Transcripts For BLOOMBERG Bloomberg West 20150227

There is caution on rising Interest Rates. Heres Morgan Stanley senior economist allens at an are on the Interest Rate debate. Economist allens aetna on the recent Interest Rate debate. You run the risk of choking off an early economic expansion. The fed should delay a rate increase and raise rates more sharply. The u. S. May cut off more russian banks from the local financial system, because russia said they should ease support from separatist rebels in eastern ukraine. It was relatively calm in the conflict zone. Three soldiers were killed in the past day. Sales of the iphone and ipad blocked. Seven new Patent Infringement lawsuits against apple in federal court. And they are asking the ftc to block products including iphones. The company sued each other after talks for a new failed. And republican president ial hopefuls are making their case of a Political Action conference. Former Texas Governor rick perry and donald trump. The republicans have to toughen up. They have to toughen up on the irs. If they have to toughen up on benghazi. They have to toughen up on everything and perhaps other than immigration they have to toughen up on obama care, which is a told a lie and a total complete disaster. We have total and complete coverage on bloomberg politics. Congress may be close to avoiding a partial shutdown in the department of Homeland Security but only temporarily. Technology is caught on the crossfire. Peter cook is on the hills with the latest. What is the latest on a temporary fix. Theres a lot of pressure not to get this done. It has been a moving target all day. House republicans agreed to today bring to the floor current levels for three weeks. The whole reason for this holdup in the first place. They gave the greenlight for suffrage for a separate funding bill. No mention of the immigration executive action. A change of dual strategies for Mitch Mcconnell and john boehner. Democrats are saying anything other than full funding for this agency is a mistake. It means no new contracts are going to be out there, even if we have this temporary continuing resolution. No grants for things like Cyber Security at the local level. The key to securing our borders is technology. This does not allow us to employee to deploy the same kind of technology for a safer country. What he is talking about his new investments in cameras and aerial surveillance of the border. A lot of this comes down to technology. Even if we have a temporary solution there is a question about whether or not that investment would be made and bolster border security. Thank you very much. Interesting stuff indeed. What happens in three weeks . Do we go through this whole exercise again . We are not certain there will be the foes to do that today. They could be a couple of other issues that get lumped in here. No real doubt about the fact that republicans and democrats support funding the department of Homeland Security immigration issue holding them up. Even as this gets delayed for three weeks. Covering the politics. We appreciate it. What about what the dhs actually does in the Cyber Security. What would a potential shutdown mean to online threats . Joining us from detroit, mark weatherford, further deputy undersecretary. What does this mean . I dont think there is going to be any Immediate Impact to the operations and the ability of dhs to respond to cyber events. Most of the Cyber Security personnel within the organization will be deemed essential personnel and will continue on. In the immediate future there wont be any impact operation. Where there will be some impact is some of the more structural issues like a couple of large programs. There are large programs that are in various stages of implementation across both the federal government and working with private industry that will be impacted immediately. Tell me what dhs doesnt Cyber Security. What this dhs to . The Integration Center is the focal point for the federal government working with the private industry. The umbrella underneath the end kick is the u. S. Cert organization. These are mechanical organizations working with not just the private sector but with the government as well. They are doing the daily operations, the daily intake and output of Cyber Security information, working with Critical Infrastructure sectors to provide them foam or ability information they are receiving. And to aggregated together and disseminated out to the appropriate parties. In other words, at dhs there is an organization that tries to find out every cyber threat as it is happening and making sure anyone who could be affected in government or beyond government knows about it. That is exactly right. That doesnt so much of the that should stop, thats is like something that is important. It is important. That organization is not going to be affected in the shortterm. Where there could be some impact is in the morale and people aspect of this. Asthe important point is we spent a lot of time recruiting and cultivating the talented people that work in this organization. There is going to be an incredible amount of pressure on them, working on an environment where some of our peers are going to be sent home. It would seem there is no hotter employment dealing now that Cyber Security. Some government workers are probably not making top dollar. Now you had not a excess dental threat. What does it do to have these threatened shutdowns . Its terrible. I can tell you that all of the defense contractors and private Sector Companies around the country are salivating at this. I cannot name one Single Company that i that that i work on with a daily basis. This is a Good Opportunity for people to pluck out these workers that are unhappy with the environment. There are going to be some employees that are going to be sent home. They are not just going to be sitting around and waiting for the call for the government. They are looking for a job. That is going to exacerbate the problem. They will have to go out and rerecruit four. Send your resumes. We appreciate it. Bloomberg west will be right back. This is bloomberg west. Here are some top headlines. A fourmonth extension of the rollout. The vote was overwhelming 54232. 29 of the no votes came from Angela Merkels own party, showing signs of growing discontent with the greek bailouts. Managers of the Worlds Largest hedge fund is turning to Artificial Intelligence for even bigger returns. Bridgewater associates is starting an artificial intelligent unit. The team will develop algorithms. After heading up ibms watson unit. Some sad news to report Leonard Nimoy has died at the age of 83. He became one of the most famous characters ever in television. He died from chronic pulmonary disease. Turning now to Net Neutrality we yesterdays Landmark Communications was a big deal. Debating scottish dress colors. Passing monumental proposal to regulate the internet. The wild west days of unregulated net are over. One of the commissioners that voted against this one of the republicans that did vote no joining us. Title ii now reigns. What is the first pernicious thing we are going to see because of title ii . Decisions about how the internet is going to work will now be made by engineers and technologists and be made by lawyers and bureaucrats. Consumers are going to see their broadband bills go up. The fcc is going to tfa proposal. And we delete providers are going to see their state and property and other taxes go up. Those are going to be proposed on consumers as well. The wallet will feel the pinch first. The tax bill is a separate thing from title ii. The regulations themselves are going to be very farreaching if and when the fcc releases the plan. Some of the media immediate effects are going to be severe as well. You have been carting around the proposal. What is it that is really worry some . The extent to which they are inserting themselves into every aspect of how the internet works. Net neutrality was meant to encompass the relationship between Internet Service provider and a customer, the last mile connectivity. This document through a narrow majority approved yesterday goes before goes far beyond that, relegating the nuts and bolts of the internet. Even Service Plans that wireless broadband providers may offer. There is still a lot of uncertainty about how these rules will be applied. The leadership was asked how this internet conduct rule is meant to cover any how will that work . He said, we dont really know. The fcc will be able to sit there is a referee and throw the flag. That doesnt give the industry a lot of certainty. One of the interesting things we talked about this endlessly. When i think about forbearance is, the fcc is sort of seeing sort of saying trust us. Is that a good thing or a bad thing you go it is a bad thing. Some of the forbearance of the fcc grants is hedged with the classic washington caveats. That is prequel comfort for innovators in this space. Moreover it is nominally granted. It is forbearance in name only. There is still this heavyhanded backstop which is a little arcane. The fcc is going to implement the forbearance will fade over time as the regulations ratchet up. Lets talk about the issues of Net Neutrality. Netflix has complained they were compelled to play fast lane. They were thrilled they will have to they wont have to make those payments area that seems like a compelling argument. It is compelling on the surface. It is going to be worse off for everybody, for edge providers and isps. The fcc doesnt have the expertise to determine what agreements the isps region terms of Internet Connection of interconnection. Do you want an unelected bureaucracy to make decisions about how the internet functions . Do you want to rely on the light touch regulation in the last 20 years that allows Companies Like netflix to grow tremendously and reach commercial agreements that both sides can ultimately live with. I would rather have a free market approach as opposed to having a washington bureaucracy make some of those decisions. Title ii has some interesting hair on it in addition to the transit rules. Things like privacy have specific title ii requirements. I wonder what that means for a company like google. It is a big business that involves mining customer data. I wonder if those rules will now mean that google has to abide by different privacy rules . This is why Tech Companies that have been pushing for a title need to be careful what they wish for. Having classified Internet Access as a title ii service and treated the entire internet as utilities one part of the title ii is section 42 section 22. Not just the isps but the edge providers themselves to adhere to some of the more onerous privacy restrictions. Over time we will see whether or not the administration and the fcc chooses to go down that path. That is one of the many examples of pandoras box that has been opened thanks to title ii. This conversation is really good. I want to talk about municipal broadband rules and other important things the fcc did. We will talk about that right after this break. You guys yesterday that state laws into places should be overturned or get an exemption come in chattanooga and wilsonville north carolina, to offer broadband. Is there actual competition in the world of broadband . I think one of the reasons we object to this in particular is strictly a legal one. I dont take a view on any given municipal broadband project. Other people say it displaces private investment. I step away from the entire debate. I am servicing on the question that was before the fcc. Does the fcc have the legal power to block state laws regarding municipal broadband. I say the answer is no. I have seen statistics that say 75 of americans have only one choice when it comes to broadband. That is going to be a big issue in a lot of places. This is why i say instead of focusing on Net Neutrality should focus on broadband competition. Ironically enough title ii will drive competition out of the marketplace. We have heard of from thousands of other companies who say the title ii is a tremendous mistake and they dont have the resources to comply with these regulations. If we approach some of these smaller providers out of the marketplace we are going have fewer choices for consumers. So it is a problem. It needs to be solved but the way is to solve it the way to solve it is through market relations. The merger is pending before us i cant comment on how it will proceed. Generally speaking a lot of people are interested because of that reason. Thank you for coming on the show. Former aig ceo robert been much a died robert been russia Robert Benmosche died at 87. He made the announcement his successor would be coming up sooner than anticipated. Aig said under his leadership aig paved america in full. A profit of 23 billion. Diplomatic talks between the u. S. And cuba resume today. John kerry says the decision the decision is separate from talks to normalize relations from the two countries. Cuba wants to be removed from that terrorism list first. Priceline has named a new ceo of priceline. Com. Chris soderbergh comes chairman. Additions to the portfolio including the purchase of the restaurant Renovation Service opentable. French media conglomerate is planning to return 6. 4 billion dollars to shareholders through dividends and buybacks. The company has unloaded 30 billion in assets, including two wireless carriers. They profit nearly quadruple the profit nearly quadrupled in the fourth corner. That fourth quarter. This comes a week after apologizing including adware on laptop adware on laptops. They will offer effective losers a free six month subscription to antivirus services. And the u. S. Loses oil rates for the 12th consecutive week. Rates fell by 43 last week in their lowest level since 2011. Heading for their second straight week of losses. Happy house of cards friday. Pop some popcorn the season three is out tomorrow. The hit drama that has attracted a lot of attention and gave us the notion of Binge Watching how do you end up watching this thing . What does it mean for bottom line for netflix is bottom line . Joining us is paul sweeney. You love the show, we love the show. We are overpaid white guys in a particular demographic. We dont have real rating numbers for this. Netflix does not release ratings for individual shows. The only thing that investors know is the company has been pretty clear that some of the original program like house of cards has driven subsite driven subscriber growth. They feel confident their investment in original programming resulted in growth of subscribers, which is the lifeblood of their business. More subscribers allow them to even invest allow them to invest even more in original programming. They need to be big players in original programming. There was a group called Civic Science that try to put some numbers to it. They said there are 14 million users, which is a quarter of netflixs overall audience. In terms of how netflix is changed Business Model in offering second runs to offering original content. Netflix when hbo came in to the market 20 years ago it was simply a place to see movies after they came out of the theater. You go back 10 years ago hbo started investing in its own original programming, like the sopranos. I think netflix the growth of hbo. I think netflix new all along they could not a rebroadcaster of movies and tv shows. That maintains a large part of the total viewership area in an effort to differentiate themselves in an increasingly competitive video market they needed to create their own original programming. Find something they can brand a little bit. They have had a couple of successes here. They are no different than any other creative entity. It had a successful profitable business. Netflix did not. It is a principal driver of subscriber growth. What happens when house of cards is over and the flops start to happen . Its hard to pick hits. It certainly is. They have driven a business. Netflix does have a very Large Library of movies and tv shows, which continues to drive subscribers and continues to drive the amount of time spent with netflix by its users. Clearly they are lining their stars with more original programming, which just heightens the whole programming risk to the netflix story, which wasnt there in the early years. Particularly if they can own the programming that is on netflix. They do not own house of cards. Thats a big deal. People think they own it. The fcc fines that the rights of it would go back to the producers after a little bit of time. There are certain markets internationally where they do not have the ability to show house of cards. Most importantly it allows it allows longterm syndication rights over other different distribution that forms. Much like the big Hollywood Studios make money on the tail end. What we are seeing is netflix is getting increasingly into original programming. They are one of the most important buyers in hollywood today. The chief content officer at netflix is one of the most widely accepted people in hollywood, because yesterday checkbook. He is willing to write some checks for original programming. Are you going to Binge Watching this weekend . Im going to get started here. I know there is a lot of pent up demand from netflix subscribers. Thank you very much. Bloomberg west will be right back. Will convert big as names and mobile will be there to focus on the next big thing. One company that is really focused on this is intel. Intel is from new york. Chris joins me right now. Why should we care at the mobile congress the syriac oh this is really the main event where people will launch their products for the next year. What is going to be exciting . Intel is known as the pc company. They are going to be announcing a up of computing and communications chip that makes consumer devices. A much higher performance and longer battery life. And we are launching a new set of user experiences. Move the whole world in a new gesture of user interface. No passwords . I love that. We interview hundreds of thousands of people per year. What is frustrating people are those passwords, the ones you try to get into your 401 k account in the weekend. Our job is to make your face your password. Five years from now we were we will be wondering what the heck those things even work. We are talking about the dual identification to biometric identification. What is the role of silicon and when will the technologys focus around that . One of the benefits is were merging hardware and software technologies. We launched a new product where you can use multifactor authentication. You can use your face or fingerprint or voice to be able to login. We think it will be more secure. Whether it is logging into your favorite websites, no more passwords as we roll these things out. When you look at the business , a lot of companies talk about it. The revenues are getting to be something serious. Is this the place where mobility matches, even though it is not the main chip in a cell phone . Everything is getting smart and connected from vending machines to kiosks. We are a communication company. Our job is to make everything in the world more smart and connected and to do it in a standard space way. They want to work on the partners with the Industry Partners in the industry to make this happen. While america is very forehead on 4g or 5g, maybe it can be a challenge. What do you expect in terms of rollout to . This takes years to work on. We are confident the industry will work together. We are a leader in standard bodies around the world, whether you look at 5g for communications or even something such as usb connector on pc. Our job is to make sure we roll that out. That makes Technology Adaption faster. One of the big ideas coming out of mobile World Congress was wireless charging. Is that about standards . Why is that . There were three different standard bodies. We are excited about the power matter alliance. What that means for consumers is the same way you charge your wearable device, it is the same way you charge your phone tablet and pc. As we get toward the end of this year you will be up to charge details at coffee shops, your airport lounge, and intel will be launching the first tablet and pcs that you can actually keep that you can actually keep the power brick at home. Maybe three to five years from now youll be wondering what is the password and why did you ever connect something to your pc . Im still trying to explain to my kids why phones had dials. Have a safe trip to barcelona. Bloomberg top stories. Robert thens died at the age of 70. With his family by his side and undergoing treatment for lung cancer since 2010. Paying the bailout in full. Google submitted plans to redesign office space in Mountain View california. They want to increase their Square Footage big time. Shares of weight watcher are falling the most ever today. Coming up with sales of a dining company. Digital fitness. The job alone are eating into their business. Bottom and top line. Mark crumpton is with us right now. Are you aware of these devices, this digital stuff . No, cory. I know what to get you for christmas. Coming up. Can the thinking industry be liable for acts of terrorism . One new jersey lawyer is putting that to the test in a lawsuit filed for federal court in brooklyn new york. The banks are crying foul. Ariels and recruited the plaintiffs in that case. He will join me to discuss the intricate web he says to connect the dots of terror funding right back to the banks. I will see you in a few minutes. Back to you in san francisco. Bloomberg west will be right back. This is bloomberg west and yesterday i got an invitation, a surprise invitation. March 9 is announcing an event, but they are not telling us what is going on. We expect the apple watch will be announced in greater detail. Perhaps it is a reference reference to daylight savings times. It plans to start shipping the watch in april but the Marketing Campaign is in full swing. Check out vogue. 12 pages of an apple ad. The ceo of the june group and an Advertising Firm that includes cocacola and others tim is that my copy or your copy . This is my copy. That is a big deal. Is this the impact . Is this what we are seeing . It is a device that is going to be Tech Knowledge he driven technology driven. What do you make of them taking out this big ad invoke of all places . I think it is a clear indication that it is more about fashion than unction. There have been reports that actual functionality has been scaled back. It looks like they are going to make this the musthave accessory. Is this a bigger move for apple itself . Apple has been brand focus. I wonder if this is a different take for them. It is terranova for them. I think it is their first real big foray since the ipad. They are betting a lot on that. It is interesting they are taken this fashion look at it. One of the things i wonder is if apple is going to start having a much more segmented product line and much different price points what did you not know before you saw these ads . They hit on the things we see before. It is about the placement of vote. They have been doing things in paris tried to get into the fashion world. There are Big Questions people want to know when they are doing this event. We only know the base price at 350. Then we want to know how long the battery is going to last. Tim cook telling a newspaper there that if he wears it all day, what is the charge . The other thing is the case for why you are going to want this. Is it going to be style or functionality to it . Apple has not laid out the entire case for it. Why do you want to buy it . Is fashion enough to sell the millions of watches they are going to need to make this business work . Initially it will be. Apple has the kind of pen that will make people go out. The first early adopters will go and buy it. I dont know if it is enough to carry its longterm. It will have to have some useful functions to make it part of our day in the way other devices have become. Do you expect to see more of these ads and other places . My guess is you are going to see a lot more and this tells you that that is the way they are link they are leaning. I would be surprised to see some Beautiful Television pieces. They are betting so much on it. Every other major release they have had has been the musthave device. This is a little different. So they have a lot riding on it. We appreciate it. Now it is time for special bwest byte. One number that tells us a whole lot. A special guide from someone. Do you recognize my voice . That is emily chang back from a turned the leave. What is the bite . Do you miss me . Badly. Please come back. That is good to hear. The number is four. The you know what that is . I heard a child in the background, i love that. Tomorrow is the fouryear anniversary of us launching this show. It has been four wonderful long years. They are running the hair video. They are running video of all your hairstyles. I knew you would not be able to resist. He would not be of to resist that clip. I said specifically not to do it. We really miss you. I got a phone call from a viewer calling from god knows where saying what happened to ms. Chang . You are coming back in april, il i hope. Im sorry i cant be there today to celebrate this very momentous occasion. I promise we will have a big blowout for the fiveyear. I have to thank everyone who has worked on the show and moved on and the team we have working so hard and even harder in your absence. We have a lot of ground to cover. The viewers have been very supportive of the show. Emily, it has been great to have you by my side the whole time. Innovation, technology and the future of business, the most important show on television. And you are carrying the torch valiantly. I cannot wait to be back in april. I love hearing your son in the background. Im calling from the home front. Thank you very much. You can always get the latest headlines on your phone and tablet. We will see you tomorrow. From bloomberg World Headquarters in new york, im mark crumpton. This is bottom line. 12 viewers here in the United States and those of you joining us from around the world welcome. To our viewers here in the United States. Alix steel examines the highs and lows of crude oil prices. Villa lamarcus continues his series on his trip to cuba today. Peter