tv Lunch Money Bloomberg December 18, 2013 9:00pm-10:01pm EST
>> this is "taking stock" for wednesday, december 18, 2013. i am pimm fox. we will focus on stimulus for the economy, your mind, and your relationships. ben bernanke begins to tap the brakes on economic stimulus. we will tell you how this might affect your portfolio and finances. move over candy crush. the app quizup takes the casual gaming word by storm.
grouper is looking to bring some romance to your off-line world. >> u.s. senate has passed a budget bill. the agreement eases automatic spending cuts under $63 billion. the vote was 64-36 in favor of the bill. oracle reported fiscal second quarter that topped analyst estimates. revenue climbing 2%. sac capital adisers' michael steinberg becoming the longest- serving manager to be convicted of insider trading. it is a government figure that might increase pressure on his former colleagues to cooperate in the u.s. investigation. >> thank you very much. important news, the federal reserve's decision to trim its
monthly bond purchases, this pace will follow to $75 billion a month. this will be divided between 40 billion. stocks surging. shares on the dow jones industrial average up nearly two percent. here to tell us more, robbert van batenburg who is with newedge. we are joined with with j.p. morgan funds. -- with anastasia amoros with j.p. morgan funds. is this a good decision today? >> this substantial and self sustained recovery has been achieved.
with that, that is another confirmation that we are in the late stage expansion part the business cycle. yes, the stocks continued to perform well throughout that stage. >> robbert van batenburg, do you agree? >> the problem that i have with the monetary policy is that very few people have articulated that there is enormous unattended costs involved. >> such as what? >> two things. why is there such low inflation right now? the reason why there was low inflation is because the fed has been propping up asset prices to the point they have not settled back to their proper balance between supply and demand. the average american is getting squeezed because of high asset prices. properties or commodities. oil, when ben bernanke started, was at $35 a barrel.
ever since he embarked on qe1, 2, 3, it has been around $100. that is a half $1 trillion tax on the american public per year. >> there are two things. there is inflation and an increase in the price of assets. >> that is why we are actually having deflation. the other unattended consequence is that it is the biggest one of them all which blows of the unfunded liability of the entitlement programs in the u.s.. they hold collectively $4 trillion in treasuries and they are not getting the required rate of return on capital. when ben bernanke started some of the unfunded liabilities were 35 trillion. now they are more than 100 trillion. those are the unattended costs of quantitative easing. no one be -- is able to acknowledge them. >> truths and consequences, or is it both?
>> there is now a sustained lower trajectory of growth both in the u.s. and the global economy and there are unintended consequences in costs with doing so. property is absolutely one of those unintended consequences. it seems to us that there is a bubble type of feeling particularly in some of the primary urban housing markets that have had the unintended consequences of taking are stripping away purchasing power from the middle class and that is where the economy will gain a higher level of trajectory of growth. once you can get the labor markets back in play. the labor conversation was not as big of a part of the commentary in the press conference as i would've liked to have heard. >> but didn't they say in the report that they would keep the fed funds rate at its current
level, far beyond six and a half percent. >> the far -- the complexion of the labor market is the issue. if you don't get sustained higher wages, you will not have a sustained long-term recovery. >> could we look at this to play the hand you're dealt with. we will talk about the unintended consequences. if this is the hand that you're dealt as an investor, what do you do? >> one thing that is important to realize is why was the fed doing this and the reason was to stimulate the housing market. if you look at the reaction of various asset classes, one of the best-performing assets is actually home builders. in order to lift more boats out of the potential slump we have been in, you have to have the stock market recovery, of course which is what we have had, but you also have to have the housing market recover.
how do we play the hand that we are dealt? we have the cyclical assets that are geared to those. >> what about investing in financial industry assets? if you have rising interest rates because of a pullback, wouldn't that be great for banks? >> the second best-performing part today. the issue is the extraordinary performance across the board. it belies a something that robert was talking about in terms of the housing market and that is the one part of the market that do not react well during the dress rehearsal over the summer was the housing market. they were trying to get in under the line where the 30 year started to move higher and financing costs became greater. we think this number is a big
trend. this is piling into the last moment where they can get financing under the 5% level. >> there are many individuals and many institutions that have not purchased stocks. they have been buying bonds. is this the time to finally throw in the towel and say, yes, now buy stocks because the interest rate environment is looking not so great if you happen to own fixed income. >> as rates go up, you have the higher fix on your assets. >> only if you actually buy them currently. if you own them, that does not look so good. you will have to rate for the duration. >> i don't fully subscribed to the rotation from bonds to stocks because unfortunately a lot of investors hold bonds because they cannot hold anything else. for example, the chinese and the
japanese, the foreign reserves. >> the institutional mandates. >> before social security, medicare, i cannot invest in anything else. a lot of state pension funds are invested up to the hilt on stocks. there is a limit that the capital that is trapped in treasuries can switch to stocks. >> if your fiduciaries responsibility is not to a state or local government but is to yourself, your family, your own institution, what do you do with the money? >> that is a good question. i will tell you that there is of course not just all about the fed. there are other known unknowns and unknown factors that will play out in the next year or so. >> anything going to do rail the market if things continue the
way they are now? >> you can have some near-term pullback. the one thing you consider whether the market is up for a rally or a pullback in the short-term, it is valuation, how much has gone into equities. judging by some of those things, yes, potentially the market could be set up for a pullback. is not clear what the trigger might be. the way investors think about this, they have to couple the short-term positioning with where we are in the business cycle. in this part of the business cycle, we think two things can happen. rates could continue to grind higher than the weather it is long-term or short-term. the second thing i think it's very possible is that for once, the central bank may actually succeed at driving up inflation. once again, inflation hedges will be needed. >> i want to thank you very much for your thoughts.
>> the u.s. senate has passed the most recent budget bill which will ease about $63 billion worth of automatic spending cuts. it is on its way to the desk of president obama. i'm joined by phil mattingly, our white house correspondent, and also maya macguineas, the president of the nonpartisan committee for a responsible federal budget. it is also cochaired by michael bloomberg. he is the founder and majority owner and majority holder of bloomberg lp. what happens next?
>> the significance is the fact that nine republicans voted with senate democrats to clear this. this was a bipartisan budget deal, about 63 billion dollars in relief for the sequester cuts. they are able to come to a bipartisan consensus. house republicans pass with a large majority last week. this matters. anyway you look at it, anytime you can get bipartisanship in in a very partisan town right now, this is considered a positive thing and it takes the budget issue off the table for the next two years. this has been a big problem recently. positive news from capitol hill. a small deal but a deal nonetheless. >> is it good to take it off the
table for two years? >> i think it is good steps that they passed this bill orhe exact reasons that we just heard because we have not been able to do anything and the fact is that any bipartisan agreement, and this is more than what was expected either in the house are senate shows that they are starting to work together. that takes the uncertainty out of the economic environment. this is positive in terms of political symbolism. it is better to smooth out the assets over time as long as the savings are realized. did we fix the situation? not even close. what is troubling is that they need a baby step forward. this takes some of the low hanging fruit and policy choices and it leaves the real challenges.
there will not be any action forcing moments. hopefully this'll will move along more smoothly. they are not sure what next point in which people go through the issues. >> can you look at how this furthers the political ambition. >> in this case, you have two people in senator patty murray and representative paul murray -- paul ryan that works really well together. everyone likes to look at paul ryan and wonder where he is going to go. he was on the vice presidential ticket with mitt romney, is he the next house speaker?
the fact that he was on board with this was huge for providing coverage for the rest of his conference. what they wanted was something to move forward. house republicans got burned on the shutdown and we don't want to have to be dealing this next year. the democrats wanted a victory of any kind. in terms of political ambitions, not as much a major moment right now but we get to lawmakers who are willing to get behind closed doors and shut everyone else out and find an agreement, it shows the process can still work. not again, not in a grand bargain kind of way. >> is this something the president is going to be able to point to as a success? >> this is not been about presidential leadership. it has been about emergence of two new leaders.
maybe they would, but they real deal or gimmicks to get around them. we have chairman ryan, chairman murray have both emerged with people that their party's trust and can work and can talk together. i think you need presidential involvement in these issues to grapple with the harder issues that should be on the horizon if we are going to tackle them in a responsible way. the white house has not been central to the fiscal issue and it looks like they are not making that a priority going forward. >> phil mattingly and maya macguineas, the head of the we'll get more insight on the nsa spying report from an attorney who worked on privacy issues in the u.s. senate. ♪
>> the obama administration has released a report on the government spying activities which has 46 recommendations. it says that any data collection should serve an important government interest and that the nsa should stop collecting bulk phone records. we are joined by the codirector of the liberty and national security program at the brennan center for justice. we want to thank you for being here. did you get a chance to look at the recommendations? >> i did. i have looked at them. >> you have experience in the u.s. senate guiding their various senators and advising them on national security issues. what do you make of the proposals?
>> well, they went quite far actually, to changing the way the nsa operates and specifically making changes to some of the programs that have been reported such as the bulk collection of american phone records. it would end the bulk collection program. there is a little asterix there that there is the potential that the records would be shifted, going to a third party which could then hold them for as long as two years, as the recommendation. >> a third party not associated with government? >> not associated with the government. it could be the telephone companies, it could be a third party that collects the data in one database from the telephone companies. that is a bit of a wrench in the works, the fact that they are contemplating that kind of activity. essentially, it ends bulk collection as it is occurring
now. it also extends some new protections to how the government can treat the contents of communications that are acquired for foreign intelligence purposes. it would put limits on the use of backdoor searches which is this practice of searching through communications that supposedly targeted foreigners to try to find information about the u.s.. >> based on your experience, with the revelations, are they revelatory to you? >> they were. i don't know if you can be surprised without being shocked or shocked about being surprised. this is the kind of activity that it might be collecting. nobody expected the size and scope of the collection activities. >> can you explain the legal term sovereign immunity and what that has to do with the lawsuits related to this information?
>> that is the principle that the government has to consent to be sued. it seems counterintuitive that they would give the consent but they frequently do. there's a real controversy right right now over what mechanisms have been made available to people to challenge the nsa activities. the government has taken the position that this is very limited. >> as an expert in this area, do you have any insight into why the ruling will go -- into where the ruling will go? >> it can be very hard to prevent these issues. in terms of constitutional challenges, people will find a way to get these reviewed by the court. >> i want to thank you very much for joining us.
>> the selection of mary barra made history as she became the first female chief executive. i want to bring you another female chief executive. lynn good, she is the first female executive of duke energy. alix steel caught up with her at the nyse and asked her how things are different with her running the company. >> coal has been under attack. environmental regulations have made it a challenge. i think it will be a part of our mix. we have continued to invest in coal and there will be more gas in the portfolio. >> what you envision that to
come out to be? are you looking for 30%-30%? >> it will be a third coal, a third gas, a third nuclear. >> but the biggest issues that a utility company faces is a lack of demand. what are you going to do to continue to grow earnings? >> demand is flat, basically. really being driven by a sluggish economy, energy efficiency. it puts the onus on us to continue to focus on controlling our costs. we continue to have great opportunities to invest to the benefit of our customers. those will be the opportunities that will drive over time. >> would you be looking specifically into natural gas resources? >> m&a for duke has been businesses.
we have looked for enterprizes. with can make sense from time to time but we would be looking at ways to add to the business portfolio itself. >> 10% come from overseas, like a hydro plant in brazil. do you consider this an asset that you can realize and spin off in value? >> this has added to our growth portfolio over time and we would see it continuing to do so. we operate in brazil, chile, and in peru. a very important market. >> will you keep them? >> they are part of the business. the question is always interesting. there is something that we have as part of our portfolio that has been important to growth and if we continue to grow the is business and produce cash flow, that will be good. >> the federal reserve kept rates low for an extended time. what do you do now?
>> rising interest rates will have an impact on our stock valuation. we trade on the dividend, but our assignment would be to make duke a very strong value proposition. i think that will drive a lot of value for shareholders. >> how do you drive the business to continually entice investors? >> a combination of growth and dividend, that delivers about 10% total shareholder return. >> is this bigger down the road? >> we have been growing this had two percent. we take the opportunity to grow the dividend exists. >> you are in this tough spot between trying to grow earnings and entice investors, what would be more important? >> for duke, stock buyback have not historically been a big part of the formula, we have delivered earnings growth and
dividends. >> you were one of the first utility executives to say that the slow sales growth would be normal. part of that has been about cost cutting. how much further do you have to go in that arena? >> we have a great opportunity to drive efficiency out of our business and we think that we can have opportunities to do that. we recently announced that we have saved around 9% of our overall operating expenses and we will keep going to continue to find the most efficient way to use our resources. >> that was lynn good, the chief executive of duke energy speaking with our own alix steel. coming up, let's play a round of quiz up. it is the biggest trivia game in the world. i will tell you why after the break. ♪
>> if you like trivial pursuit, how about quizup? it is a game that allows users to challenge each other from the music of lady gaga to the james bond franchise. thor fridriksson is the chief executive of the company that makes the game. you are a bit of a veteran when it comes to creating apps, what makes quizup different? >> we had been working on it for two years. before that, we made apps for preschool children, the differences kind of huge but that is not too unusual. we start out by doing something that we think is a good idea. then we got an idea of how we
could really do an amazing social trivia game that would connect people all around the world together and that is what we're doing now now, it is quite different. >> give us an example of how quizup works. >> we figured out that trivia in its essence is an amazingly social thing. people want to compete against other people. quizup is a place to do that. you can choose from a huge variety of topics and then you can compete in real time against other fans of that same topic. the cool thing is that after you compete against people, you can actually communicate to them as well. >> can you give us an example of how many people are quizzing up?
>> we only launched the game about a month ago and it is only on iphone and we already have more than 5 million players playing the game. the whole reception in the u.s. is absolutely mind blowing. we have been doing this for a long time, preparing for the game. a the reception is crazy. >> what would be an example of some of the questions? >> they range from anything and everything. i heard that you are a fan of the james bond movie series. we actually have that as a special topic. let's see, goldfinger came out in what year? >> 1964.
it was the third movie. >> i'm sure you would do really good. >> can people create their own topics? >> yes, for us, it was no way that we could ever have made this huge amount of questions. we actually reached out to people you can actually apply to become like the content contributor. we have had close to 30,000 people that have applied to contribute content of the game. people really want to share and write questions for us. we could not be more happy. >> you divide your time between san francisco and iceland?
why are you in san francisco and what happens in iceland? >> i really enjoy a long airplane rides. they're just so relaxing for the mind. i am joking. the commute is terrible. the reason we are in seven cisco is because once we got the idea, we really -- it was a grand idea and it took a lot of money to execute it. it's where else to go then san francisco, the capital of tech and vc. when we got the idea, we moved the company to san francisco. we got some help with some angels and venture funds. where we are getting our funds to be able to create something like this. >> you are hiring in iceland, what are some of the perks of playing for plain-vanilla games in iceland? >> first of all, iceland is a pretty unique country. if you like the outdoors,
iceland is the place to be. the weather in san francisco kind of beats the weather in iceland at this moment, especially in the winter, but all in all, the company is such a great and fun company to be in, we have got such a great team. there's one thing thing that i would say which is a good thing about working with us in iceland is that you get to be involved with this awesome product and these great people. >> thor fridriksson is the chief executive of plain-vanilla games, they are the makers of quizup. if you would like to get off your mobile phone and meet real people, my next guest has an online service for you. loneliness serves as a catalyst for the company that helps people meet. it is called grouper, and it has evolved.
the founder and the chief executive, michael waxman joins me now. how did you start grouper? >> this is a really simple concept. we are a social club that sets up drinks between two groups of friends. it is opportunity to use technology to get off-line in the real world. >> how does it work? you go to your site, you go where? >> you go to our website or you can download our app in the app store. you can sign up with facebook and we match you to another individual. you are each responsible for bringing two friends. each person pays for their first drink. we give you a bar to meet at and you show up and the night is up
to you. imagine a house party of six people that is sort of on demand. you press a button and there you are in this comfortable setting with your friends. >> did michael waxman press a button? >> of course, i have to use the service. i love going on grouper. >> was it successful for you? >> i am currently dating a girl that i met on grouper. this there have been other successes, people have made business relationships, it's a lot of different ways that it helps people build relationships. >> in building these relationships, are you privy to the other person's identity and information? >> one of the unique things in our site is that we don't have
any profiles or messaging that happens. it is all about meeting in the real world and we think that is refreshingly different compared to social networks whether it is facebook or other apps where it is profiles and messaging. we feel that what matters is meeting people face-to-face. >> we understand that bitcoin us plays a role. >> it was just a small experiment that we did. you're all about thinking about making the world better through technology. you can pay at our partner bars now using bitcoin. it is a fun little experiment we are doing. there is this mission of using technology not for its own sake but to make the real world better. >> launched in london? >> yes, we had our first groups go out in london. we think it is a real universal
problem, the modern isolation. people use social networks. sometimes they replace the social lives. we the offer an opportunity to use technology to get off-line and hang up with friends and meet new people. >> you are making money -- do you get it from the bars? where'd you get the money from? subscriptions? >> we have a simple business model. we charge people to use our products each time. it is 20 dollars per person which includes the first round of drinks. we have partnerships with the bars. >> i want to follow-up on this. you say a traditional business model where you provide a service and and you charge people for it. what do you make of all of the business models from social
media companies -- we are not really worried about the making of the money, all we want our a lot of eyeballs. >> that can work in certain cases but it was never for us. i think paying customers is the best way to get great feedback. i've made a point of wanted to charge customers and they wanted something else for the feedback. we are focused on this off-line space and it is still where we spend 90% of our time and money and that is why it is easier for us to have a business model. solving off-line challenges and bringing people together face- to-face is where real value creation happens. >> if individuals actually spend the $20 before they go and meet the other members of the group, they are more likely to show up if they have spent money. >> absolutely. we have an incredibly low no- show rate for that reason among others. >> thank you very much, the grouper founder and ceo, michael waxman. we have information on viking
>> perhaps you commute to work using a bicycle. my next guest has reinvented the wheel. he is the associate director of the m.i.t. sensible city laboratory. they released the copenhagen wheel. this could revolutionize urban mobility. it is great to have you with us here on "taking stock." please explain what you have brought with you here today and how could this change every bicycle trip in the world? >> this is the copenhagen wheel. it can go on almost any bike. the main idea is that it
captures your energy when you break or go down hill and then it gives you a push automatically. you turn one screw, another screw, download an app, boom. >> there is a battery, there has to be some way to store the energy of an individual. storing the energy when the bike brakes. tell us about how it works. >> inside this red hub there is a motor which is also a generator, a set of batteries. there are about a dozen sensors. it measures about your pedaling behavior, about your environment, are you going over a long distance? then, it instructs the motor on how must boost to give you. >> that is connected to an app that is on your phone? >> yes, i have a mode that is called flatten my city.
>> will that give you directions? >> what it does is it detects when you are on a hill and it gives you a boost going up. when you are going down, it makes it harder than normal. this captures your energy and stores it in the batteries. >> is the energy that is stored, can you use it for other things or is it just for the bicycle? >> for now, we are just using it for powering you. giving you back your energy. >> what is the cost of something like this? >> we developed it about three years at mit's sensible city lab. when it was affordable enough, we license this. we are building them ourselves, they are all made in massachusetts. the first 1000 will go for $699.
thereafter, $799 on our website. >> what about the materials that go on the rear wheel? >> mostly plastics, some magnetics in there. >> you have been able to patent this? >> m.i.t. filed patents on this back in 2009. we continuously packed into this since then. there are quite a few patents on the technology and super pedestrian has the exclusive license. >> what was the biggest challenge of creating this? there have been fights that have electrical boost, batteries and so on. what makes this different? >> first of all, it is a control system that governs how this behaves. it weaves itself into your motion very seamlessly. also, you want to manage the range that you get out of the batteries so it is optimized. making it look good so that your
bike looks even better with this on is another challenge. altogether, it is a few years of development, multiple iterations of the hardware. now, it is ready to get to everybody out there. >> are you a user of super pedestrian? >> yes, i have been using this between home and work. i live so close to work that i often walk but getting on a bike with this on removes any second thoughts. >> why is it called the copenhagen wheel? >> is started with a collaboration between the mayor's office in copenhagen and the m.i.t. city lab. we asked how we can get more people to cycle. >> it certainly looks like this. the founder of super pedestrian and the copenhagen wheel. a stock market rally today, the dow up or to give percent.