are going up. So, when they raise money to do an acquisition, they may be raising a little bit more. This financing is really cheap now. And credit0 year spreads modest. It is possible that this will be a slow process. The back story to this is what Jeffrey Hayzlett i am from a codec family, back when development stopped. You are from a kodak that blew up, trying to keep up with creative destruction. That is what keeps jon golubs role going . A you are also dealing with company that was scared about what their legacy was going to be and try to hang on to that too long. Two or three decades to on. Creative see the destruction out there that leads to the margin of Economic Growth . I think there will always be creative out